January 5, 2014


The robots are coming. Will they bring wealth or a divided society? (Gavin Kelly, 1/04/14, The Observer)

To get a better sense of the impact of technology on our labour market we don't need to rely entirely on frothy speculation about the future. There is a decade or more of research to draw on. The rise of information and communications technology (ICT) is hardly new. The dominant view, both in the UK and elsewhere, is that it has already been eroding a swath of jobs that involve repetitive tasks capable of being automated and digitised. This has disproportionately affected roles in the middle of the income distribution - such as manufacturing, warehousing and administrative roles.  

This doesn't result in lower overall employment - for most economists the main change is to job quality, not quantity.  There has been a rapid growth in demand for high-skill roles involving regular interaction with ICT, as well a rise in lower-paid work that is very hard to automate - from caring to hospitality. Consequently the balance of employment has shifted upwards and downwards with less in between; as Manning puts it, the labour market has been polarising into "lovely and lousy jobs". The impact of technology has been gradual but inexorable - "it only goes one way", he tells me. In some sectors the decline in employment and relative pay has been dramatic: the typical heavy goods driver receives less in real terms today than a generation ago.   

Some of this is contested. Recent evidence suggests the extent of polarisation may be overstated as it hasn't taken into account entirely new middle-income roles that replace old ones. Others point out that job-title inflation means that yesterday's mid-level jobs are sometimes counted as today's high-level ones.  Some roles that are popularly assumed to have fallen prey to machines have adapted and survived - as President Obama realised to his cost when he asserted that ATMs have led to the demise of bank tellers (their numbers have risen).  And it's important to keep a sense of proportion: between 1990 and 2010 employment in hard-hit occupations in the UK like skilled trades fell by 25% and administrative jobs by 20%. Big losses, but they hardly represent the death of mid-level jobs. 

A narrow focus on technology is also inadequate, as it fails to explain some of the big shifts of the last decade like the explosion in rewards at the very top - 60% of the enormous increase in the slice of income flowing upwards to the richest 1% over the last decade went to those working in finance. To lay this at the door of the anonymous force called "technology" is to excuse way too much. Sure, developments in ICT were relevant, but they don't explain political choices over deregulation or account for rapacious rent-seeking by the financial elite.  Wage inequality has many authors, from the demise of collective bargaining to the rise of globalisation. As the influential Washington-based EPI thinktank has argued: don't make robots the fall guy.

Nor does an exclusive techno-focus illuminate the post-crisis polarisation of our jobs market, which has seen recession-busting increases in high-paying jobs in sectors like business services alongside a big growth in low-paid work, with sharp falls in between in sectors like construction. Further signs of the impact of technology? Doubtful. This pattern has coincided with a demand-starved economy, an investment strike by business and plummeting wages. Indeed recently the robots could be forgiven for worrying about their prospects given the falling cost of labour.  It all adds up to a complex story. The hollowing out of the jobs market is real and important. But its scale can be overstated and technology, though crucial, is by no means the only factor at work. None of this means we should be sanguine about the future. 

Given the uncertainties and the capacity of market economies to adapt to shocks, many will assume that things will continue much as they have done. Perhaps. But if the techno-enthusiasts are at least partly right, the consequences will be far-reaching. 

Fortunately, perhaps, at least some of the issues that this would mean grappling with are more extreme versions of those we should be worrying about already. The rise of the robot is likely, for instance, to result in an increasing share of GDP flowing to the owners of capital at the expense of labour - something that has recently been occurring across many OECD countries (though less so in the UK than is often assumed). An acceleration of this should rekindle interest in finding ways to distribute the ownership of assets more evenly as well as finally prompting a serious discussion about shifting some of the burden of taxation from labour towards wealth.  

Accelerating wage inequality, together with a rise in economic insecurity, would sharpen the need to bolster our working-age welfare system at a time when it's already creaking and has few political friends.

Posted by at January 5, 2014 8:25 AM

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