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Literate: Jurnal Ilmiah Indonesia p�ISSN: 2541-0849 e-ISSN: 2548-1398
Vol. 7, No.
09, September 2022�����������������������
UNVEILING THE IMPACT OF TECHNOLOGICAL
ADVANCEMENTS ON MACROECONOMIC STABILITY AND LABOR MARKET DYNAMICS
Herman
Oddyansyah Felani1*, Nirdukita Ratnawati2
1*,2 Universitas Trisakti, Indonesia
Email:
1*[email protected], 2[email protected]
Abstract
The
rapid development of information and communication technology has an impact on
economic growth that is increasingly varied. Economic stability is a basic
prerequisite for achieving improvements in people's welfare through high growth
and improved growth quality. In line with that, technological progress also has
a significant impact on the dynamics of the labor market. The labor market has
a mutual relationship between companies and labor. If developing countries want
to achieve higher economic development, they must increase trade and physical
capital with a stable macroeconomic environment. But on the other hand,
technology automatically leads to a decrease in employment and wages. This
changes the relative demand for jobs.
Keyword: Technological Advancements; Macroeconomic
Stability; Labor Market Dynamics
Introduction
Economic stability is a
basic prerequisite for achieving improvements in people's welfare through high
growth and improving the quality of growth. Economic stability is very
important to provide business certainty for economic actors. Macroeconomic
stability is achieved when the relationships of the main macroeconomic
variables are in balance, for example between domestic demand and national
output, the balance of payments, fiscal revenue and expenditure, and savings
and investment. These relationships do not always have to be in a very precise
balance. Fiscal and balance of payments imbalances, for example, remain
compatible with economic stability as long as they can be financed on a
sustainable basis.
In line with that,
technological advances also have a significant impact on the dynamics of the
labor market. Technological development in the era of the fourth industrial
revolution is like two sides of a coin. On the one hand, it opens up
opportunities for progress and prosperity. But on the other hand, machines and
automation are replacing the role of low-skilled labor (Saragih, 2019).
The labor market has a mutual relationship between companies and labor. So it
can be said that companies need labor in accordance with market demand and this
is commonly known as drived demand. It is assumed that the market in the
economic system if the entrepreneur is not able to influence the price, but on
the one hand the company is said to be able to determine the price (price
taker) (Putri & Idris, 2020).
Technology is a human
science about how to solve problems regarding meeting needs, fulfilling
desires, by combining resources to produce goods, including raw materials,
tools, methods, processes, techniques, methods, and skills. Technology is also
the development of a medium whose use is more practical and more efficient to
facilitate all human activities (Setiawati & Al Qoodir, 2021). Technology is
the hallmark of human nobility, as it proves that humans cannot live just to
eat, but need more than that. Technology can activate the non-material components
of human life, feelings, thoughts, minds, intuition and ideals (Adiwijaya,
2018).
The rapid development of
information and communication technology has an impact on economic growth that
is increasingly varied. Dianari (2018) calls this phenomenon the New Economy
which is a term for the birth of a new economic structure as a result of the
development of information and communication technology. Technology is the most
important factor to drive the industry. Technological advances will make
changes in production processes and methods as a result of innovation and
renewal or new techniques. Technological changes will increase productivity.
Increased productivity will have an impact on the division of labor and the
expansion of the scale of production, thus creating specialization, and
ultimately can bring changes towards large-scale production efforts (Setiawati & Al Qoodir, 2021).
Advances in information
and communication technology have a positive and significant role in economic
development in developing countries. Developed countries have a more stable
macroeconomic environment than developing countries, so macroeconomic stability
plays a more important role for developed countries. If developing countries
want to achieve higher economic development, they must increase trade and
physical capital with a stable macroeconomic environment (Audi, Marc, Amjad, 2019). Developing
countries must adopt advances in information and communication technology (ICT)
to compete with developed countries in the process of economic stability.
In today's life,
technological progress is inevitable, because technological progress will
follow the changes and developments of the times. Technology is the real proof
of scientific progress. The innovations created can provide positive benefits
for human life. Convenience in human activities is a new way technology plays a
role in human activities. Therefore, this article discusses the impact of
technological progress on macroeconomic stability and labor market dynamics.
