Since the beginning of the industrial revolution, millions of manual workers have been replaced by machines but the number of jobs has grown almost continuously, as have the real incomes of most people in the industrial world.

Now, some fear that computers and related services, broadly termed information technology, are eliminating jobs in a way different in pace and nature from the past. The fear is based on three claims:

• Unlike the industrial revolution, information technology is all-pervasive, with the potential to displace both manufacturing and service jobs, including those requiring high skills.

• Information technology is being introduced so quickly that society has less time than in the industrial revolution to retrain workers and create new jobs.

• Information technology makes work more portable, making it easy to move jobs to places with low-paid workers.

However, fears of information technology are based on the notion that there is only a fixed amount of output (and hence work) to go around. This notion ignores the fact that technology creates new demand, both by increasing productivity and hence real incomes and by creating new goods. Anecdotal evidence so far refutes the fears, too. For example:

• The United States invests more in computers and uses more computers per 100 people than any other country, yet we have only 5.5 percent unemployment compared to 11 percent in Western Europe.

• Japan has more industrial robots per worker than any other country - and the lowest unemployment rate among developed countries.

• A 1988 survey of European employers found that information technology had created twice as many jobs as it had eliminated.

The most difficult problem presented by the growth of information technology is the pace at which employment can be shifted between old sectors and new ones. Attempts to protect outmoded jobs or industries only make the period of adjustment longer and harder. Strong economic growth and free markets for both labor and products support adjustments that are fast and nondisruptive.

Source: "Technology and Unemployment," The Economist, February 11, 1995.

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