The promise and peril of automation

Summary:  Today we have a status report on society’s recognition of the coming industrial revolution. The next wave of automation (the next industrial revolution) was long forecast (even in the 1950s), but became clearly visible in 2010 with the writings of far-seeing people like Martin Ford (reported to readers of the FM website in August 2010). The news hit the mainstream in 2012 with the publication of Race Against The Machine by Erik Brynjolfsson and Andrew McAfee (reported here in April 2012). 2013 was the year of declaring it no big deal. 2014 might be the year we realize the scale of the challenge it faces — and the potential rewards.

The future of automation
The future of work

Contents

  1. The promise and peril of robots
  2. The robots are coming and will terminate your jobs“, Tim Harford, Financial Times
  3. The robots are coming. Will they bring wealth or a divided society?“, Gavin Kelly, The Guardian
  4. Remembering sabots (wooden shoes)
  5. For More Information

Red emphasis added.

(1)  The promise and peril of robots

Automation of service jobs will, like the first industrial revolutions (agriculture, then manufacturing), probably will increase humanities wealth and income. A successful transition requires again managing two challenges:

  • Most of the gains will go not to workers, but capital (i.e., owners of the machinery).
  • There will be massive unemployment.

That means

  • distributing these gains to maintain both social stability democracy,
  • creating new jobs for the unemployed — or otherwise supporting them,
  • creating new jobs for the next generation.

So far the typical responses have been to assume past success guarantees success today — without the need for special effort (the invisible hand will provide for us) — and education. The first is a Marxist-like faith in history. The second is illogical innumeracy: not everybody can benefit from advanced education (already we produce more undergraduate degrees than the market requires), and there is no evidence that the market for advanced degrees will expand sufficiently to absorb those unemployed by automation.

They still tend look to the past for signs of this new revolution, failing to see that it has barely started — with little recognition of its potential magnitude and the resulting human cost.

The two articles shown below show progress in recognition of these things, and improvement over the blindness that characterized articles to date in the news media.

(2) The robots are coming and will terminate your jobs“, Tim Harford, Financial Times, 27 September 2013 — “In future, there may be people who – despite being fit to work – have no economic value.” Excerpt:

Computing power is starting to solve everyday problems – which turn out to be the hardest ones. Computers were laughable drivers in 2004, when a computer-driving competition was “won” by a car that crashed after completing seven miles of a 150-mile course. Now computers drive cars safely.

In 2008, robots still struggled with a problem known as “Slam” – simultaneous localisation and mapping, the process of mentally building up a map of a new location, including hazards, as you move through it. In 2011, Slam was convincingly addressed by computer scientists using Microsoft’s “Kinect” gaming hub, an array of sensors and processors that until recently would have been impossibly costly but is suddenly compact and cheap.

Problems such as language recognition and Slam have so far prevented robots working alongside humans; or on tasks that are not precisely defined, such as taping up parcels of different sizes or cleaning a kitchen. Perhaps the robots really are now on the rise.

… What is sobering is that we have already seen convincing evidence of the impact of technology on the job market. Alan Manning of the London School of Economics coined the term “job polarisation” a decade ago, when he discovered that employment in the UK had been rising for people at the top and the bottom of the income scale. There was more demand for lawyers and burger flippers. It was middle-skill jobs that were disappearing. The same trend is true in the US, and is having the predictable effect on wages: strong gains at the top, some gains at the bottom, stagnation in the middle.

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… Of course cheap, ubiquitous computing power has brought many good things – and will bring more. The question is whether we are equipped to deal with the possibility that in future, there will be people who – despite being willing and fit to work – have no economic value as employees. By the time today’s 10-year-olds have their degrees, computers could be a hundred times cheaper and smarter than they are today. A future full of robot servants could be a bright future indeed, but only if we can adapt our institutions quickly enough.

(3) The robots are coming. Will they bring wealth or a divided society?“, Gavin Kelly, The Guardian, 4 January 2013 — “Driverless cars, robo-ships and delivery drones are likely to become commonplace in the decades to come. One labour market expert argues that a ‘second machine age’ will test our ability to spread the rewards fairly.” Excerpt:

As with all prophecies of doom, or indeed those of an impending economic boom, we should treat such visions with caution. Predictions about the uniquely transformational yet job-killing impact of technological change are as old as capitalism itself. There’s never been an era without plausible experts warning the population that they are on the cusp of a new, usually scary, world resulting from technological breakthrough.  Occasionally they’re not wrong; mostly they are.

Which isn’t to downplay technology as the motor of economic change.  Time and again – from spinning wheel to steam engine – it has had disruptive implications for the workforce. But labour displaced from field or factory eventually found new, more productive roles, demand expanded, living standards rose.