Research Method
This article uses a mixed
research approach, namely quantitative and qualitative. The quantitative
approach is the process of collecting and analyzing data numerically to answer
questions and test predetermined hypotheses. While the qualitative approach is
theory testing by analyzing data sources derived from literature studies. The
data collection process by the author involves a comprehensive review of
scientific literature, including journals that have been reviewed by experts
and authoritative books. The sources used in this study are not only limited to
domestic publications, but also include international literature and research
findings.
The initial step in the
data analysis process involved data reduction, which involved data
classification and subsequent selection to simplify the data that had been
identified. The author then proceeded to the second stage, which involved a
careful review of the data results obtained and strategically highlighting important
elements to be further organized into a coherent text narrative. In the next
stage, after identifying the main gist of the data obtained through a
comprehensive literature review, the author composes a coherent narrative that
aims to gain conclusive insights and validate them as potential solutions to
the issues raised in the article.
Discussion
Unveiling the Impact of Technological
Advancements on Macroeconomic Stability
A country is considered
successful or not in solving its own economic problems can be seen from the
macro and micro economy of the country. Macroeconomics is the study of
activities that discuss the economy of a country. One of the macroeconomic
indicators used to measure the stability of a country's economy is inflation.
Changes in this indicator will have an impact on the dynamics of economic
growth. In an economic perspective, inflation is a monetary phenomenon in a
country where the rise and fall of inflation tends to cause economic turmoil.
Inflation is a phenomenon in which the general price level increases
continuously. An increase in the price of just one or two goods cannot be said
to be inflationary unless the increase is widespread or results in price
increases in other goods.
Global economic
conditions in November 2022 were still under pressure from high inflation,
reflected in the realization of inflation in the Euro Area, the United States,
and Peru. In addition, based on UN FAO data, global food prices also surged by
27.3 percent, influenced by weather factors, the energy crisis, and the surge
in fertilizer prices (Kemenkeu, 2022). These two things add pressure to
consumers and governments around the world that inflation control policies are
very important, especially to maintain the socio-economic conditions of the
community and a stable economy. Here is a summary of country inflation:
Table
1
Country
Inflation Summary
|
Country |
Q3 Growth (YoY) |
Description (Influencing Factors) |
|
Euro Area |
4,9% |
Driven by energy scarcity and rising
electricity prices. Even core inflation, which excludes volatile components
such as food and energy, also increased to 2.6 percent (YoY). |
|
United States |
6,8% |
Driven by surging prices for energy,
shelter, food and vehicles. People also faced higher costs for basic
necessities, namely: Food, up 6.4 percent (YoY), the highest since December
2008. Gasoline, up 6.1 percent (m-to-m) and matching the increase in October,
the highest since March 2021. Residential
rent surged to 3.8 percent (YoY), the highest since 2007. |
|
Mexico |
7,4 |
This is more than double the central
bank's target of 3.0 percent and the highest pace since early 2001. In
addition, this condition will also encourage an increase in the benchmark
interest rate this week and become the fifth consecutive increase throughout
2021. |
Source:
CEIC, 2023
With inflation, an
increase in the inflation rate indicates economic growth, but in the long run,
a high inflation rate has a very bad impact. With the high inflation rate, this
causes domestic goods to be relatively more expensive when compared to the
price of imported goods (Ramadani, et al., 2021). If we see that
in principle not all inflation has a negative impact on the economy. Especially
if there is mild inflation, namely inflation below 10%, with this mild
inflation can encourage economic growth. This is what encourages entrepreneurs
to further increase their production by opening new jobs. Macroeconomic
inflation in Indonesia in Oktober 2023 is as follows:
Table
2
Macroeconomic
Inflation in Indonesia in Oktober 2023
|
|
Inflation |
Inflation Share |
|
General Inflation |
2,56 |
2,56 |
|
Food, Drinks and Tobacco |
5,41 |
1,39 |
|
Clothing and Footwear |
0,85 |
0,04 |
|
Housing, Water, Electricity and
