First, they came for the factory workers, but I did not speak out –
Because I was not a factory worker.
Later, they came for the bank tellers, but I did not speak out –
Because I was not a bank teller.
Soon, they’ll come for the taxi drivers, but I do not speak out –
Because I am not a taxi driver.
Are they coming for me?
This adaption of Martin Niemöller’s famous poem about the Nazis’ creeping reign of terror is supposed to illustrate the ambivalence of ordinary people to technological change.
We like the fact that TVs, computers, mobile phones and domestic appliances are better and cheaper than in the past. Progressive automation in manufacturing has been a key driver of the productivity gains that allowed this happen.
We like the fact that we can use an ATM, rather than having to queue in the bank for half an hour. More and more, the provision of services is becoming automated, with higher skilled jobs being replaced by ever-more sophisticated machines.
Even in agriculture, automation has made farming far more productive and far less labour intensive, one of the reasons why we now spend much smaller proportions of our income on food than ever before.
Technological progress has underpinned economic development since the dawn of the agricultural revolution, and through the various phases of the industrial revolution. The Davos set has hailed recent advances in robotics, artificial intelligence, biotechnology, driverless vehicles and the so-called ‘internet of things’ as harbingers of a fourth industrial revolution, following the third ‘digital’ revolution seen since the 1980s.
Looking at the bigger picture, it is hard to argue that on average our material well-being has not improved with every successive generation. Meanwhile, in the most recent generation, the combination of technological diffusion and global economic integration have allowed for catch-up growth in China and other emerging countries, underpinning perhaps the most rapid and widespread improvement in living standards the planet has ever seen.
This is a rather rose-tinted view of the impact of technological change and the prevailing economic model. The truth, of course, is far more complex. Averages, such as GDP per capita, are useful indicators, but they often conceal as much as they illustrate. For example, catch-up growth in emerging economies has seen a narrowing in income inequalities between countries, but inequality within countries has almost universally widened in the past generation. Moreover, tech-driven job displacement can have a profound short-term, and even longer-term, impact on households in communities where production was previously concentrated.
Obviously, if technology is replacing labour in the production of goods and provision of services, then it is the owners of that technology – whether tangible things like machines, or intangible intellectual property – that will derive the material benefits in the form of profits. The IMF, for instance, attributes half of the decline in labour’s share of national income in the three decades from the mid-1970s onwards to the impact of technology.
In the earlier stages of automation, it was mainly low-to-medium skilled workers that were displaced, even as higher-skilled jobs opened up in the supervision and maintenance of machines, for example. On a mass scale, this can cause what economists call ‘polarisation’ in the labour market, whereby there is high demand for highly skilled and un-skilled workers, and lower demand for medium-skills workers. In turn, this puts pressure on wages in medium skill jobs, forces more people in low skill, low pay jobs, and increases the wage premium for higher skill jobs, contributing to greater income inequality. This is exactly what we have seen, and continue to see, across most advanced economies. In the US, meanwhile, real median wages (earned by the worker in the middle of the income distribution) have been basically stagnant since the late 1970s.
Now, of course, automation is moving higher and higher up the skills spectrum. Driverless taxis may be coming soon to a street near you! In an important 2013 study, researchers at Oxford University assessed the likelihood of 702 occupations being computerized. They found that nearly half of all employment in the US was at risk of automation within two decades. They also found that those jobs at least risk of computerization, such as those requiring a large amount of human interaction and many years of training, also tended to be those with the highest wages.
Technological progress is a fact of life. It is not only welcome, but crucial to underpin continued broad-based improvements in living standards as our populations grow and age within the very real environmental constraints that are already apparent, and becoming more so. Public policy should aim to support rather than to stifle innovation. But, it should actively aim to harness its dynamism for the benefit of everyone, while managing and mitigating its inherent challenges.
The way we live, work and play continues to undergo rapid change, raising new questions for policymakers and for the labour movement: Do we need a tax on robots? Should we use anti-trust competition regulation to break up the tech behemoths that have come to dominate the digital economy? How can we avoid further tech-related labour market polarization, in terms of jobs and wages, and reverse the damage that has already been done?
These are just some of the policy challenges we face at the dawn of the so-called fourth industrial revolution. I hope to come back to these and others during 2018.