Part 1 of 10: If technology destroys too many jobs, what should we do?

This is the first in a series of ten posts on the threat to jobs and growth from technology and online distribution, and what we might do about it. 

  • The first part summarises the argument
  • The second introduces the challenge.
  • The third looks at the threat to jobs from automation.
  • The fourth looks at the threat to jobs from online competition.
  • The fifth looks at what economic problems this might cause.
  • The sixth looks at the social and moral problems it might cause.
  • The seventh looks at some of the arguments against a policy response: are we really sure this is a problem? Doesnt technology always create as many jobs as it destroys? Surely there is nothing we can do?
  • The eighth explains why more education and training isn’t the solution to technological un and underemployment.
  • The ninth explains why more self-employment and entrepreneurship isn’t an adequate solution either.
  • The tenth looks at other solutions, and proposes a new one.

If technology destroys too many jobs, what should we do?

The question might sound crazy, but I don’t think it is any more.

What’s changed?

Three things.

Firstly, over the last thirty years, middle jobs – jobs which rank in the middle of the spectrum in terms of pay, skills, security, and status – have been disappearing on aggregate in the USA and sixteen European countries.

Unless something big happens, the trend is likely to continue.

For more, see post 2.

I’m not panicking yet. What’s the second reason?

Technology replacing jobs.

Some pharmacists, construction workers, financial advisers, legal workers, journalists, retail workers, and accountants have already been replaced. Dubai is about to start experimenting with robot guards. The range of professions will only increase.

The technology is getting both better and cheaper all the time.

The most authoritative research on this concludes that nearly two thirds of jobs in OECD countries could be automated in the next 20 years. According to the Bank of England, that could destroy half the number of jobs in Britain today.

For more, see post 3.

And the third reason?

Online competition.

Once competition in an industry moves online, margins normally fall and an industry shrinks, supporting fewer jobs.

That’s already the story of newspapers in the UK and the US, recorded music, and taxis. It’s the direction of travel in academia, legal services, and local markets for household tasks.

But the big one is yet to come.

I expect in the next decade or so the same will happen in manufacturing. When 3D printing is ubiquitous and we have a ‘Spotify for products,’ jobs in manufacturing, distribution, and transportation – the great engines of twentieth century job creation – are also likely to crater, as I explain in post 4.

We will have a race between the broadly ‘job-creating’ forces and the ‘job destroying forces,’ but it will be tough for the ‘job creating forces’ to win. 

So everything will be cheaper. What’s not to like?

Here’s the problem: jobs are the main way money flows from the owners of companies to everyone else.

When economies work like they did in the US and Western Europe in the middle of the twentieth century, money flows from the owners of companies to the majority of people, who in turn buy those companies’ products. It’s a virtuous circle.

But if there are fewer jobs or middle jobs, companies grow but the money flows into the pockets of a smaller and smaller pool of employees – who are also potential customers. The result: customers are poorer than they would otherwise be.

Although we’re not sure technology is the cause, that has started. The share of total wealth which goes to employees has fallen in seventeen big countries between 1970 and 2013.

And that’s a problem.

If the trend towards fewer middle jobs or lower pay continues, it could mean lower purchasing power and growth, deflationary pressure, lower productivity, lower interest rates, worse health, increasing inequality, the decoupling of effort and reward, a pool of wasted education and skills, an ever greater accumulation of wealth in the hands of the owners of the technologies and greater debt at the bottom.

For more, see posts 5 and 6.

You do know that employment today in the US and the UK is at a record high, don’t you?

Yes. But the trend over decades is towards fewer middle jobs and lower demand across developed countries. That trend is more consequential than one data point – even if it’s today’s.

For more, see post 7.

But technology has always created as many jobs as it destroys. Why might this time be different?

I hope it won’t. But here are five reasons it might.

  1. This time, automation will affect mental work as well as manual work
  2. The internet will shrink industries and the numbers they employ.
  3. The industries of the future probably won’t create as many jobs as those of the past.
  4. Even if it reverses eventually, high unemployment which lasts for five, ten, or twenty years is still a debilitating problem for those who experience it
  5. The loss of middle jobs is arguably already hurting demand and growth.

For more, see post 7.

Isn’t the solution just more education and training?

I don’t buy it. Skilling up doesn’t, by itself, create new jobs.

See post 8.

Isn’t the solution more self-employment and entrepreneurship?

They are good in and of themselves, but they won’t fix this problem, because:

  1. Most self-employed people don’t actually make much money.
  2. They’re unlikely to replace lost middle jobs in sufficient numbers
  3. They’re unlikely to create as many jobs as technology is predicted to destroy.

See post 9.

Well thanks. This has left me thoroughly depressed. Are there solutions?

I don’t think there are solutions which fall within the boundaries of what is electorally acceptable in the UK or US today.

The best solution is to create new jobs. As with the response to the global financial crisis, if companies won’t, governments should.

One solution is to create an enlarged sovereign wealth fund and use the dividends to create jobs. It makes particular sense for the fund to invest in tech companies like Alphabet where profits are exceptional and job creation is low compared to the big companies of the past.

The jobs programme might be similar to a permanent version of the 2009 Recovery Act in the US which created or saved 1.6 million jobs, as I argue in post 10.

After all, even if companies might need fewer employees than ever, we do not lack for work to be done.

Printing press