Tuesday, November 25, 2014

The Rise of the Robots

LONDON – What impact will automation – the so-called “rise of the robots” – have on wages and employment over the coming decades? Nowadays, this question crops up whenever unemployment rises.

In the early nineteenth century, David Ricardo considered the possibility that machines would replace labor; Karl Marx followed him. Around the same time, the Luddites smashed the textile machinery that they saw as taking their jobs.

Then the fear of machines died away. New jobs – at higher wages, in easier conditions, and for more people – were soon created and readily found. But that does not mean that the initial fear was wrong. On the contrary, it must be right in the very long run: sooner or later, we will run out of jobs.

For some countries, this long-run prospect might be uncomfortably close. So, what are people to do if machines can do all (or most of) their work?

Recently, automation in manufacturing has expanded even to areas where labor has been relatively cheap. In 2011, Chinese companies spent ¥8 billion ($1.3 billion) on industrial robots. Foxconn, which build iPads for Apple, hopes to have their first fully automated plant in operation sometime in the next 5-10 years.

Now the substitution of capital for labor is moving beyond manufacturing. The most mundane example is one you will see in every supermarket: checkout staff replaced by a single employee monitoring a bank of self-service machines. (Though perhaps this is not automation proper – the supermarket has just shifted some of the work of shopping onto the customer.)

For those who dread the threat that automation poses to low-skilled labor, a ready answer is to train people for better jobs. But technological progress is now eating up the better jobs, too. A wide range of jobs that we now think of as skilled, secure, and irreducibly human may be the next casualties of technological change.

As a recent article in the Financial Times points out, in two areas notoriously immune to productivity increases, education and health care, technology is already reducing the demand for skilled labor. Translation, data analysis, legal research – a whole range of high-skilled jobs may wither away. So, what will the new generation of workers be trained for?

Optimists airily assert that “many new types of job will be created.” They ask us to think of the lead drivers of multi-car road trains (once our electric cars join up “convoy-style”), big data analysts, or robot mechanics. That does not sound like too many new jobs to me.

Imagine a handful of technicians replacing a fleet of taxi drivers and truckers, a small cadre of human mechanics maintaining a full robot workforce, or a single data analyst and his software replacing a bank of quantitative researchers. What produces value in such an economy will no longer be wage labor.

We can see hints of that future now. Twitter, the social-media giant, is an employment minnow. It is valued at $9 billion, but employs just 400 people worldwide – about as many as a medium-size carpet factory in Kidderminster.

It is not true that automation has caused the rise of unemployment since 2008. What is noticeable, though, is that structural unemployment – the unemployment that remains even after economies have recovered – has been on an upward trend over the last 25 years. We are finding it increasingly difficult to keep unemployment down.

Indeed, the days when we in Britain thought it was normal to have an unemployment rate of 2% have long since passed. It was considered a great achievement of the last government that it brought unemployment down to 5% at the height of an unsustainable boom. And it only succeeded in doing so by subsidizing a lot of unnecessary jobs and useless training schemes.

No doubt some of the claims made for robots replacing human labor will prove as far-fetched now as they have in the past. But it is hard to resist the conclusion that “technological unemployment,” as John Maynard Keynes called it, will continue to rise, as more and more people become redundant.

The optimist may reply that the pessimist’s imagination is too weak to envisage the full range of wonderful new job possibilities that automation is opening up. But perhaps the optimist’s imagination is too weak to imagine a different trajectory – toward a world in which people enjoy the fruits of automation as leisure rather than as additional income.

During the Industrial Revolution, working hours increased by 20% as factories replaced feasting. With our post-machine standard of living, we can afford to shed some of the Puritan guilt that has, for centuries, kept our noses to the grindstone.

Today we find a great deal of work-sharing in poor countries. It is the accepted means of making a limited amount of available work go around. Economists call it “disguised unemployment.”

If escape from poverty is the goal, disguised unemployment is a bad thing. But if machines have already engineered the escape from poverty, then work-sharing is a sensible way of “spreading the work” that still has to be done by human labor.