The lag, however, can be a long one. Not long before his death in 1873, John Stuart Mill remarked that the industrial revolution had not yet had much impact. This seemed an extraordinary observation, but it captured at least a partial truth. As the economic historian Brad DeLong has shown, from 1800 to 1870 real working-class wages grew at just 0.4% a year before tripling to 1.2% from 1870 to 1950 (reaching almost 2% in the golden postwar decades). Similarly, we are yet to experience the true gain, whatever it turns out to be, as well as the pain, of the robot era.

To get a better sense of the impact of technology on our labour market we don’t need to rely entirely on frothy speculation about the future. There is a decade or more of research to draw on. The rise of information and communications technology (ICT) is hardly new. The dominant view, both in the UK and elsewhere, is that it has already been eroding a swath of jobs that involve repetitive tasks capable of being automated and digitised. This has disproportionately affected roles in the middle of the income distribution – such as manufacturing, warehousing and administrative roles.

This doesn’t result in lower overall employment – for most economists the main change is to job quality, not quantity.  There has been a rapid growth in demand for high-skill roles involving regular interaction with ICT, as well a rise in lower-paid work that is very hard to automate – from caring to hospitality. Consequently the balance of employment has shifted upwards and downwards with less in between; as Manning puts it, the labour market has been polarising into “lovely and lousy jobs“. The impact of technology has been gradual but inexorable – “it only goes one way”, he tells me. In some sectors the decline in employment and relative pay has been dramatic: the typical heavy goods driver receives less in real terms today than a generation ago.

A narrow focus on technology is also inadequate, as it fails to explain some of the big shifts of the last decade like the explosion in rewards at the very top – 60% of the enormous increase in the slice of income flowing upwards to the richest 1% over the last decade went to those working in finance. To lay this at the door of the anonymous force called “technology” is to excuse way too much. Sure, developments in ICT were relevant, but they don’t explain political choices over deregulation or account for rapacious rent-seeking by the financial elite.  Wage inequality has many authors, from the demise of collective bargaining to the rise of globalisation. As the influential Washington-based EPI thinktank has argued: don’t make robots the fall guy.

Nor does an exclusive techno-focus illuminate the post-crisis polarisation of our jobs market, which has seen recession-busting increases in high-paying jobs in sectors like business services alongside a big growth in low-paid work, with sharp falls in between in sectors like construction. Further signs of the impact of technology? Doubtful. This pattern has coincided with a demand-starved economy, an investment strike by business and plummeting wages. Indeed recently the robots could be forgiven for worrying about their prospects given the falling cost of labour.  It all adds up to a complex story.

… Given the uncertainties and the capacity of market economies to adapt to shocks, many will assume that things will continue much as they have done. Perhaps. But if the techno-enthusiasts are at least partly right, the consequences will be far-reaching.

Fortunately, perhaps, at least some of the issues that this would mean grappling with are more extreme versions of those we should be worrying about already. The rise of the robot is likely, for instance, to result in an increasing share of GDP flowing to the owners of capital at the expense of labour – something that has recently been occurring across many OECD countries … An acceleration of this should rekindle interest in finding ways to distribute the ownership of assets more evenly as well as finally prompting a serious discussion about shifting some of the burden of taxation from labour towards wealth.

Accelerating wage inequality, together with a rise in economic insecurity, would sharpen the need to bolster our working-age welfare system at a time when it’s already creaking and has few political friends.

Whether the greater democratisation of economic risk – if those in medicine, law and accountancy also feel the pressure – would shift the political dynamic remains to be seen.

… Our historical weaknesses on education policy would cost us more dearly. The wage penalty arising from flaky sub-degree-level qualifications – a longstanding weakness – would rise, as would the premium for those who can combine rigorous analytical thinking with creativity. Massive wage returns are likely to flow to those with applied postgraduate degrees – ensuring fair access to them would become a more central feature of distributive politics.

(4)Remembering sabots (wooden shoes)

… an origin of sabotage, a result of the poverty caused by unequal distribution of the fruits from the first industrial revolution: see this comment.

(5) For More Information about the robot revolution

These posts link to a wealth of information and speculation, helping you to prepare for what is to come.
Robot hand holding the 21st Century world

(a) Dynamics of the robot revolution

  1. The coming big increase in structural unemployment, August 2010
  2. The coming Robotic Nation, 28 August 2010
  3. The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010
  4. Economists grapple with the first stage of the robot revolution, September 2012
  5. The coming big inequality. Was Marx just early?, 27 November 2012

(b) First signs of the robot revolution appear

  1. The Robot Revolution arrives & the world changes, Apr 2012
  2. In Friday’s job report you’ll see early signs of the robot revolution!, 5 December 2012
  3. Krugman discovers the Robot Revolution!, 9 December 2012
  4. How do we respond to the Robot Revolution?, 11 December 2012
  5. 2012: the year people began to realize the robots are coming, 3 January 2013
  6. Journalists reporting the end of journalism as a profession, 19 March 2013
  7. The next step of computer evolution: becoming bloggers, 20 March 2013
  8. A book about one of the trends shaping the 21st century: the next industrial revolution (robots), 29 December 2013

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10 thoughts on “The promise and peril of automation

  1. Again, I still say this is a bit an alarmist sales campaign for a book and personal-brand-2.0 of the authors, but I now realize it’s useful.

