The empirical evidence on the impact of automation and technology on jobs is mixed. In the short term, some workers are more vulnerable to displacement, so there are likely to be transition costs leading to undesirable consequences of lost income, income polarisation and rising inequality.
In the long run, however, technological advances boost productivity, which over time creates new jobs, allowing incomes and living standards to rise.
A 2017 RIETI discussion paper, using Japanese prefectural data, found increased robot density in manufacturing to be associated not only with greater productivity but also with local gains in employment and wages. This suggests embracing innovation outside of manufacturing should also provide long-term dividends. Technical innovation is also necessary to help alleviate a declining workforce.
That said, the Japanese government will need to carefully manage the transition.
Strong and effective social safety nets will be crucial to support workers displaced or disadvantaged. In addition, the government can take a proactive position in educating and reskilling workers to enable them to take advantage of jobs in a high-tech world.
Increasing technological change in Japan will affect a spectrum of industries and improve quality of living. Japan is a relatively unique case in the world given its negative labour-force dynamics.
Productivity supported by investment in automation, AI and technology will need to feature strongly as an engine supporting long-term economic growth. Japan’s experience could hold valuable lessons for economies such as China, South Korea and Europe, which are facing similar demographic trends.