Impacts of innovation on labor market: Descriptive analysis

This paper examines the effects of innovation on the labor market, more clearly employment dynamics by analyzing the relationship between different measures of innovation and unemployment rate. It reviews existing literature on the link between these two variables and analyzes the argument for and against the adverse effects of innovation. Taking into account that there are different types of measures of innovation, firstly, the author tries to find the most relevant one of them. Paper concludes that there is no evidence to believe that innovation increases unemployment rates. By contrast, it is observed that the unemployment rate is almost always around its natural level in countries with a high innovation level. However, it is not true to state that innovation decreases the unemployment rate. To get more reliable results, one should distinguish between highskilled and low-skilled labor, because innovation and new technologies affect them differently. Additionally, a high innovation level is mainly observed in developed countries, which means that the low unemployment rate may be the result of other economic variables, not innovation.