Over time the demand for labor is influenced not only by changes in relative factor prices but also by changes in technology. Improvements in the state of technology arise from advances in basic knowledge. For example genetic engineering and improved techniques of production (such as robots, words processors and jumbo jets). There was widespread concern over whether the process of technological change or ‘automation’ would result in rising levels of unemployment in the economy, a concern that has resurfaced today as robots replace auto workers and word processors make the typing pool a thing of the past.
The impact of technological change on employment can be analyzed with the long-run theory of labor demand. Improvements in the state of technology can most often be incorporated into the production process only through the addition of new capital in the form of more modern, up-to-date equipment.
Thus in the short run the employment of our employer is largely unaffected by technological change since by definition the amount of capital is fixed. In the long run however our employer has the opportunity not only to substitute between labor and capital but also to replace older, technologically outdated capital with the most technologically advanced capital. We have seen this first hand in the station department when the former CEO Jay H Walder pushed the metro card vending machines in hopes to eliminate labor.
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