Academic journal article Academy of Strategic Management Journal

The Strategic Implications of Technology on Job Loss

Academic journal article Academy of Strategic Management Journal

The Strategic Implications of Technology on Job Loss

Article excerpt


This paper investigates the impact of technology on job loss (both slowed growth rates and actual declines) across the economy (both manufacturing and service segments) and reflects on the strategic implications of that activity for firms and individuals. It argues that the technology-enabled economy will continue to expand and produce an increasing potential for further job losses or reallocation across all economic sectors. Firms able to create or adopt strategies for coping with the implications of technology in their respective industries may be able to convert a potentially difficult situation into an opportunity. Finally, this paper begins to investigate the question: how will (or can) the economy provide continued or future employment to displaced workers or alternatively give them and their firms some practical strategic coping mechanisms?


Much has been written about the loss of jobs from first-world developed counties (i.e.: United States, Japan, Western Europe) to third-world developing countries (i.e.: Mexico, China, India). The focus often has been on manufacturing jobs simply because jobs lost in that sector provide politicians and labor leaders alike with opportunistic sound bites. However, many economists argue that the total drop in factory employment (in one country) is not due largely to foreign displacement (to another country). The loss of factory jobs is happening all over the world. From Drezner (2004), during the seven-year period 1995 to 2002, 22 million global factory jobs disappeared--not due to offshoring but due to increased productivity (which, even in the face of those lost factory jobs, resulted in a 30 percent increase in global industrial output since 1995). The implication, to both individuals and firms, of protracted job losses and/or reallocations is a topic of considerable importance and concern to anyone with an interest in the future. A generalized examination of options for firms and individuals faced with the changing conditions brought about by technology is a crucial staring point for determining how best to respond at both levels. This paper is a preliminary effort intended to consolidate many of the observations and information related to technology generated job losses with some initial suggestions on mediating their effect.

Substitute "advances in technology" for "increased productivity" and the underlying shift from a labor-intensive to a technology-enabled economy can be explained. This shift not only explains the significant loss in global factory jobs, but the off-shoring effect seen, for example, in the movement of customer service call centers from the U.S. to India. Still, the shift of technology-enabled jobs from one country to another (whether they are manufacturing or service) is not a loss of jobs within the global economy. Economic arguments abound that such shifts are not only necessary but desirable since they lead to overall economic improvements. Of greater concern is the permanent loss of jobs (or those jobs never created) because of the increased use of technology.

Business Week estimates that every one percent of annual productivity growth allows U.S. corporations to eliminate about 1.3 million jobs. Productivity in the U.S. has grown almost two percent since 2001; that accounts for almost all of the 2.5 million jobs lost in the past three years. Many argue that the best remedy is for the government to help those workers find new employment, rather than trying to stop the jobs from being destroyed in the first place. So, as the argument goes, the loss of manufacturing jobs is not of major concern--just as the agriculture economy was transformed by the manufacturing economy, the manufacturing economy, in turn, will be transformed by the service economy. They might be different jobs, and some workers might suffer from the displacement effects, but the necessary jobs will be created none-the-less. …

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