Fact of the Week: When Companies Adopt Technological Innovations, Workers’ Actual and Perceived Job Security Improves

Luke Dascoli October 25, 2021
October 25, 2021

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

Source: Caselli et al., “The Reassuring Effect of Firms’ Technological Innovations on Workers’ Job Insecurity,” Global Labor Organization Discussion Paper, June 2021.

Commentary: The increasing complexity of new innovations in technology may seem intimidating at first to workers who fear being “out-skilled” in a tech-heavy labor market. It has become commonplace for policymakers and pundits to decry the economic transformations that come with globalization, digitalization, and automation for their alleged impact on job security. But this maligning of innovation obsesses too heavily on the labor-saving features of innovation and misses the enhancements in worker productivity that new innovations bring. New research from economists with the Global Labor Organization (GLO) refutes the idea that innovations worsen job insecurity, and instead finds econometric evidence showing the opposite.

Using survey data on the Italian labor market from the National Institute for the Analysis of Public Policies, GLO’s econometric modeling shows workers at firms that have implemented major technological innovations in the previous two years report highly statistically significant reductions in both affective job insecurity and cognitive job insecurity. The data on affective insecurity comes from workers’ explicit answers on the question of job insecurity, and the cognitive insecurity data is derived from questions on workers’ confidence that they will retain their jobs. The analysis shows that automation and process innovations are associated with the highest and most significant reductions in job insecurity among workers, whereas product innovations are far less relevant. This is likely due to both automation and process innovations driving down unit costs of production, thus enabling firms to profitably increase production and maintain employment.

So, empirically, technological innovations in the workplace are lowering anxieties about jobs, not worsening them. Rather than criticizing innovative firms, policymakers should address the socioeconomic factors creating anxiety around income stability that worsen feelings of job insecurity in the modern labor force.