Advances in supervision technology and economic welfare: a general equilibrium analysis

We analyze the impact of improvements in the technology by which employers monitor their workers. It is unclear a priori whether workers should benefit or not from such advances. On the one hand, they decrease the total costs of hiring workers and stimulate labor demand. On the other hand, as supervision becomes less costly employers tend to substitute monitoring for wages as a means of motivating workers. We show how the impact on firms and workers of such technological progress depends on the nature of the labor market equilibrium (i.e. whether there is full employment or not) and the cost (technology) of monitoring. A distinct possibility is that unemployed workers welcome the changes in supervision because they promote employment, while employed workers resist such changes and the more intensive supervision they encourage.