If one machine can cut necessary human labor by half, why make half of the workforce redundant, rather than employing the same number for half the time? Why not take advantage of automation to reduce the average working week from 40 hours to 30, and then to 20, and then to ten, with each diminishing block of labor time counting as a full time job? This would be possible if the gains from automation were not mostly seized by the rich and powerful, but were distributed fairly instead.

Rather than try to repel the advance of the machine, which is all that the Luddites could imagine, we should prepare for a future of more leisure, which automation makes possible. But, to do that, we first need a revolution in social thinking.

Read more from our "In Keynes's Footsteps" Focal Point.

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    1. CommentedCristiano Oddera

      The reason it didn't happen is that capital incomes increase more if productivity grows while real wages remain still. So capitalists instinctively prefer to have more unemployment, but more profits, rather than a better distribution of technologic driven benefits.
      This implies that workers, in the long run, do not have the money to buy the goods (and services) they produce. This also conduces to the raise of both private and public debt and the financial crisis we are periodically living in.
      Since roughly the 1960 the labor productivity starts to grow more than real wages do and there is no sign of trend break. There are clear signs of a great debt worldwide crisis instead.

    2. CommentedHeriberto Arribas

      I mixed Ludd's idea with Laffer's idea. This curve have a maximum. Before, go up, but after, go down.
      You propose one solution there are other solutions. People no need work to 20 at 65 years old, maybe 30 at 50. But this is not Wonderland, now some countries up to 70. People may not need a job but a salary. Other solution is a salary only for to be.
      If the system don´t change they are not solution.

    3. CommentedZain S.

      Good article. One thing that I would like to point out is that more leisure time would also help lower carbon emissions and limit pollutants. This is something which is often missed in the popular narrative.

    4. CommentedNRA Borges

      A very good article. A revolution in social thinking? Just consider Frank Pasquale's comment below that we all Twitter users work for it. In fact we don't but indeed we do add value to it: the value of our free time that we dedicate to twitting. If you do not agree just consider what value Twitter would have from its actual US$9billion if all users decided to plug out on it. The Net is not definitely a free ride for its users.

    5. CommentedCox Andy

      What this all points to is the irrefutable fact that capitalism is no longer fit for purpose, and that we need to establish a new socioeconomic dispensation that will easily accommodate desirable advances in technology whilst at the same time meeting the needs of all humanity. Establishing a world wide system of free access to all goods and services with common ownership of the means of production is just what it would take to get rid of the misery and morass inflicted upon us by this dog-eat-dog system in which competing interests vie for trade and dwindling resources with scant regard to the environmental impact of their voracious greed. The consequences are only too obvious: wars, poverty, hunger (despite the potential for abundance, food production is subservient to market demand), waste (on a massive scale), glogal warming, pollution, oppression, a lack of progress in medicine (Big Pharma, for example, has abandoned research into antibiotics because it’s not profitable), shoddy goods, mass unemployment (200 million worldwide this year), and decaying disaffected neighbourhoods, to name but a few. The alternative, world communism (not to be confused with the cynically mislabelled variants of state capitalism, such as Soviet Russia, China, or North Korea), would entail the elimination of billions of unnecessary and unproductive jobs in banks, insurance companies, civil services, retail outlets, advertising, armed forces, police forces, stock exchanges, amongst others; thus providing far more hands and heads to cater for the needs of everyone. States and national boundaries would disappear as both of these phenomena originate in propertied societies. It would be a voluntaristic, liberated society, and as such would evince a far more commodious and optimistic ethos. Importantly too, communism, by eliminating the conflict between capital and labour would allow technology and indeed automation to flourish. To those who might reflexively dismiss this as pure utopian nonsense, I would say, think again. Chances are yours is a intellectually indolent knee jerk reaction and you’ve never scratched the surface of this idea. The intellectual arguments and empirical evidence in support of it are vast and complex. Its time to start thinking outside the box

    6. CommentedJ. T. G.

      A great article... Robert Skidelsky very frequently has interesting thoughts & ideas.

