Data Insight: Impact of technology investment on Northern Ireland's economy
11 October 2023
This study explored the effects of technology investment on Northern Ireland's economy. It found that firms investing in technology experience increased employment growth and offer higher wages. However, the impact on overall productivity is minimal. The relationship between technology investment and economic outcomes varies based on firm size. This study explored the effects of technology investment on Northern Ireland's economy. It found that firms investing in technology experience increased employment growth and offer higher wages. However, the impact on overall productivity is minimal. The relationship between technology investment and economic outcomes varies based on firm size.
Understanding these dynamics is crucial for policymakers, business owners, and the public to address the productivity puzzle and mitigate job insecurity and inequality. Our research supports the Department for the Economy's vision and emphasises the importance of balancing technological advancements with inclusive growth strategies.
What we found
The results provide empirical evidence of the positive impact of technology investment on employment growth and wages. Specifically, we found a significant increase in employment growth associated with an increase in technology investment. This suggests that firms investing in technologies tend to create more jobs. Similarly, we observed a positive relationship between technology investment and wages, indicating that firms investing in technology tend to offer higher wages to their employees. Additionally, we identified a significant positive association between technology investment and a proxy for eco-unfriendly growth, suggesting that technology adopters are less likely to adopt environmentally-friendly practices.
When examining the relationship between technology investment and labour productivity, we found no effect. This suggests that while technology investment may lead to employment and wage growth, it may not substantially impact overall productivity levels. Furthermore, we noted a negative relationship between technology investment and alternative employment (part-time employees, unpaid employees, and temporary agency staff), indicating that overall employment conditions are likely to improve somewhat. Still, the relationship is insignificant, so we cannot establish a binding relationship for an average firm.
Interestingly, in the additional regressions the effect of firm size emerged as a significant moderator. Further analysis uncovered that for larger firms, investment in technology does not necessarily result in higher employment, with the coefficient now being negative. For smaller firms, we see that the growth in employment is significant. We also find that larger firms, which possess greater resources and flexibility, exhibited less impact on employment conditions and offered higher wages compared to smaller firms. Thus, technology enables smaller firms to mitigate their lower employment growth, but it does not necessarily translate into improved employment conditions for these firms.
Why it matters
A deeper understanding of how investment in technologies affects the Northern Irish economy, including productivity and employment, is vital for policymakers, business owners, academics, and the general public. This knowledge is key to addressing the long-standing productivity puzzle in Northern Ireland and alleviating technological anxiety among the population.
Investing in technology has an increasingly significant impact on employment conditions and availability. Secure and well-paid jobs have been reduced and replaced by the gig economy. There is potential for further job reductions, as demonstrated by the partial displacement of taxi drivers by Uber and the future prospect of driverless cars. These emerging technologies are likely to exacerbate inequality and contribute to job insecurity and overall employment loss, particularly for lower-skilled workers.
While some evidence suggests that investment in technology creates new, higher-skilled jobs, its specific implications within Northern Ireland remain unclear. Robust and empirical evidence measuring the large-scale effects of technology investment on job creation across the entire UK is still lacking, further fueling technological anxiety.
This project played a vital role in reducing technological anxiety by providing a deeper understanding of how investment in computers, machinery, and equipment influences employment dynamics within organisations. By identifying the extent to which such investments contribute to changes in employment conditions, this research enhances our understanding of human capital needs and helps policymakers, business owners, and the general public navigate the challenges of Industry 4.0.
Additionally, the study contributes to the Department for the Economy's 10x vision, which aims to drive innovation, productivity gains, and inclusive growth through targeted technologies and strategic clusters. The project's descriptive statistics comparing regions and sectors in their technology investment and resulting benefits, such as economic growth, inclusive growth, and green growth, will support the assessment of the 10x vision's success.
Moreover, this research offers insights into the relationship between technology investment and employment growth and conditions in an advanced economy like Northern Ireland, where skill shortages pose challenges. The findings emphasise the importance of balancing technological advancements with strategies that promote inclusive growth and support small firms in adapting to changing economic landscapes.
By considering the impact of technology adoption on the workforce and implementing strategies to mitigate employment reductions, policymakers and businesses can effectively navigate the dynamic landscape of technological advancements. Addressing skill gaps and challenges related to digital exclusion is crucial to closing productivity gaps in regions like Northern Ireland and promoting sustainable economic development.