In the course of the last century the economy experienced a gradual shift from the primary and secondary to the tertiary sector. With the emergence of disruptive IT the service sector’s traditional barriers are experiencing a fundamental erosion. In this context “disruptive IT” stands for big data, predictive analytics, machine learning and artificial intelligence. The overall hypothesis this thesis seeks to verify is “disruptive IT will substitute human capital to an extent that will irreversibly materialize in an unprecedented technological rate of unemployment”.
The investigation commences with an analysis of unemployment statistics and a trend analysis over the last decades with the objective to reveal what could be perceived as technological hike of the natural rate of unemployment. It will be shown that historical data yet does not provide sufficient evidence to become scientifically convinced about the hypothesis laid out before . This does not come with surprise given the disruptive nature of recent IT advances which have yet only moderately started to unfold their full potential. Hence, disruption makes past-oriented statistics a second best guess of what to expect in future but suggests a rather simulation-based approach validated by expert opinion.
Therefore, we take a look at the contemporary study and analytical model of the Oxford researchers Carl B. Frey and Michael A. Osborne followed by the criticism of their criteria-based outside-in assessment on behalf of the Organisation for Economic Co-operation and Development (OECD). Next part of the discussion is the analysis of a recent report by the World Economic Forum (WEF) based on a self-assessment of industries’ opinion leaders and field matter experts captured via means of employer survey. Finally, both the common denominator of as well as the key separators between the discussed material get consolidated and interpreted – with the distinction of the latter into those that arise out of methodological heterogeneity in contrast to those which relate to results and conclusions.
It’s not academics’ primary concern to make predictions and surely not part of their routine tasks. This master thesis wants to make a contribution to the way policymakers, employers and employees as well as the society as a whole shape the future and to serve with quantified substance as facilitator in nudging science to expand the comfort zone and rethink the frontiers of academically serious work.
Table of Contents
Introduction
1.1 Problem formulation
1.2 Objective of the Master Thesis
1.3 Course of investigation
2 Glossary of terms
2.1 Substitution
2.2 Disruption
2.3 Information Technology
2.4 Unemployment
3 Main part
3.1 Unemployment statistics and trend analysis
3.2 Frey’s and Osborne’s “The Future of Employment” study
3.3 The OECD’s “Risk of Automation for Jobs in OECD Countries” Report
3.4 The WEF’s “The Future of Jobs” Report
3.5 Key commonalities and differences
4 Conclusions and future prospects
Objectives and Topics
This master thesis investigates the disruptive impact of Information Technology (IT) on human capital, specifically testing the hypothesis that IT will substitute human labor to a degree that irreversibly creates unprecedented technological unemployment. By analyzing global unemployment trends, predictive models, and employer surveys, the work explores the changing landscape of job profiles and the potential for structural labor market shifts.
- The substitution of human capital by disruptive IT technologies like AI and machine learning.
- Methodological analysis of predictive job loss studies from Oxford and the OECD.
- Economic evaluation of unemployment statistics and their correlation with digital evolution indices.
- Strategies for labor market adaptation, including reskilling, upskilling, and lifelong learning.
Excerpt from the Book
3.2 Frey’s and Osborne’s “The Future of Employment” study
The Oxford scholar fellows Carl B. Frey and Michael A. Osborne are the well renowned pioneers of predictive analytics in the field of the impact of computerization on the labor market in terms of the relief of human capital by IT. This first mover attribute and the recognition of their quantitative research by international institutions as discussed in the MBA business core’s “Managerial Economics” module such as the Organization for Economic Co-operation and Development as well as the World Economic Forum qualify their year 2013 “The Future of Employment” study as starting point in the following discussion upon the disruptive substitution of human capital by IT. Their research was prompted by the empirical observation of technological unemployment that John Maynard Keynes once predicted. While so far mostly routine manual and cognitive tasks have been simplified by specialization and partially even mechanized along assembly lines, nowadays disruptive technologies such as self-driven vehicles and handwriting recognition make a mounting portion of non-routine tasks obsolete. And this is just the beginning.
As a starting point non-routine tasks were defined by a direct match with computerization as “not sufficiently well understood to be specified in computer code”. In a next step this definition was questioned and the underlying synchronization with programmability diluted by the aforementioned observation of increasingly digitized non-routines. Finally, Frey and Osborne succeeded to re-establish the match of non-routines’ definition with computerization when they introduced the theory of engineering bottlenecks. Such bottleneck is to be understood as the prevailing road block engineers need to ultimately overcome on the way toward task automation: The more non-routine tasks are complex as per engineering bottlenecks and the more such bottlenecks even resist simplification efforts, the less feasible is task translation into computer language and the less vulnerable these tasks are to substitution by IT.
Summary of Chapters
Introduction: This chapter establishes the problem of labor shift from primary/secondary to tertiary sectors and presents the thesis hypothesis regarding the substitution of human capital by disruptive IT.
Glossary of terms: This section defines the foundational concepts of substitution, disruption, information technology, and various forms of unemployment necessary for the subsequent analysis.
Main part: This chapter provides a detailed analysis of global unemployment statistics, critiques prominent predictive studies (Frey/Osborne, OECD, WEF), and interprets the commonalities and differences between these models.
Conclusions and future prospects: The final chapter synthesizes findings, evaluates the verification of the hypothesis, and offers recommendations for future research and policy-making.
Keywords
Disruptive IT, Human Capital, Substitution, Technological Unemployment, Structural Unemployment, Automation, Predictive Analytics, Digital Evolution Index, Labor Market, Frey and Osborne, OECD, World Economic Forum, Engineering Bottlenecks, Skill Mismatch, Reskilling.
Frequently Asked Questions
What is the core subject of this thesis?
The thesis explores the "disruptive substitution of human capital by IT," examining how modern technological advances might permanently alter the labor market and lead to widespread unemployment.
What are the primary thematic fields covered?
The core themes include technological disruption, the evolution of labor markets, the impact of artificial intelligence on job tasks, and the validity of predictive models for future employment.
What is the primary research goal?
The primary goal is to verify the hypothesis that disruptive IT will substitute human capital to such an extent that it creates an irreversible, unprecedented technological rate of unemployment.
Which scientific methods were employed?
The author uses a multi-step approach: retrospective statistical analysis of unemployment and digital indices, a qualitative review of academic literature, and a comparative evaluation of predictive models and employer surveys.
What topics are discussed in the main part?
The main part analyzes historical unemployment statistics, critiques the 2013 Frey and Osborne study, examines the OECD’s counter-analysis, and details the 2015 World Economic Forum employer survey findings regarding future job growth and contraction.
How are the key terms defined for this study?
Key terms like "substitution" are analyzed using the S-curve concept, while "IT" is defined according to ISIC industrial classifications, and "unemployment" is interpreted through structural and technological lenses.
What does the "theory of engineering bottlenecks" imply?
It implies that certain non-routine tasks remain protected from automation as long as they are too complex to be translated into computer code, serving as a barrier to complete task substitution.
Why are the findings of Frey and Osborne considered "bearish"?
They are described as bearish because they suggest that nearly 47% of U.S. jobs are at high risk of replacement by IT in the near future, focusing largely on the job destruction effect without accounting for potential new job creation.
How does the WEF survey complement the other studies?
The WEF survey provides empirical, near-term data from industry experts (2015-2020), offering a more granular look at net job losses and emphasizing the need for flexible working arrangements and proactive reskilling.
- Quote paper
- Mag. Peter Weber (Author), 2017, The Disruptive Substitution of Human Capital by IT, Munich, GRIN Verlag, https://www.grin.com/document/369343
