Technological Effects on Wages and Labour: Classical and Neoclassical Ideas

The introduction of new technology may have significant effects on the level of employment and the real wage rate; effects that have received considerable attention even from the economic thinkers of the classical period. This paper aims to analyze and evaluate the various views and arguments of early classical and neoclassical economists concerning the technological effects on wages and employment. On the one hand, the economists of the early decades of the 19th century (mainly between 1800 and 1840) had recognized and analyzed many of the effects of technology on labourers’ welfare. On the other hand, early neoclassical theorists of the period between 1890 and 1935 tried to expand on the classical views and to develop their own theoretical arguments, based on new perceptions like the marginal productivity theory. The main conclusion drawn is that most of early classical and neoclassical economists recognized and specified the temporary adverse effects of new technology on labour (e.g. short-run unemployment), but, at the same time, they argued for the beneficial long-run consequences of technological progress on labourers’ welfare.