This is the seventh 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? Doesn’t 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 there is a structural loss of middle jobs or total jobs, should politicians do anything about it?
The prospects of wasted education, worse health outcomes, and increased inequality are enough to horrify someone with social democratic instincts like me. But plenty of people will see those same trends and feel equally strongly that we can’t or shouldn’t do anything about it.
And when they convert those feelings into arguments, here are some of the arguments they’ll use.
1. We’re not yet sure it’s a problem
As I’ve set out in previous posts, the data is still coming in.
We know technology destroys middle jobs – American and European labour markets are hollowing out. We can see that rich countries like the US and the UK have growing skill unemployment, and that productivity, investment and median incomes have stalled relative to long term trend.
But will automation and online competition really kill so many jobs? There’s still room for reasonable people to disagree.
And, as a busy politician might add, voters are angry for plenty of reasons, but aggregate effects like ‘a hollowing labour market’ is just not something most people think about.
But this is silly. Such devil-may-care logic doesn’t afflict political debate when discussing other risks, such as cybersecurity or nuclear threats. There is enough evidence to believe that we might have the beginnings of a serious problem, and it is politicians’ job to address possibilities as well as certainties.
The debate about the collapse of middle jobs and purchasing power is today in a similar place to where the political debate on climate change was in the early noughties.
Then, credible sources in the scientific community were concerned with it, some in policy circles knew about it, but it was still seen as a fringe risk. Hardly any politicians had started thinking seriously about what we should do.
Even though we aren’t sure we will face structural un or underemployment, we can be pretty confident that if it happens, the consequences will be dire.
Why wouldn’t we start thinking about it?
2. Technology could create as many jobs as it destroys
Technology doesn’t just destroy jobs, it also creates them.
For all the lamplighters and lathmakers who have fallen into history, there are many more digital brand managers, graphic designers, and database managers. There are deodorant testing armpit sniffers. There is Shingy.
Over the last two centuries, jobs have come and gone, but the UK employment rate has fluctuated around a relatively fixed average, as this graph shows.
Source: Speech by Andy Haldane: ‘Labour’s Share’
It might do in future as well. After all, there is no limit to what humanity might imagine or demand, so no limit to what the economy might have to supply.
No doubt supporters of the UK government would make this kind of argument. ‘Look’, they might say, ‘all this talk of a hollowing labour market is so much carping. UK unemployment just hit a ten year low. The employment rate is at its highest since records began‘. There will always be enough jobs.
I hope they’re right.
But employment now only gives us one data point. The trend is more important.
And there are at least five reasons to think that this view about the future is too complacent.
1. As set out in post 2, this time, automation will affect mental work as well as manual work. Machines can increasingly learn, recognise patterns, sense, and be taught dexterity. All this is new in human history.
2. As set out in post 3, this time we are reckoning with online competition, often global, which puts unprecedented downward pressure on prices and margins, making it hard for existing industries to support as many jobs. This too is new in human history.
3. The industries of the future probably won’t create as many jobs as the industries of the past.
Martin Ford puts it well: “you can imagine lots of new industries: nanotechnology and synthetic biology – but they won’t employ many people. They’ll use lots of technology, rely on big computing centres, and be heavily automated.”
You can already see this trend at work. Take photography, for example. As Henrik Killander points out, at its pinnacle, Kodak employed more than 140,000 people; when Instagram was sold to Facebook in 2012, it employed 13.
It’s hard to find research indicating that technology creates lots of jobs, but it’s not hard to find research showing that it doesn’t. One study calculates that of all the new jobs created in the US in 2010, only a puny 0.5% were in industries which didn’t exist at the turn of the century. It looks more and more like new technologies create plenty of wealth but not much work.
I don’t think we yet know enough to say for sure that the new industries of the future will need fewer jobs than the industries of the past.
But one thing is for sure: business leaders look for the most efficient way to get the task done, and labour is a cost. If technology can do a better job than people, or the same job more cheaply than people, or both, they will employ fewer people. Nobody goes into business first and foremost to create jobs. If the industries of the future don’t need as many jobs as those of the past, fewer will be created.
Uber is a salutary example. It talks a good game about how much work it has provided to drivers around the world. But it is still working on replacing them with self-driving cars.
3. Higher unemployment which lasts for five, ten, twenty years is still an apocalyptic problem for the generation which experiences it.
Often people argue about technological unemployment as if it’s something that either will or won’t happen, forever. One side says employment will hold up – technology will create as many jobs as it destroys. The other side says this time it might leave us with fewer jobs permanently. But something else could happen: technology could destroy many jobs in the short run and create just as many in the long run, but give us five, ten, twenty years of transitional high unemployment.
Long-term, high, but non-permanent unemployment has happened before. Whether or not it was because of technology, unemployment in Britain stayed above 10% from the early twenties until the beginning of the war.
In other words, even if the optimists are right that technology will create as many jobs as it destroys in the long-term, it can still devastate purchasing power, growth, and human potential for a generation.
4. Fewer middle jobs can still hurt demand and growth. The total number of jobs isn’t the only thing that matters. Getting enough money into enough pockets is important too. Even if technology creates as many jobs as it destroys, if the labour market carries on hollowing out – losing middle jobs – we can still expect a net loss of purchasing power, demand and wellbeing: security, status, opportunity, and development, because the rich spend a lower proportion of their income than everyone else.
And for me, this is the strongest counterargument to the boast that today’s low unemployment means there is no problem: boasting about how many jobs have been created but ignoring how much they pay is like boasting how many cans of beer you’ve got in the fridge but ignoring how little beer is left in each can.
Whereas permanent technological unemployment is a prospect, hollowing out is already happening.
I think we can be pretty confident it has depressed demand relative to trend: many more workers are on the minimum wage. Fifteen years ago, only one in fifty jobs were paid minimum wage; today it is one in twenty, and it’s predicted to be one in nine by 2020.
3. There is nothing we can do
Tyler Cowen, for example, believes that in the coming decades, the top ten to fifteen percent of workers whose skills will complement those of intelligent machines will prosper, and the rest will stagnate. In his telling, it’s inevitable.
A flippant way of putting the argument is: ‘if driverless vehicles are going to kill driving jobs and 3D printing is going to kill factory jobs, then, with the best will in the world, there’s not much any Minister for Work and Pensions can do about it’.
I don’t buy this.
Market forces are shaped by laws, institutions, customs, and culture. They have, at various points in history, involved owning slaves, employing children, and letting multinationals negotiate their own tax rates. These things are inevitable … until politics changes the rules. Not everyone will like the solutions, but that doesn’t mean there aren’t any.
But if technology really does reduce jobs and work, isn’t the solution just better education and training, skilling up?
In the next post I’ll look at this argument.