A new era of machinery: Will the accumulation of capital grow and labor intensity decrease?

Abstract

In order to forecast the macroevolution of the contemporary developed societies it appears essential to take into account the dynamics of a number of economic and technological indicators. In the present paper we undertake such an attempt. Almost ten years after the start of the last economic crisis, the world economy is looking for the most effective plans for recovery. Such recovery is often associated with the fourth industrial revolution, in which the technological factor becomes a key driver of development. However, like any technological breakthrough, it will bring not only 'roses of prosperity' but 'prickly thorns' of disappointment as well. The key challenges will be the provision of a new quality of economic growth and addressing the associated employment problem. In this paper, we attempt to show the trends in the ratio between capital and output, as well as the possible effects on employment in the industrialized countries and China until 2050. We used a modified production function with labor-saving technological progress. It is shown that by 2050 the capital-output ratio will not undergo significant changes, and in case of a rejection of institutional reforms and legislative diversification of new types of labor activity in different segments of the economy, there may be a decrease in the number of employed by an average of 20 per cent.