Technology, growth and employment

The relationship between technology, productivity and employment is a complex one. Increased productivity can lead not just to increased market share, but through falling relative prices can help expand markets, and through product innovation can develop new markets. On the other hand, if demand and hence output does not expand in line with productivity, then an inverse relation between productivity and employment will result. The European Union seeks to improve living standards in Europe by boosting productivity, competitiveness and employment together. How, though, is this to be achieved? This paper looks at the effects on productivity of different forms of investment--in physical capital, in Research & Development, and in human capital. The paper also distinguishes between the high-tech and low-tech sectors. There does appear to be scope for boosting both productivity and employment, particularly in the high tech sectors. But to do so will require increased investment across all three categories--in machinery, in innovation and in people.