How Does Technology Affect the Economy?

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Table of Contents

Introduction
Effect of technological advancement on employment
Conclusion
Works Cited

Introduction

In the contemporary world, the word technology is perhaps one of the widely used terms. It refers to the application of science or innovative non-human energy to perform work. Technological advancement has been praised as one of the factors that drive the economies of most nations and emerging markets. The application of new technology is very profound in almost all sectors of the economy, including medicine, health, transport, communication, entertainment, and manufacturing.

Effect of technological advancement on employment

One of the major issues associated with the technology is employed. New technology has created employment opportunities for many workers in different capacities.

For instance, a technology company like Apple has necessitated the creation of job capacities such as the CEO, managers of the various product lines, marketing staff, and workers in the factories. In total, the company has employed over 98,000 people (Apple Inc.). All the other factors held constant. It is needless to state that technology is a driver of economic development through job creation.

However, technology is also one of the contemporary agents of job losses. For instance, the case of Apple discussed above has displaced hundreds of thousands of workers who previously worked for postal corporations and other landline companies across the world. Many former secretaries of companies have lost their jobs as there is no need for staff to answer calls since bosses can now communicate directly with their clients using mobile devices.

The overall effect of the new technology is an increase in the productivity of businesses by saving costs related to labor (Arvanitis). The savings in labor costs can be directly translated to mean unemployment for workers who are displaced as a result of the application of new technology in businesses. The worst part of such displacement is that the displaced workers might find it hard to find new jobs as their skills are deemed outdated (Freeman).

Most of the technological advancements originate from developed nations that have the necessary resources and institutions that promote and fund such developments (Arvanitis). The living standards of people in these developed countries are far much better than those in the developing nations. Technological advancements in these nations have the effect of creating more jobs for the people. The developing nations import the goods and services from the developed nations.

This importation results in the loss of jobs as the technological goods and services make the earlier technologies in the developing countries obsolete. The net effect of this phenomenon is the creation of jobs in developed countries and the loss of jobs in developing nations. The inevitable end result is that the developed nations (haves) tend to expand as the developing nations (have-nots) shrink, further widening the gap between them.

Another negative effect of technological advancement relating to income distribution is that the high technology companies in the developed nations tend to relocate their manufacturing divisions to the developing nations where the cost of labor is low (Arvanitis). The technical workers are employed from the local communities where they are paid low wages in order to minimize costs.

The companies then sell their products at high costs in order to obtain high-profit margins. The developing countries are not spared from the high price tags of the products, and the profits are repatriated back to the developed nations. Thus, the gap between the haves and have-nots continues to widen in the process.

Another illustration of the effect of technology on the economy is associated with multinational corporations. Technological advancements have made the world a global village, where companies establish operations in several parts of the world. Most multinationals have been incorporated in the developed nations (Dunning). They then expand their operations to the developing world.

A notable phenomenon is that these corporations partner with other corporations from the developed world to deliver their services to the customers. For instance, technology has stimulated online shopping trends, thus making it easy for customers to buy products and services over the internet. Shipping companies also benefit from the shift from traditional brick and mortar stores.

The result is that online shopping companies (like Amazon) sell their goods to customers around the world at lower prices than some of the physical retail stores in those countries. Customers shift from buying products from physical stores to online shops. This shift results in the loss of jobs for those directly and indirectly employed in the retail sector.

To make matters worse, the online shopping companies (in this case, Amazon) may use other multinational companies (say, DHL) to deliver the goods to the consumers. The effect of such technological advancements in the loss of retail jobs in the developing nations and an increase in sales (and profits) by multinational companies. The lower class of people in the developing nations continues with the misery of job losses as the owners of the factors of production in the triumph of the developed nations.

Conclusion

Technology is a clear driver of economic development in most nations. However, it creates jobs on one hand and destroys jobs on the other. The sad part is that jobs are mostly created for people with more resources and destroyed for those with fewer resources. The effect of such imbalances is that the gap between the rich and the poor in society continues to widen as more technological applications are embraced.

Works Cited

Apple Inc. Inclusion Inspires Innovation.2014. Print.

Arvanitis, Spyros. “Computerization, workplace organization, skilled labour and firm productivity: Evidence for the Swiss business sector.” Economics of Innovation and New Technology 14.4 (2005): 225-249. Print.

Dunning, John H. “Location and the multinational enterprise: A neglected factor & quest.” Journal of international business studies 40.1 (2009): 5-19. Print.

Freeman, Richard B. “Globalization of scientific and engineering talent: international mobility of students, workers, and ideas and the world economy.” Economics of Innovation and New Technology 19.5 (2010): 393-406. Print.

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How Does Technology Affect the Economy?

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