Finland: One-third of Finnish employment susceptible to computerisation

A recent report examining the effects of computerisation on the Finnish labour market suggests that as much as one third of Finnish employment is highly susceptible to computerisation in the next decade or two. While this outlook implies major future changes in Finnish employment, the estimated impacts may not necessarily imply future mass unemployment.

Background

A common embarkation point for the future vision of the labour market is technological transformation, often described as one of the largest structural changes since industrialisation. Until now, a study shows that computerisation has mostly influenced routine tasks. In the future, however, the influence will increasingly extend also to non-routine tasks.

While the phenomenon of computerisation is taking place worldwide and will most likely increase global welfare, the effects on national labour markets will naturally vary extensively, not least due to cross-country differences in occupational structures. The Research Institute of the Finnish Economy (ETLA) has studied how computerisation is set to affect the Finnish labour market within the decades to come. The study, Computerization threatens one third of Finnish employment, was carried out as part of collaborative research between ETLA and the Berkley Roundtable on the International Economy (BRIE) at the University of California. The study was published in ETLA’s own publications series ETLA Briefs in January 2014. 

Identifying and quantifying jobs at risk

The ETLA study quantifies what recent technological advances will mean for future employment in Finland. The primary objective is to analyse the implications of digitalisation for individual occupations and sectors, as well as analysing the number of jobs at risk.

The ETLA study builds on a paper on the future of employment by researchers at the University of Oxford and the novel methodology they have developed to examine expected impacts of future computerisation on US labour market outcomes. By matching technical possibilities and engineering solutions with job tasks, the researchers derive a ‘probability of computerisation’ measure for each occupation, enabling an analysis of jobs at risk. The ETLA brief employs the same methodology, providing corresponding estimates for Finland. It also provides a comparative perspective, comparing the outcomes for the labour market in Finland with a corresponding outlook for the United States (US).

While the University of Oxford research uses data from the American Occupational Information Network (O*NET) and the Standard Occupational Classification by the US department of Labor, covering 702 occupations in 2010, ETLA builds its analysis on the same US data from 2012 and similar 2011 data for Finland from Statistics Finland. In the Finnish study, the probabilities defined for US occupations were converted to the International Standard Classification of Occupations, resulting in 410 occupations in the final analysis. This data cover as much as 92% of Finnish employment.

Results and analysis

The results of the ETLA study show a high probability that about one third of current Finnish employment will be replaced by computer-controlled equipment in the next decade or two. While this proportion is large, it is still 10 percentage points lower than the corresponding estimate for the US.

The findings reveal that most occupations are either quite sheltered from or quite threatened by computerisation, rather than falling somewhere in between. Compared to the US, however, this uneven distribution of susceptibility is slightly less evident in Finland. 

The study also looks at the susceptibility by sector and by average wages. It finds that low wage and low skill jobs are most vulnerable and manufacturing jobs are somewhat more at risk, while service jobs are relatively more sheltered. Shop sales assistants, secretaries and office clerks are among the occupations most at risk in Finland. However, nurses, social workers, childcare workers and counselling professionals are reported to be least susceptible to computerisation. In the US, the outlook is similar: occupations most at risk include cashiers, secretaries and administrative assistants while nurses, surgeons, lawyers and software professionals are among the least threatened occupations. 

In the ETLA study, the term ‘computerisation’ is used to cover a broad set of technologies falling under machine learning, mobile robotics and task restructuring. The methodology used, however, purely focuses on technological capabilities. This means that social forces such as legislation, regulations and other political measures that inevitably influence changes in the labour market are disregarded in the estimated impact. The fact that work tasks can be replaced by technology, does not mean that this will necessarily happen. Furthermore, the approach does not take into account the fact that the content of tasks within occupations are in a constant flux – as expected, the occupational structure in Finland is bound to develop during the next 20 years, not least due to globalisation.

As the study points out, there has been a continuous fear of mass unemployment caused by technological progress since industrialisation began, but these concerns have not materialised. The current phase of computerisation, however, is described as unique in its magnitude and speed of change. The study notes that computerisation is likely to lead to substantially different occupational structures and work contents in Finland. During a transition period, an imbalance between job creation and job destruction might well lead to considerable difficulties in the shorter run, with a permanent and higher natural rate of unemployment. Nonetheless, the study's authors remain optimistic about Finland’s ability to adjust in the longer run, with the help of education and training.

As the authors point out, it is also worth noting that Finland as an innovation-intense country is well positioned to have a reasonable market share in the segments developing, providing and implementing technologies that are referred to as computerisation.  

Social partner reactions

While the report received much attention in the national media, it was little contested. The then Prime Minister Jyrki Katainen commented on the ETLA report in a news interview (in Finnish), noting with calm that jobs disappearing is 'a normal development'. Several social partners commented on the report, all agreeing on the importance of training and education in meeting future challenges. In a news article (in Finnish), the Central Organisation of Finnish Trade Unions (SAK) especially raised the importance of adult education. The leading business organisation in Finland, the Confederation of Finnish Industries (EK), commented on the report by welcoming the developments in the labour market. While the transition period was predicted to be a problem, as old jobs disappear before new ones are created, the employment rate is likely to be maintained in the long run, with the help of well-directed educational measures and flexibility in the labour market, according to an online news article on the ETLA report (in Finnish). The Private Employment Agencies' Association (HPL) pointed out in a press interview (in Finnish) that new technology also creates new jobs. Lifelong learning, including both very specific training of workers and the need for re-education, will be increasingly important to meet future challenges. The careers of young people will look different than those of previous generations, with two to three different occupations over a lifetime.

Commentary

Structural changes in the labour market seem inevitable and there is no doubt that digitalisation will be a major force in this development in future decades. Structural unemployment is however only likely to occur where there is no capacity to redirect educational resources to meet new demands. Accordingly, adjustment measures are needed in all parts of society. A report by the Ministry of Transport and Communications, Digitalisation in medium-sized enterprises (in Finnish), wisely points out the importance of business management training and awareness-raising among employers, ensuring that digitalisation forms an integral part of business strategies.

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