The effects of the new communications media on employment

The post-World War II economic growth happened in a context of significant productivity gains in the industrial sector and an increasing demand for services, where productivity gains remained quite low. This explains the strong expansion of employment in the tertiary sector relatively to the industrial sector. In the 1970s, this growth pattern reached a crisis point: in most Western economies, productivity gains lagged in the industrial sector while no visible changes occurred in productivity in the service sector.With the more widespread use of data processing and the emergence of new communication media, this trend showed signs of reversal. Information handling activities showed considerable productivity gains, rivaling those previously seen in industry. And the spur for technical progress, once limited to the industry, appears to have spread to the services and information sector.With respect to employment, this tendency could lead to a reduction in employment in the tertiary sector. So the new technologies would come about at the worst possible moment, with all time high unemployment rates in Western economies.So it is not surprising to see the current temptation to delay the process, or to adopt a so called “two-speed growth strategy”: the strongest productivity gains would be enhanced in the traded sector (mostly the industrial sector) where foreign competition is most prevalent; and the resulting cost on employment would be offset by maintaining low productivity levels in the protected sector which, to the present, has typically been the services sector.The present analysis takes a more optimistic stand-point on the net effect of technical progress on employment. The authors focus on the interplay between productivity in the exposed sector and productivity in services, with emphasis on the necessity for decreasing unit costs in the protected sector, enabling the traded sector to remain competitive.