Just how extensively will jobs be lost to automation?

New Scientist recently interviewed Andrew McAfee, one of the authors of The Second Machine Age: Work, progress and prosperity in a time of brilliant technologies. McAfee and co-author Erik Brynjolfsson are experts in digital technologies and economics (their previous book was called Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy). A basic question raised in the interview (and addressed in the book) is whether advances in technology will greatly reduce the need for human labor, leaving a large segment of the population unemployed. Their answer, basically, is ‘yes.’

In the interview, McAfee describes three possible scenarios. One, the disruptions could be more or less temporary. Technology has been eliminating the need for human labor in various segments of the workforce for hundreds of years now. But technology also creates new jobs. If it can do that fast enough, workers can be retrained, avoiding extensive periods of high unemployment.

Two, there could be successive waves of automation that have a much larger impact than anything we’ve experienced in the past. Automated driving, for example, will eliminate jobs that require a human driver. While this is but one of many examples of automation, it is by no means insignificant. According to the latest US census estimates, the largest occupation category among men was truck driver, employing 3.2 million people. The point is, in this scenario it will be difficult for the economy to adjust simply by retraining workers.

Three, the need for labor could be dramatically reduced. This is the scenario McAfee believes is most likely. There will still be a need for those entrepreneurs who create and perfect even more automation, but the rest of us will not be needed.

I believe that in my lifetime – I’m in my mid-40s – we’re going to see that third scenario. We won’t see a zero labour economy, but we’re going to head into a labour-light economy. Of course, people like me have been saying some version of that for 200 years. The Luddites, John Maynard Keynes, a lot of people have said it and been wrong. But when I look at the encroachment of digital stuff into the total bundle of skills and abilities that humans have, I think this time it is different. …

We’re going to see a lot of automation and displacement in areas of routine information processing and routine physical work. When I talk to my favourite geeks in Silicon Valley, they look around and say, “man, the work of a financial adviser, a junior analyst at an asset management firm, a pathologist, a hamburger flipper, I can automate that”. I don’t know if all those are going to be successful within the next 10 years, but there’s a whole lot of technology coming.

What’s worse: Working as if you were an automaton or being replaced by one?

So will this lead to a society of leisure? Would that be a good thing? In the book, McAfee and Brynjolfsson discuss the economic and political options that would need to be considered in this third scenario. They relate how Richard Nixon spent his first presidential term advocating a policy that would provide everyone with a ‘basic income.’ This is one way of dealing with massive unemployment.

In a 1969 speech [Nixon] proposed a Family Assistance Plan that had many features of a basic income program. The plan had support across the ideological spectrum, but it also faced a large and diverse group of opponents. Caseworkers and other administrators of existing welfare programs feared that their jobs would be eliminated under the new regime; some labor leaders thought that it would erode support for minimum wage legislation; and many working Americans didn’t like the idea of their tax dollars going to people who could work, but chose not to. By the time of his 1972 reelection campaign, Nixon had abandoned the Family Assistance Plan, and universal income guarantee programs have not been seriously discussed by federal elected officials and policymakers since then.

McAfee and Brynjolfsson feel this is just as well, since they do not approve of programs that would provide a basic income. They believe that when people do not have jobs, they are troubled by boredom and prone to crime. As evidence, they cite statistics that indicate crime, as well as divorce, increases among those who are marginally employed. In the New Scientist interview, McAfee states that when you don’t work, you not only lose an income. You lack a “sense of dignity, community, purpose and direction that comes from having work.” To back this up, the book quotes a man who says of his job in an Amazon warehouse: “[It] gives you your pride back. That’s what it gives you. Your pride back.” The authors wholeheartedly agree.

While it’s most definitely true that being employed rather than unemployed can be a source of pride, the working conditions in an Amazon warehouse are not exactly a source of dignity, are they. One might reasonably ask: Which is worse? A job in which you must spend your days acting like an automaton or losing your job because you were replaced by one?

