The onrushing wave - The Future of Jobs
Squeezing out the middle class could generate antagonistic, unstable and potentially dangerous politics.
Satochi Kambayashi
The Economist
Previous technological innovation has always delivered more long-run employment, not less. But things can change
Summary:
One of the worries Keynes admitted (in 1930) was a “new disease”: “technological unemployment…due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor.”
Nowadays, the majority of economists confidently wave such worries away.
By raising productivity, they argue, any automation which economizes on the use of labor will increase incomes.
That will generate demand for new products and services, which will in turn create new jobs for displaced workers.
For much of the 20th century, those arguing that technology brought ever more jobs and prosperity looked to have the better of the debate.
Industrialisation did not end up eliminating the need for human workers.
On the contrary, it created employment opportunities sufficient to soak up the 20th century’s exploding population.
When the sleeper wakes
Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently.
They start from the observation that, across the rich world, all is far from well in the world of work.
In rich countries the wages of the typical worker, adjusted for cost of living, are stagnant.
This is because substituting capital for labour through automation is increasingly attractive;
as a result owners of capital have captured ever more of the world’s income since the 1980s, while the share going to labor has fallen.
There is already a long-term trend towards lower levels of employment in some rich countries.
Jobs are at high risk of being automated in 47% of the occupational categories into which work is customarily sorted.
The picture suggested by this evidence is a complex one.
The Industrial Revolution was not simply a matter of replacing muscle with steam;
it was a matter of reshaping jobs themselves into the sort of precisely defined components that steam-driven machinery needed—cogs in a factory system.
The way old jobs were done changed; new jobs were created.
New investments in education provided a supply of workers for the more skilled jobs that were by then being created in ever greater numbers. This shift continued into the 20th century as post-secondary education became increasingly common.
Workers were in a “race between education and technology” during this period, and for the most part they won.
The impacts of technological change take their time appearing.
Although in many simple economic models technology pairs neatly with capital and labour to produce output, in practice technological changes do not affect all workers the same way.
Some find that their skills are complementary to new technologies.
Others find themselves out of work.
New machinery displaced handicraft producers across numerous industries, from textiles to metalworking.
At the same time it enabled vastly more output per person than craft producers could ever manage.
But the “race” aspect of technological change means that such workers cannot rest on their pay packets.
The mere fact that a job can be automated does not mean that it will be; relative costs also matter.
it can make sense instead to seek out ever cheaper supplies of increasingly skilled labour.
workers have found themselves facing increased competition from both machines and cheap emerging-market workers.
The share of American employment in manufacturing has declined sharply since the 1950s, from almost 30% to less than 10%.
At the same time, jobs in services soared, from less than 50% of employment to almost 70%
A new wave of technological progress may dramatically accelerate this automation of brain-work.
Evidence is mounting that rapid technological progress is back.
It should deliver enormous benefits—but not without a period of disorienting and uncomfortable change.
The argument rests on an underappreciated aspect of the exponential growth in
chip processing speed,
memory capacity
and other computer metrics:
The amount of progress computers will make in the next few years is always equal to the progress they have made since the very beginning.
The main bottleneck on innovation is the time it takes society to sort through the many combinations and permutations of new technologies and business models.
Brave new world
Watson, a pattern-recognising supercomputer developed by IBM, bested the best human competitors in America’s popular and syntactically tricksy general-knowledge quiz show “Jeopardy!” Versions of Watson are being marketed to firms across a range of industries to help with all sorts of pattern-recognition problems.
The machines are cleverer,
they also have access to far more data.
The combination of big data and smart machines will take over some occupations wholesale;
in others it will allow firms to do more with fewer workers.
Being newly able to do brain work will make them better at manual labor.
The designers of the latest generation of industrial robots talk about their creations as helping workers rather than replacing them; but there is little doubt that the technology will be able to do a bit of both—probably more than a bit
Rich economies seem to be bifurcating into
a small group of workers with skills highly complementary with machine intelligence
and the rest.
The rise of the middle-class—a 20th-century innovation—was a hugely important political and social development across the world.
The squeezing out of that class could generate a more antagonistic, unstable and potentially dangerous politics.
The potential for dramatic change is clear.
A future of widespread technological unemployment is harder for many to accept.
The productivity gains from future automation will be real, even if they mostly accrue to the owners of the machines. Though inequality could soar in such a world, unemployment would not necessarily spike.
The machine stops
Adaptation to past waves of progress rested on political and policy responses.
The most obvious are the massive improvements in educational attainment brought on first by the institution of universal secondary education and then by the rise of university attendance.
Boosting the skills and earning power of the children of 19th-century farmers and labourers took little more than offering schools where they could learn to read, write and do algebra. Pushing a large proportion of college graduates to complete graduate work successfully will be harder and more expensive.
Perhaps cheap and innovative online education will indeed make new attainment possible.
Another way in which previous adaptation is not necessarily a good guide to future employment is the existence of welfare.
The alternative to joining the 19th-century industrial proletariat was malnourished deprivation.
Today, because of measures introduced in response to, and to some extent on the proceeds of, industrialisation, people in the developed world are provided with unemployment benefits, disability allowances and other forms of welfare.
They are also much more likely than a bygone peasant to have savings.
Society may find itself sorely tested if, as seems possible, growth and innovation deliver handsome gains to the skilled, while the rest cling to dwindling employment opportunities at stagnant wages.