The effect of today’s technology on tomorrow’s jobs
will be immense - and no country is ready for it
INNOVATION, the elixir of progress, has always cost
people their jobs. In the Industrial Revolution artisan weavers were swept
aside by the mechanical loom. Over the past 30 years the digital revolution has
displaced many of the mid-skill jobs that underpinned 20th-century middle-class
life. Typists, ticket agents, bank tellers and many production-line jobs have
been dispensed with, just as the weavers were.
For those, including this
newspaper, who believe that technological progress has made the world a better
place, such churn is a natural part of rising prosperity. Although innovation
kills some jobs, it creates new and better ones, as a more productive society
becomes richer and its wealthier inhabitants demand more goods and services. A
hundred years ago one in three American workers was employed on a farm. Today
less than 2% of them produce far more food. The millions freed from the land were not consigned to
joblessness, but found better-paid work as the economy grew more sophisticated.
Today the pool of secretaries has shrunk, but there are ever more computer
programmers and web designers.
Remember Ironbridge
Optimism remains the right starting-point, but for
workers the dislocating effects of technology may make themselves evident
faster than its benefits. Even if new jobs and wonderful
products emerge, in the short term income gaps will widen, causing huge social
dislocation and perhaps even changing politics. Technology’s impact will feel
like a tornado, hitting the rich world first, but eventually sweeping through
poorer countries too. No government is prepared for it.
Why be worried? It is partly just a matter of history
repeating itself. In the early part of the Industrial Revolution the rewards of
increasing productivity went disproportionately to capital; later on, labour
reaped most of the benefits. The pattern today is similar. The prosperity
unleashed by the digital revolution has gone overwhelmingly to the owners of
capital and the highest-skilled workers. Over the past three decades, labour’s
share of output has shrunk globally from 64% to 59%. Meanwhile, the share of
income going to the top 1% in America has risen from around 9% in the 1970s to
22% today. Unemployment is at alarming levels in much of the rich world, and
not just for cyclical reasons. In 2000, 65% of working-age Americans were in
work; since then the proportion has fallen, during good years as well as bad,
to the current level of 59%.
Worse, it seems likely that this wave of technological
disruption to the job market has only just started. From driverless cars to
clever household gadgets, innovations that already exist could
destroy swathes of jobs that have hitherto been untouched. The public sector is
one obvious target: it has proved singularly resistant to tech-driven
reinvention. But the step change in what computers can do will have a powerful
effect on middle-class jobs in the private sector too.
Until now the jobs most
vulnerable to machines were those that involved routine, repetitive tasks. But
thanks to the exponential rise in processing power and the ubiquity of
digitised information (“big data”), computers are increasingly able to perform
complicated tasks more cheaply and effectively than people. Clever industrial
robots can quickly “learn” a set of human actions. Services may be even more
vulnerable. Computers can already detect intruders in a closed-circuit camera
picture more reliably than a human can. By comparing reams of financial or biometric data, they can often diagnose fraud or
illness more accurately than any number of accountants or doctors. One recent
study by academics at Oxford University suggests that 47% of today’s jobs could
be automated in the next two decades.
At the same time, the digital revolution is
transforming the process of innovation itself, as our special report explains. Thanks to off-the-shelf
code from the internet and platforms that host services (such as Amazon’s cloud
computing), provide distribution (Apple’s app store) and offer marketing
(Facebook), the number of digital startups has exploded. Just as computer-games
designers invented a product that humanity never knew it needed but now cannot
do without, so these firms will no doubt dream up new goods and services to
employ millions. But for now they are singularly light on workers. When
Instagram, a popular photo-sharing site, was sold to Facebook for about $1
billion in 2012, it had 30m customers and employed 13 people. Kodak, which
filed for bankruptcy a few months earlier, employed 145,000 people in its
heyday.
The problem is one of timing as much as anything.
Google now employs 46,000 people. But it takes years for new industries to
grow, whereas the disruption a startup causes to incumbents is felt sooner.
Airbnb may turn homeowners with spare rooms into entrepreneurs, but it poses a
direct threat to the lower end of the hotel business—a massive employer.
No time to be timid
If this analysis is halfway correct, the social
effects will be huge. Many of the jobs most at risk are lower down the ladder
(logistics, haulage), whereas the skills that are least vulnerable to automation
(creativity, managerial expertise) tend to be higher up, so median wages are
likely to remain stagnant for some time and income gaps are likely to widen.
Anger about rising inequality is bound to grow, but
politicians will find it hard to address the problem. Shunning progress would
be as futile now as the Luddites’ protests against mechanised looms were in the
1810s, because any country that tried to stop would be left behind by
competitors eager to embrace new technology. The freedom to raise taxes on the
rich to punitive levels will be similarly constrained by the mobility of
capital and highly skilled labour.
The main way in which governments can help their
people through this dislocation is through education systems. One of the
reasons for the improvement in workers’ fortunes in the latter part of the
Industrial Revolution was because schools were built to educate them—a dramatic
change at the time. Now those schools themselves need to be changed, to foster
the creativity that humans will need to set them apart from computers. There
should be less rote-learning and more critical thinking. Technology itself will
help, whether through MOOCs (massive open online courses) or even video games
that simulate the skills needed for work.
The definition of “a state education” may also change.
Far more money should be spent on pre-schooling, since the cognitive abilities
and social skills that children learn in their first few years define much of
their future potential. And adults will need continuous education. State
education may well involve a year of study to be taken later in life, perhaps
in stages.
Yet however well people are taught, their abilities
will remain unequal, and in a world which is increasingly polarised
economically, many will find their job prospects dimmed and wages squeezed. The
best way of helping them is not, as many on the left seem to think, to push up
minimum wages. Jacking up the floor too far would accelerate the shift from
human workers to computers. Better to top up low wages with public money so
that anyone who works has a reasonable income, through a bold expansion of the
tax credits that countries such as America and Britain use.
Innovation has brought great benefits to humanity.
Nobody in their right mind would want to return to the world of handloom
weavers. But the benefits of technological progress are unevenly distributed,
especially in the early stages of each new wave, and it is up to governments to
spread them. In the 19th century it took the threat of revolution to bring
about progressive reforms. Today’s governments would do well to start making
the changes needed before their people get angry.
The Economist