Why we can’t blame globalization

I haven’t read every chapter in The Second Machine Age, but I’ve read enough to say that the authors can explain complex economic ideas very clearly. For example, they discuss how, since the late 1990s, labor productivity has continued to rise while “private” employment has not. (It’s perhaps more significant that, since the 1970s, productivity has continued to rise, but wages have been flat. But never mind.) Could the decoupling of productivity and employment be explained by globalization, they ask. If businesses can employ Chinese workers for less money than US workers, jobs will move to China.

The authors point out — and this is what I found interesting — that this is a situation that will not last. Automation will not only displace workers in the US, but in China and in any other country that tries to compete by offering the lowest wages. (emphasis added)

In the long run, the biggest effect of automation is likely to be on workers not in America and other developed nations, but rather in developing nations that currently rely on low-cost labor for their competitive advantage. If you take most of the costs of labor out of the equation by installing robots and other types of automation, then the competitive advantage of low wages largely disappears. This is already beginning to happen. Terry Guo of Foxconn [manufacturer of the iPhone, iPad, Kindle, BlackBerry, …] has been aggressively installing hundreds of thousands of robots to replace an equivalent number of human workers. He says he plans to buy millions more robots in the coming years. The first wave is going into factories in China and Taiwan, but once an industry becomes largely automated, the case for locating a factory in a low-wage country becomes less compelling. There may still be logistical advantages if the local business ecosystem is strong, making it easier to get spare parts, supplies, and custom components. But over time inertia may be overcome by the advantages of reducing transit times for finished products and being closer to customers, engineers and designers, educated workers, or even regions where the rule of law is strong. This can bring manufacturing back to America.

I hadn’t seen this argument before (but that’s undoubtedly because I don’t normally read about the automation of work). So what we can anticipate is a lack of income for populations worldwide (on top of the dislocations caused by climate change). This will not be pretty.

Can we replace the economic engine of capitalism?

On the basis of what I’ve read so far, I would not give The Second Machine Age a five-star review. Not with statements such as this:

We are also skeptical of efforts to come up with fundamental alternatives to capitalism. … Capitalism allocates resources, generates innovation, rewards effort, and builds affluence with high efficiency, and these are extraordinarily important things to do well in a society.

Affluence for whom? For those who benefit from endless compound growth. Allocating resources? More like exploiting nature to its very limits. Rewards effort? This is a fundamental tenet of neoliberalism. In fact, effort is no match for the disadvantages of being born at the low end of the socioeconomic gradient. (See, for example, The Long Shadow.)

Innovation? Yes, definitely. This is what these two authors find most compelling (Brynjolfsson is the director of the MIT Center for Digital Business and McAfee is a principal research scientist there). It is this very innovation, they believe, that will create a future in which there are no jobs for the majority of human beings.

If this book provokes serious thinking about the social implications of such a future, then it will have made a worthwhile contribution. Meanwhile, I’d rather be reading David Harvey’s new book, Seventeen Contradictions and the End of Capitalism, where he says:

What I am seeking here is a better understanding of the contradictions of capital, not of capitalism. I want to know how the economic engine of capitalism works the way it does, and why it might stutter and stall and sometimes appear to be on the verge of collapse. I also want to show why this economic engine should be replaced, and with what.

I find this a much more creative and hopeful line of inquiry.

Image source: Thoughts from the Balcony

References:

Niall Firth, Automatic, for the people: Welcome the robot workforce, New Scientist, April 26, 2014, pp 28 – 29 (paywall)

Erik Brynjolfsson and Andrew McAfee, The Second Machine Age: Work, progress and prosperity in a time of brilliant technologies

Karl L. Alexander, Doris Entwisle and Linda Olson, The Long Shadow: Family Background, Disadvantaged Urban Youth, & the Transition to Adulthood

David Harvey, Seventeen Contradictions and the End of Capitalism