A Business Encyclopedia

Technological Unemployment

Definition: The Technological Unemployment is caused when the individuals lose their jobs due to the technological advancement. Simply, the substitution of manpower with technology results in technological unemployment.

It is a form of structural unemployment wherein the structure of the economy changes with the shifts in demand for manpower due to the introduction of new machinery, time-saving technology and improved methods of production.

Typically, the technological unemployment occurs with the introduction of new machinery, and it said to be temporary or short-lived. This is because with the use of an improved technology the returns for company increases in the long run and these can be employed to further diversify into other business lines or promote the allied industries. In doing so, the new job opportunities gets created for the unemployed and the rate of unemployment decreases.

Also, with the use of new machinery, now fewer workers are needed to manufacture one unit of a commodity which results into less cost of production. With this, the price of a commodity decreases and the customer is able to buy it by spending a small percentage of his income. As a result of this, the demand for the commodity increases that leads to increase in the demand for the workers. Thus, more workers are required to fulfill the demand.

This shows that technological advancement does bring the change in the manpower requirements, but it is a temporary phenomenon that ultimately results in an increase in the demand for manpower in the long run.

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