Thursday 30 April 2015

Is Technology Taking People's Jobs?

There has been a lot of comment recently, especially since the publication of 'The Second Machine Age' by McAfee and Brynjolfsson, about whether the robots are taking over. Citing examples of how technology can replace human input, the fear has been expressed that technology will increase the share of income going to capital and reduce the share going to labour.

In the extreme version of this scenario, robots are doing all the jobs and there are very few left for humans - the few jobs being for the people who program the robots. In this future of idleness, one would have to imagine a new way of splitting the fruits of the non-labour in order to allow humans the money to consume the bounty created by greater technology.

The recent decline in labour participation rate, coming at the same time as a rise in information technology has added to this fear. Computers replacing check-out operators in supermarkets, computers replacing check-in personnel in airports and cheque receivers at banks being replaced by online payments. Professions relying on higher education levels are no longer immune. Computers are replacing financial advisers and medical staff. You can find lists of jobs most likely to be replaced by robots, bizarrely the most likely one being telemarketer (who doesn't hang up straight away when a recorded telemarketer rings?).

Talk in the tech sector is of disruption. Everyone is looking for the next Uber of chest waxing (just press a button on your app and someone will be round to depilate you in minutes) or similar but slightly more realistic ideas. The basic idea is to use technology to enable cheaper entrants to established markets, with the cheapness based on workers who are prepared to work for less money with no job security. A future where the labour force is self-employed, always undercutting the competitor to get work and living with fear of not being able to pay next month's rent awaits us. Meanwhile the cool guys in Silicon valley take 20% for themselves and charter helicopters to have dinner in Napa.

It all sounds pretty dystopic to me, but I would like to offer a counter argument. That the long term fears that we have for the economy are based purely on the terrible economic situation that we have at the moment. Superficially unemployment is low, but this masks the people working part-time and zero-hours who wish to work full time. It masks the fall in participation rate by people leaving the labour force. And more than that, if you look at wages, it shows how people have been pushed into the bottom end of the labour market in jobs that could be done by a machine but are not because labour is so cheap. In fact, we have a real deficit of demand in the economy.

I believe, as I argue here, that this low demand is caused not by technology improvements but by debt overhang causing rent extraction which sucks demand out of the economy. I also believe that we have a way of solving this problem. But that as things stand we are going to suffer from chronically low demand for a long time.

What happens when there is chronically low demand? People who want to find work can't find work and often end up having to work part-time, zero hours on unpaid internships or whatever it takes to get by. Blame for this is then placed on immigrants or technology or scroungers whatever the fashionable scapegoat-du-jour is. 

But I feel that the whole 'Technology taking jobs' argument is a big red herring. I heard recently of an example where robots can now take blood for patients meaning that blood taking nurses are now redundant. Well, this is fine, but also I would like to wait less than three hours when I go into casualty with my kid - maybe the nurses can be put to use on other jobs that also improve patient care. Bank branches are closing down, replaced by online banks - bank tellers are made redundant. But at the same time, I can think of hundreds of ways that I could get better service in other areas. The tube could be less crowded - a better transport system could be built. Libraries are being closed. Youth clubs closed. Mental health charities could be given more funding. More carers are needed for the elderly and disabled. 

There are so many ways that life could be improved if the money was there to pay to give people jobs who do not have jobs. And many of these, machines can't replace. So I think that there will always be jobs available. It is just a case of using resources correctly - or in other words not having so much unemployment.

And the whole success of Uber (and similar) is based on people's desperation for work. If demand were high enough that everyone had jobs, then the dystopic vision of an Uber future will not become reality.

If we, as a society can effectively manage demand in a way suggested here then any savings caused by dividends accruing to the owners of the robots is negated by an increase in money supply elsewhere. We need not have unemployment and we need not worry about the future of robots taking over, but instead look forward to a future where more of our needs are taken care of.

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