The question of technology replacing jobs has a long history. Perhaps the most famous was the notorious so-called half-wit Ned Ludd who led a movement to destroy cotton making machines in 17 th Century Britain. That incident led to a movement called Luddites. They were much criticised as being in the way of progress. Yet Luddites appear often in contemporary society – most notably Donald Trump during his 2016 USA Presidential bid. The consequence of Trump Luddism, echoed by Bernie Sanders on the left of the bid, has also led to a huge attack on trade and implicitly technological progress itself.
So some facts. There is no doubt that technology destroys obsolete jobs. Nor that importing cheaper goods and services from technologically more backward countries also destroys jobs. Happily the new technological progress leads to higher levels of productivity and new jobs in more technologically advanced industries. Further, trade is mutually beneficial in that it allows countries with low levels of skills to reach higher levels of employment through exporting to richer countries, while richer countries may export technologically advanced goods to poorer countries. Germany is a good example of the latter and achieves unemployment rates less than 5% through exporting high technology machines.
Yet, there is a downside in that the new jobs may not be as plentiful as before and, more importantly, the old jobs either become obsolete or in less demand because they are essentially low tec.
There is some evidence (Silicon Valley in the USA for instance) that high tec jobs bring higher wages than the obsolete jobs they replaced. Both Germany and USA have experienced lower rates of unemployment in the past few years of less than 5% suggesting that the swap process in jobs accompanied with higher rates of growth of GDP has worked. But, again, the downside is that the labour force in the USA has reduced – workers with obsolete qualifications simply withdrawing from the labour force (discouraged workers) – thus the unemployment rate which is, of course, numbers unemployed[1] divided by the labour force should actually increase! Thus, curiously, the numbers in unemployment doesn’t change but the unemployment rate actually goes up. Curiously too, when jobs start to be increased and unemployed numbers fall, discouraged workers come back into the labour force and are likely to be unemployed thereby again increasing the unemployment rate.
Another indicator of the health of an economy is the homelessness rate. In the USA homeless numbers have actually reduced even as unemployment remained stubbornly (in the early part of the Obama administration) high despite benefits having been drastically reduced by an uncaring Republican dominated Congress. The preceding, if you are still with me, demonstrates that the interpretation of employment/unemployment statistics is not easy!
Two further problems are that the discouraged workers live on vastly reduced savings and that obsolete workers have to re-train and re-locate. This is where a socially responsible Government steps in and should provide benefits to discouraged workers living on or under the poverty line and compensates workers to re-train. Germany has done this but the USA, with its Republican Congress and Senate, simply refuses to introduce benefits. Trade does lead to jobs being lost by the low skilled, or even the wrong skilled. Yet the new higher skilled jobs in the new trade should be better paid and should also be taxed to allow the displaced workers to benefit. If this is not done then there are disgruntled former workers. But blaming the result on trade, again as the Republicans have done in the USA while not providing unemployment benefits is nonsensical. Quickly followed by a war on trade is likely to lead to an even larger loss in jobs, as well as higher import prices as retaliatory trade barriers are also thrown up thereby reducing exports as their price increases.
New thinking is required, especially with the above processes occurring along with stagnant wages on average. Some have been there already most notably Bertrand Russell in the early 1900s when he argued that technology has brought new prosperity and the need for less labour. This should be welcomed and so should be the need for less work. But without income, those out of work or working less hours than before suffer living standards loss not an increase.
The worsening income distribution around the world suggests that the benefits of technical progress are accruing to the very rich and not the majority of the working population. But why should this new wealth not be distributed fairly? Curiously our Governments have become less socially responsible and have moved toward less taxes for the rich and fewer benefits for the poor and/or unemployed.
My main conclusion is that technological progress through increasing use of technology (such as robotics) should be welcomed since new technologies reduce the drudgery of life. Yet, both our public and private sectors should be mindful that those who suffer from being replaced by technological progress should be compensated. That income distribution around the world is worsening suggests that the technological progress and increased trade that are occurring have not led to an increase in the social responsibility of Governments. So readers, await more Bernie Sanders and Jeremy Corbyn type politicians. Much as I like aspects of their programmes, my hope is that the latter types do not damage technological progress nor the private sector nor trade. So far the phrase ‘private sector’ rarely falls from their lips except in derogatory terms. The truth is, as ever, more complicated than that. Social responsibility of both our private and our public sectors deserves a much higher consideration than up to now.
[1] Note to be unemployed one must be both in the labour force and looking for work, yet not have found work for pay or in kind for at least one hour in the reference period beforehand. [ILO international definition].
Bio:
President of MHCi, an international research and advisory services company. Regular blogs, newsletters are produced and MHCi is the holding company for the CSR and Financial Institute, and also the holding company for the CSR International Club which now has 3000 members worldwide.