Technical change has probably meant loss of more unskilled jobs than globalisation

In the week before Emmanuel Macron was elected president of France, he visited a factory near Lille which was closing, and, at the gates of the factory, he met the workers who were losing their jobs. Naturally many of them were angry, blaming globalisation for their pain.

Macron acknowledged that their factory was losing out to foreign competition, but he also pointed out that the next factory down the road, which exported most of its output, depended on the modern globalised economy. Rather surprisingly, instead of bawling Macron out one of the workers losing his job acknowledged that his son worked for the second factory, and was, implicitly, a beneficiary of trade.

Across the developed world the nature of work has changed dramatically over recent decades. Globalisation has been one of the drivers of change. Manufacturing that employs relatively unskilled workers, such a clothing and textiles, has moved to Asia.

However, technical change has also played a role that is at least as important. Wherever manufacturing takes place, automation and computerisation have led to job losses among the least skilled, whose jobs are most easily automated. Technical change has probably meant more losses of unskilled jobs than globalisation.

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For those with limited education and skills, this process has been very painful, especially as they may find it difficult to find alternative employment.

Newer member states

Across the EU the number of people at work who had not completed second-level school has fallen continuously over the past 20 years. This holds not just for the EU15 but also for the newer member states, with an identical fall in such employment of over 2 per cent a year in each grouping. Thus it has not been a case of these jobs moving eastwards in the EU.

The skills required by a modern workforce have greatly increased. In both older and newer member states, the number of jobs for third-level graduates has increased in every one of the last 20 years, with an average growth rate in such employment of between 3 per cent and 4 per cent a year.

The recession did not significantly slow the growth. Even in Ireland at the height of the financial crisis, jobs for graduates continued to increase.

This changing pattern of demand for labour in a modern economy poses particular problems in regions where the workforce is predominantly middle-aged, with limited education.

The wrong answer to unemployment of such workers would be to cut wages to try and be “more competitive”. The evidence is that to grow unskilled employment, unskilled wages would have to fall by a large amount. For most of Europe, such low wages would be unacceptable, as signalled by the level of minimum income afforded by the social safety net.

While enhanced training and education for those now laid off can make a real difference, it is not always easy for those who are unemployed to undertake the necessary retraining even when it is offered.

Skills and training

There are no simple answers to layoffs of unskilled workers in a shrinking market for unskilled work. However, the long-term solution to loss of unskilled jobs is to ensure that in future those leaving education have the skills and training they will need for a lifetime working in the modern economy.

Research in the 1980s and the 1990s alerted Irish policymakers to the serious social and economic problem of early school-leaving, and a 1992 ESRI report showed very substantial economic benefits from persuading children to complete their education.

In 1990 a third of Irish children left school without completing their Leaving Cert. Today the figure is down to 5 per cent, with all the resulting economic and social benefits.

The steady rise over decades in the education level attained by young people has ensured that today the skills and education of the Irish workforce better matches the needs of a modern labour market.

However, research also shows there is still work to be done to improve the quality of education our young people experience and not just its duration, and to reduce drop-out rates at third level.

In particular, we need to improve opportunities and outcomes for less academic pupils, to enable them acquire much-needed technical and practical skills.

Fewer than one in five EU jobs are now filled by people who did not complete second level, and this proportion is dropping every year. However, countries like Italy, Spain and Portugal which, unlike Germany or Ireland, did not invest early enough in raising overall education levels, today experience high unemployment, which is proving difficult to tackle.