Household Fuel |
1,16 |
0,23 |
|
Supplies, Equipment and Routine
Household Maintenance |
1,89 |
0,11 |
|
Health |
2,04 |
0,05 |
|
Transportation |
1,20 |
0,16 |
|
Information, Communication and Financial
Services |
0,11 |
0,01 |
|
Recreation, Sports and Culture |
1,50 |
0,03 |
|
Education |
1,00 |
0,11 |
|
Provision of Food and
Beverage/Restaurant |
2,21 |
0,20 |
|
Personal Care and Other Services |
3,67 |
0,23 |
Source: Badan Pusat
Statistik, 2023
In October 2023 there was year on year (y-on-y) inflation of 2.56
percent with a Consumer Price Index (CPI) of 115.64. The highest inflation
occurred in Tanjung Pandan by 5.43 percent with a CPI of 120.87 and the lowest
occurred in Jayapura by 1.43 percent with a CPI of 112.88. Y-on-y inflation
occurred due to an increase in prices as indicated by the increase in all
expenditure group indices, namely: food, beverages and tobacco group by 5.41
percent; clothing and footwear group by 0.85 percent; housing, water,
electricity, and household fuel group by 1.16 percent; household supplies,
equipment and routine maintenance group by 1.89 percent; health group by 2.04
percent; transportation group by 1.20 percent; information, communication, and
financial services group by 0.11 percent; recreation, sports, and culture group
by 1.50 percent; education group by 1.99 percent; food and beverage
supply/restaurant group by 2.21 percent; and personal care and other services
group by 3.67 percent.
The month to month (m-to-m) inflation rate for October 2023 was 0.17
percent and the year to date (y-to-d) inflation rate for October 2023 was 1.80
percent. The y-on-y inflation rate of the core component in October 2023 was
1.91 percent, m-to-m inflation was 0.08 percent, and y-to-d inflation was 1.54
percent (BPS, 2023)
Most indicators of global
economic activity showed positive momentum. The global Purchasing Managers
Index (PMI) for example, edged up to 54.3 for the Manufacturing PMI, while the
Services PMI increased to 55.6. Both recorded output growth with the services
sector outperforming manufacturing. Supply constraints that plagued the
manufacturing sector are again evident especially in the United States and
Europe. Supply delays and backlogged of works are still on the rise. Among the
many drivers of inflation, energy prices are the main culprits (Bappenas, 2021).
Although energy commodity
prices declined in November 2021 due to strong commitments from the United
States, Russia, and China to increase supply. Energy prices still remain at
high levels compared to 2020. Inflation in November 2021 accelerated with an
inflation rate of 0.4 percent (m-to-m). This development was driven by price
increases in all expenditure groups, especially the food, beverage and tobacco
group (Bappenas, 2021).
Technological advances
also have a significant influence on macroeconomic stability. The importance of
the influence of technology on economic growth has been an important study
since long ago, Romer, who is the originator of endogenous economic theory,
argues that technological flows can encourage investment so that capital will
increase, in addition to investment, the increase in technology also has an
impact on cultural exchange, especially in the field of education because
sophisticated technology must be supported by qualified human resources so that
the use of technology in the production process becomes effective and efficient
(Setiawati & Al Qoodir, 2021).
Technology is a
projection of the flow of investment, trade and effectiveness in production.
Technological growth encourages international trade and foreign investment into
the country because it is almost impossible for a country to meet its
technological needs independently. In addition, technological growth will
encourage effectiveness and efficiency in production because technology will
produce acceleration in the production process. With technological advances, a
country can produce products/services needed by its population, and technology
can improve the quality and quantity of goods/services more effectively and
efficiently, so that the products/services produced can compete with other
countries. The impact of technology on the economy, making high productivity
(greater output), increased product quality, diverse new product variations,
and modern product innovations.
Technology greatly
affects a country's economy. The economy is measured through economic growth or
the value of GDP and GDP per capita. Technologically advanced and modern
countries, their economic growth rate is always positive and stable, although
they experience negative growth, but the gap is not too large. GDP per capita
is very high, and this is a criterion for developed countries in terms of GDP
per capita.
