Blog Post

The computerisation of European jobs

Who will win and who will lose from the impact of new technology onto old areas of employment? This is a centuries-old question but new literature, which we apply here to the European case, provides some interesting implications.

By: Date: July 24, 2014 Topic: Innovation & Competition Policy

The key takeaway is this: even though the European policy impetus remains to bolster residually weak employment statistics, there is an important second order concern to consider: technology is likely to dramatically reshape labour markets in the long run and to cause reallocations in the types of skills that the workers of tomorrow will need. To mitigate the risks of this reallocation it is important for our educational system to adapt.

Debates on the macroeconomic implications of new technology divide loosely between the minimalists (who believe little will change) and the maximalists (who believe that everything will).

In the former camp, recent work by Robert Gordon has outlined the hypothesis that we are entering a new era of low economic growth where new technological developments will have less impact than past ones. Against him are the maximalists, like Andrew McAfee and Erik Brynjolfsson, who predict dramatic economic shifts to result from the coming of the ‘Second Machine Age’. They expect a spiralling race between technology and education in the battle for employment which will dramatically reshape the kind of skills required by workers. According to this view, the automation of jobs threatens not just routine tasks with rule-based activities but also, increasingly, jobs defined by pattern recognition and non-routine cognitive tasks.

It is this second camp – those who predict dramatic shifts in employment driven by technological progress – that a recent working paper by Carl Frey and Michael Osborne of Oxford University speaks to, and which has attracted a significant amount of attention. In it, they combine elements from the labour economics literature with techniques from machine learning to estimate how ‘computerisable’ different jobs are. The gist of their approach is to modify the theoretical model of Autor et al. (2003) by identifying three engineering bottlenecks that prevent the automation of given jobs – these are creative intelligence, social intelligence and perception and manipulation tasks. They then classify 702 occupations according to the degree to which these bottlenecks persist. These are bottlenecks which technological advances – including machine learning (ML), developments in artificial intelligence (AI) and mobile robotics (MR) – will find it hard to overcome.

Using these classifications, they estimate the probability (or risk) of computerisation – this means that the job is “potentially automatable over some unspecified number of years, perhaps a decade or two”. Their focus is on “estimating the share of employment that can potentially be substituted by computer capital, from a technological capabilities point of view, over some unspecified number of years.” If a job presents the above engineering bottlenecks strongly then technological advances will have little chance of replacing a human with a computer, whereas if the job involves little creative intelligence, social intelligence or perceptual tasks then there is a much higher probability of ML, AI and MR leading to its computerisation. These risks range from telemarketers (99% risk of computerisation) to recreational therapists (0.28% risk of computerisation).

Predictions are fickle and so their results should only be interpreted in a broad, heuristic way (as they also say), but the findings are provocative. Their headline result is that 47% of US jobs are vulnerable to such computerisation (based on jobs currently existing), and their key graph is shown below, where they estimate the probability of computerisation across their 702 jobs mapped onto American sectoral employment data.

How do these risks distribute across different profiles of people? That is, do we witness a threat to high-skilled manufacturing labour as in the 19th century, a ‘hollowing out’ of routine middle-income jobs observed in large parts of the 20th as jobs spread to low-skill service industries, or something else? The authors expect that new advances in technology will primarily damage the low-skill, low-wage end of the labour market as tasks previously hard to computerise in the service sector become vulnerable to technological advance.

Although such predictions are no doubt fragile, the results are certainly suggestive. So what do these findings imply for Europe? Which countries are vulnerable? To answer this, we take their data and apply it to the EU.

At the end of their paper (p57-72) the authors provide a table of all the jobs they classify, that job’s probability of computerisation and the Standard Occupational Classification (SOC) code associated with the job. The computerisation risks we use are exactly the same as in their paper but we need to translate them to a different classification system to say anything about European employment. Since the SOC system is not generally used in Europe, for each of these jobs we translated the relevant SOC code into an International Standard Classification of Occupations (ISCO) code,  which is the system used by the ILO. (see appendix)  This enables us to apply the risks of computerisation Frey & Osborne generate to data on European employment.

Having obtained these risks of computerisation per ISCO job, we combine these with European employment data broken up according to ISCO-defined sectors. This was done using the ILO data which is based on the 2012 EU Labour Force Survey. From this, we generate an overall index of computerisation risk equivalent to the proportion of total employment likely to be challenged significantly by technological advances in the next decade or two across the entirety of EU-28.

It is worth mentioning a significant limitation of the original paper which the authors acknowledge – as individual tasks are made obsolete by technology, this frees up time for workers to perform other tasks and particular job definitions will shift accordingly. It is hard to predict how the jobs of 2014 will look in a decade or two and consequently it should be remembered that the estimates consider how many jobs as currently defined could be replaced by computers over this horizon.

 


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.


Warning: Invalid argument supplied for foreach() in /home/bruegelo/public_html/wp-content/themes/bruegel/content.php on line 449
View comments
Read about event

Upcoming Event

Sep
7-8
09:00

Bruegel Annual Meetings 2017

The Annual Meetings are Bruegel’s flagship event. They offer a mixture of large public debates and small private sessions about key issues in European and global economics. In a series of high-level discussions, Bruegel’s scholars, members and stakeholders will address the economic policy challenges facing Europe.