    Alarmist:

    The problem may well be real: total_labor_needed < number_of_people * 40_hours_per_week, leading to level of unemployment and lower-class-total-compensation level that is unacceptable to the decision making apparatus.

    But I think the solution was already figured out after the first industrial revolution. (1) Require overtime. (2) Adjust the workweek until the level of unemployment and lower-class-total-compensation level are again acceptable to the decision making apparatus. Note that this time, overtime will have to be expanded to include salaried workers.

    I think the last time around the solution required a slight amount of coercion to implement. Don't see why that would be different either.

    Useful:

    Fear motivates, and robots are the ideal version of the "other". So in this sense robots are a great vehicle to attract attention to issues that can and should be solved independent of the technology involved: unemployment, and inequality.

    Also, FM often asks how to be more "effective" at getting people to care about X and bringing X into the public consciousness. It just occurred to me that Brynjolfsson and McAfee may have some good methods. So many articles everywhere plugging their book. Perhaps ask how they do it?

    1. Adsf,

      “(1). Require overtime. (2) Adjust the workweek ”

      If less labor is required, and there is a surplus of workers, why would an employer pay overtime?

      And who will “require” overtime?

      Who will adjust the workweek?

      The trend is towards lower compensation and benefits, not higher. As seen in this week’s vote by Boeing workers — one of the strongest unions, in a financially strong and growing company.

      The minimum wage was increased because it affects a small slice of workers — and the low wage was costing the government money in food stamps and Medicaid.

    2. Very true, no rational employer would voluntarily agree to such a thing.

      By require overtime, I meant require that salaried workers be subject to the overtime rule. Not that they are required to work more — we would of course them to work less, since there would, theoretically, be less work required, or less demand for work at a given real-wage (hmm).

      Who will require it and adjust the workweek? Same people who did it last time: government / decision making apparatus / unhappy crowd of unemployed.

      Regarding minimum wage: reduced workweek is a little different. minimum wage supposedly leads to unemployment. A shorter workweek is a more comprehensive solution. Obviously reduces unemployment, but as you crank up the effect, unemployment approaches zero, more “pricing power” by workers, resulting in a transfer of wealth back to the poor.

      One of the arguments against a short workweek is that less hours worked means reduced “total production”. In the robot scenario, where the limiting factor in production is not labor, but rather materials or capital, this argument should become a lot less important.

      A shorter workweek is a form of redistribution that I think is more equitable, and less threatening, than taxing the middle/upper class and giving the money to the poor. Also less wasteful than trying to increase the number of hours worked when the advancement of technology suggests the exact opposite.

      You would get several other added benefits too. (1) with less hours worked, presumably you consume less fuels or materials, some of which might be scarce no matter how much cheap labor you can get from robots. (2) You might slightly slow down the rate of technology development, if you think *that* is a problem. (3) you make time available for other things. Education, exercise, time to for kids, care for the elderly, engagement in the political process?

      If there’s really a need for this it should become plenty obvious.

    3. asdf,

      “Who will require it and adjust the workweek? Same people who did it last time: government / decision making apparatus / unhappy crowd of unemployed.”

      That legislation occurred after the great citizen mobilization of WW1 and the Great Depression. I suggest not holding your breath for that combination of conditions to repeat itself.

      On a broader scale, anything is possible — eventually. But such forecasts are IMO just pie-in-sky speculation at this time. They are daft as a basis to declare as “alarmist” warnings about visible — even likely — scenarios.

    1. Curtis,

      That is a valuable historical analogy. The entomology of “sabotage” is from “sabot” (wooden shoe). One possible origin is the labor action of 16th century textile craftsmen, throwing their wooden shoes into the machinery — sabotage to prevent unemployment.

      While that seems futile today, let’s try some empathy. Skilled craftsmen living in the lower class (wooden shoes were a class badge, an uncomfortable sign of poverty) — facing unemployment or lower wages due to automation. No food stamps, no Medicaid, no savings — little hope.

      The rapid economic growth of the first industrial revolution plus the powerful repressive engines of those regimes usually maintained the peace — albeit with sustained low-levels of domestic violence and occasional revolutions (France, across Europe in 1848) — despite the massive poverty of urban immigrants.

      The 1% of the first industrial revolution skimmed off most of its benefits. Painters like William Hogarth and writers like Dickens described the incredible poverty of urban workers created by unequal distribution of its fruits.

      Yes, wooden shoes are a good symbol for one possible outcome of the next industrial revolution. Let’s remember — and learn.

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