Innovation, new technologies and employment

Opinion article by the President of CaixaBank, Jordi Gual, in the Cinco Días newspaper

Technological improvements and innovations in the production processes are the main engines driving growth of income per capita, basically the standard of living, in our economies. This refers to continuous changes, sometimes as a result of major inventions that gradually trickle through to the whole economy but very often the result of small changes in how things are done.

Consequently, the most successful companies are businesses that are capable of developing or adopting new technologies, maybe for new uses, but also companies that continuously look at new ways of doing things. The most dynamic companies allow their employees to make mistakes because innovations require proof but also incorporate mistakes.

Improvements in productivity, by definition, allow us to produce more with less. For example, an improvement in an engine's energy efficiency can allow a plane to fly further with the same quantity of fuel. Another clear example is automation or robotization of processes, so we can produce more with less labour.

In this case, in certain circumstances, new technologies or innovations can end up displacing or eliminating part of the associated employment. This is not a new phenomenon: Luddites emerged in the early 19th century as protesting English craftsmen who feared for their jobs with the arrival of industrial weaving. Acknowledging that innovation and technological progress, whilst generally positive, can generate losses is key to alleviate its side effects. This is important in terms of equity but also to avoid movements developing to resist change, basically resisting economic progress. Luddites, or similar movements, cannot be an alternative.

Making sure that innovation leads to profit for the majority is a shared responsibility falling on individuals, companies and governments. From us, as people, it requires flexibility, the ability to adapt, a concern for continuous training and professional refreshment because the same job is hardly going to involve the same task all your life. Companies should promote continuous training for their employees and organisational flexibility that makes it easy to reassign them within the company. The challenge for governments is no less daunting. Support is growing for apparently simple formulas to minimise job losses. These solutions often suggest miraculous remedies that will fix the situation immediately. The boom in so-called protectionist policies is a good example of this. However, we should remember that import sanctions or direct subsidies for certain sectors are not exactly policies with a great track record. In fact, in most cases, they have opened the door for corruption and inefficiency, the very opposite of what a sustainable development improvement aims to provide.

The government role should focus on policies that ease innovation development and minimise any negative impact from them. Policies meeting these criteria include encouraging growth among the most dynamic companies, employing workers from sectors that are losing jobs, offering a social protection safety net that is sufficiently generous and flexible, with an important role for active work policies; and policies that guarantee a quality education system that teaches how to learn and to innovate.

The best technologies are a source of wealth for society, although, in turn, they represent a challenge that we have to face if we want inclusive economic growth, also a condition for it to be sustainable.