Speakers: José Antonio Álvarez Álvarez, Agnès Bénassy-Quéré, Pervenche Béres, Grégory Claeys, Zsolt Darvas, Jean Luc Demarty, Maria Demertzis, Anna Ekström, Lowri Evans, Sandro Gozi, Peter Grünenfelder, Patrick Graichen, Reiner Hoffmann, Levin Holle, Kate Kalutkiewicz, Steffen Kampeter, Peter Kažimír, Emmanuel Lagarrigue, Matti Maasikas, Steven Maijoor, Nathalie Moll, James Murray, Julia Reinaud, Carlos Sallé Alonso, André Sapir, Dirk Schoenmaker, Mateusz Szczurek, Marianne Thyssen, Reinhilde Veugelers, Nicolas Véron, Liviu Voinea, Johan Van Overtveldt, Ida Wolden Bache, Guntram B. Wolff and Georg Zachmann Topic: Energy & Climate, European Macroeconomics & Governance, Finance & Financial Regulation, Global Economics & Governance, Innovation & Competition Policy Location: Square - Brussels Meeting Centre
Read article

External Publication

Economic Implications of Further Harmonisation of Electronic Communications Regulation in the EU

One of the ways in which the European Commission has sought over the years to strengthen the European single market is by means of increased harmonisation of the regulation of electronic communications. To the extent that the European Union functions as a confederation of somewhat autonomous member states, however, there are both practical and political limits to the degree of harmonisation that is realistically desirable or achievable.

By: J. Scott Marcus and Christian Wernick Topic: Innovation & Competition Policy Date: August 11, 2017
Read about event More on this topic

Upcoming Event

Oct
5
12:30

Crowd Employment

This event aims to discuss the various nuances and diversity that characterize crowd employment.

Speakers: Cristiano Codagnone, Valerio Michele De Stefano, Irene Mandl, Georgios Petropoulos and Amit Singh Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Blog Post

The US retail crisis

What’s at stake: America is undergoing a retail sector crisis, partly related to the increase of competition from online commerce. We review recent contributions to this debate.

By: Silvia Merler Topic: Innovation & Competition Policy Date: July 17, 2017
Read article Download PDF More by this author

Policy Contribution

The challenge of China’s rise as a science and technology powerhouse

China's ambition to be a global leader in science and innovation by 2050 seems well within reach. The creation of US-Chinese science and technology networks is enabling China to catch up and helping the US to keep its position at the science frontier. What steps should be taken by the EU to engage more with China, not to miss out in the future multipolar science and technology world?

By: Reinhilde Veugelers Topic: Global Economics & Governance, Innovation & Competition Policy Date: July 4, 2017
Read article More on this topic More by this author

Blog Post

Cryptoeconomics – the opportunities and challenges of blockchain

While the activities using the peer-to-peer cryptocurrency Bitcoin swing between legal and illegal, the attention has been increasingly shifting to the technology underlying Bitcoin, known as blockchain. The mechanics and economics of Bitcoin have been reviewed in a previous Bruegel blogpost. In this blog review we explain, or at least attempt to, what blockchain is and whether it contains the extraordinary innovation potential that its proponents believe it to have, or perhaps such hype is oversold.

By: Uuriintuya Batsaikhan Topic: Innovation & Competition Policy Date: July 3, 2017
Read about event

Past Event

Past Event

Fintech and the digital transformation of banking

FinTech is changing the financial sector. What are the challenges associated with this and what policies should we adopt in response?

Speakers: Xavier Corman, Cora van Nieuwenhuizen, Georgios Petropoulos, Ezequiel Szafir and Pēteris Zilgalvis Topic: Finance & Financial Regulation, Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 20, 2017
Read about event

Past Event

Past Event

Geo-blocking in the digital single market

Geo-blocking is a discriminatory practice that is wide-spread in EU. It prevents online customers from accessing and purchasing products or services from a website based in another member state

Speakers: Marine Elgrichi, J. Scott Marcus, Fabian Paagman, Bertin Martens, Georgios Petropoulos, Agustin Reyna, Gareth Shier, Werner Stengg and Roza von Thun Topic: European Macroeconomics & Governance, Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 30, 2017
Read article

Blog Post

Standing on the shoulders of distant giants

New inventions build on earlier inventions, so patent citations are one indication of who is standing on whose shoulders. We show that four low-carbon technologies (wind, solar, electric vehicles and batteries) exhibit markedly different patterns of citation behaviour. If technology spillovers are structurally different between sectors, this could imply that policies to support innovation clusters would need different approaches. Differentiated policies could range from promoting individual champions for technologies with strong internal spillovers, to supporting regional eco-systems for technologies with more fuzzy spillovers.

By: Fabio Matera and Georg Zachmann Topic: Energy & Climate, Innovation & Competition Policy Date: May 23, 2017
Read about event More on this topic

Past Event

Past Event

Standardisation and patents: problems and policy options

Bruegel together with the Association for Competition Economics (ACE), is hosting an event on standardization and SEP licensing.

Speakers: Aleksandra Boutin, Georgios Petropoulos, Rebekka Porath, Pierre Regibeau and Hughes de la Motte Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 9, 2017
Read article More on this topic More by this author

Blog Post

Do we understand the impact of artificial intelligence on employment?

Artificial intelligence is already transforming the world of work, but the future is hard to predict. Some see most jobs at risk of automatisation, while others argue robots will only take on a narrow range of tasks in the coming decades. Nevertheless, we need a broad debate to prepare the appropriate economic policy response to the new industrial revolution.

By: Georgios Petropoulos Topic: Innovation & Competition Policy Date: April 27, 2017
Read about event More on this topic

Past Event

Past Event

Protecting the privacy of electronic communications: getting the next steps right

Do the European Commission's recent initiatives put us on the right path?

Speakers: Nicholas Blades, Orla Lynskey, J. Scott Marcus, Alexander Whalen and Jeremy Rollison Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 25, 2017
Load more posts