The Impact of Technology on Unemployment

Chong, Jing Yi (2026) The Impact of Technology on Unemployment. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study examines the impact of technology on unemployment in Malaysia. The main problem addressed is whether technological advancement contributes to reducing unemployment or leads to job displacement. Annual time series data from 1986 to 2024 were used, including variables such as unemployment rate (UN), labour productivity (LPAT) as a proxy for technology, foreign direct investment (FDI), gross domestic product (GDP), and trade openness (TO). The study applies the Autoregressive Distributed Lag (ARDL) approach to analyse both short-run and long-run relationships among the variables. Unit root tests (ADF, PP, and KPSS) were conducted to determine stationarity, followed by ARDL bounds testing to examine long-run relationships. The Error Correction Model (ECM) was used to analyse short-run dynamics, while diagnostic and stability tests were conducted to ensure the reliability of the model. The results show that there is a long-run relationship between technology and unemployment. In the long run, technology, foreign direct investment, and trade openness help reduce unemployment, although the effect of technology is relatively weak. In the short run, economic growth does not have a significant impact on unemployment, while the adjustment toward equilibrium is relatively fast. The findings also show that technology does not directly cause changes in unemployment but affects it indirectly through economic growth and investment. Overall, the study concludes that unemployment in Malaysia is influenced more by long-term factors, and technology plays an indirect role in improving employment. These findings suggest the need for policies that support skill development and adaptation to technological changes