Unveiling the Impact of Technological
Advancements on Labor Market Dynamics
The labor market has a
mutual relationship between companies and labor. So it can be said that
companies need labor in accordance with market demand and this is commonly
known as driven demand. It is assumed that the market in the economic system if
the entrepreneur is unable to influence the price, but on the one hand the
company is said to be able to determine the price (price taker). Labor supply
is the amount of labor provided by labor owners for possible wages that have
been offered at a certain period of time (Putri & Idris, 2020).
The individual has the right to decide whether they want to work or not and
they can determine the hours they want to work. Here is the average size of the
labor force in February 2023.
Figure 1: Total Labor Force 2022-2023
The Sakernas results for
February 2023 showed an increase of 2.61 million people aged 15 years and over
who were included in the labor force compared to February 2022. When compared
to August 2022, the total labor force also increased from 143.72 million people
to 146.62 million people in February 2023. Along with the increase in the
number of labor force, the TPAK in February 2023 also increased compared to
February 2022.
In a study conducted by
Michael Webb (2019) predicts that technology will have a significant impact on
employment. He determined that automated technology has an impact on decreasing
employment and wages. New technologies create winners and losers in the labor
market. This changes the relative demand for jobs. The concept of technology is
central to macroeconomic analysis (Kristin Dell & Nestoriak, 2020).
In the standard macroeconomic growth model, labor and capital are the main
factors of production that generate economic value.
The utilization of
technology has the potential to increase the effectiveness and efficiency of
the workforce in various industries and thus has the potential to increase the
productivity of the workforce within the company. One illustration of this
concept is the utilization of time management software, which empowers
individuals to effectively structure their work schedules and optimize their
time utilization to increase productivity. In addition, the application of
technological tools, such as reminder systems and scheduling applications, can
effectively assist the workforce in managing the organization and reduce the
adverse impact of heavy workloads.
In other cases, the
introduction of automation and digitalization in the economy can take away all
control and lead to job losses and generate structural changes that contribute
to an increase in structural unemployment. The introduction of automation can
replace the role of labor in various industries. Some jobs that are simple and
basic in nature are at high risk of being replaced by technology. The potential
impact of technological advances, such as automation and robots, on employment
in Indonesia in the next two decades is noteworthy. According to the
International Labor Organization (ILO), about 56 percent of jobs in Indonesia,
equivalent to about 60 million jobs, are considered threatened by significant
automation. The potential for job change by machines and technology does not
only occur in traditional or manual labor but also has the potential to replace
repetitive administrative work (Cahyaningtyas, Afinsha S., et al. 2023). This
has resulted in a phenomenon known as job polarization, where there is a
decline in jobs that require middle-level skills.
Technology is essentially
neutral and plays a very important role in the development of human
civilization. New technologies need not be feared as mankind has coexisted with
machines and automation processes since the first industrial revolution, but it
is necessary to be wary of them. Globalization is inevitable, the large
population and consumption base, strategic geographical position for trade, and
business-friendly government have attracted many multinational companies to
invest in Indonesia. These investors bring new technologies that have never
existed in Indonesia before, and are bound to cause disruption. The positive
impact is to push Indonesia to achieve new progress and leave behind (Saragih, 2019).
Meanwhile, the negative impact is that Indonesian industries and human
resources that are not ready to adopt and adapt to these technologies will
experience industry shock and manpower shock. A large but low-quality or
standard population will face many problems in the future.
Conclusion
Advances in information
and communication technology have a positive and significant role in economic
development in developing countries, especially Indonesia. Developed countries
have a more stable macroeconomic environment than developing countries, so
macroeconomic stability plays a more important role for developed countries. If
developing countries want to achieve higher economic development, they must
increase trade and physical capital with a stable macroeconomic environment. But
on the other hand, automated technologies have the effect of reducing
employment and wages. New technology creates winners and losers in the labor
market. It changes the relative demand for jobs. The concept of technology is
central to macroeconomic analysis. In the standard macroeconomic growth model,
labor and capital are the main factors of production that generate economic
value.
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Copyright holder: Herman
Oddyansyah Felani (2022) |
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First publication right: Syntax Literate: Jurnal Ilmiah Indonesia |
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