    7. CommentedRalph Musgrave

      Twenty years ago there were several people in my neighbourhood making use of the increased wealth afforded by automation to lead a life of leisure: they lived permanently on benefits. And they managed it without lectures from economics professors on arcane subjects like Skidelsky’s “revolution in social thinking”.

    8. CommentedWilliam Wallace

      Easily the greatest conundrum facing us over the coming decades. Job sharing combined, say, with more time spent working one's small vegetable garden, might help. But perhaps it's not enough.
      Maybe what we need is for robots to have to adopt families whom they support. Make robots responsible members of society!

    9. CommentedAvraam Dectis

      Use Modern Monetary Theory to keep unemployment at 2%

      If you look around, you will see plenty that needs to be done.

    10. Commentedha nguyen

      robot increases labor productivity, thus increasing wages for workers, including the management and control of robotic systems, design, manufacturing, maintenance, operation and programming.However, the transition to the robot will cause the process of labor mobility, the simple manual labor was replaced by the high-skilled labor- R&D, design, manufacture... which is not yet available in the society. the of labor mobility that make society to develop but it will also cause unemployment in the society. scientific research is the process of supporting the labor mobility to become more efficient.

    11. CommentedZachary Stansfield

      But this is altogether too obvious. If automation is to continually reduce the workload of the masses while increasing productivity, then the rewards of this productivity must accrue not just to those who hold the keys (or, in this case, the "codes"). But there is no clear manner by which this can be realized in an ostensibly "capitalist" society, where we eschew those who work but a little, denigrate those whose work is poorly rewarded and extol the virtues of those who game the system.

      Spin us a tale about how to make the robots work for everyone, else we can talk ourselves into the ground to no avail. It is one thing to declare that we need to change our social thought, and wholly another to enact such a state of affairs. Should we all start corporations which pay workers to complete piddling tasks for handsome wages? Should we simply let those who are most skilled at the tasks that remain earn all of the rewards and then redistribute every penny to the leisurely folk?

      What we need is not a social rethink. We can collect all the social support we want, but if the plan is faulty then it's sure to fail. What we need are actual solutions which can be practically implemented. And I don't see a lot of those coming any time soon. If you want a good hedge: it's better to be capital than labour in the age of robots.

    12. Commentederic j rhoades

      We need a revolution in social thinking in that it must no longer be considered immoral to receive benefits for not engaging in profit making endeavors.

      It is clear that the problem of being able to create sufficient employment already exists, even in the formative age of robotics. Take away China's massive infrastructure investment and how many jobs would be left in their regular economy? Modern productivity levels are such that we simply have more people than we need to create what we need.

      We are at a crossroads, and it is best that we recognize what is. The wages to fuel consumption model is about to break entirely, but before it does we are at an age of record corporate profits. Since profits are not being directed into wages because of the global labor glut we need to find a way to direct profits into the hands of people who will consume even if they aren't doing traditional work. If we don't do this the lack of consumption will dry up corporate profits before we have a chance to re-direct them, and everything will break. Consumption may be supported through debt, as it has been done for quite some time, but that is a short term fix. Ideally people should be able to save and consume, but how do they do that in the absence of a living wage?

    13. CommentedKen Presting

      The role of robots in our headlines is a distraction. Truly the issue goes back to Adam Smith's pin factory: capital investment increases productivity.

      The real problem is buried in Skidelsky's article: inequal distribution. The idle rich fascinate the working masses, who despise the (supposedly) idle poor.

    14. CommentedPaul Mathew Mathew

      Excellent article - I particularly like this:

      But perhaps the optimist’s imagination is too weak to imagine a different trajectory – toward a world in which people enjoy the fruits of automation as leisure rather than as additional income.

      I am trying to wrap my head around taking this to the extreme - say a world where almost everything was automated - with a small number of people controlling the machinery.

      Of course we'd still need some other people e.g. partners in firms who brought in business... creative people etc....

      Say over 50% of the working age population was not required.

      Would they just sit around all day watching Dancing with Stars while getting chits from the govt for free products and services?

      Or would these people live in squalor like base animals?

      Very difficult to envision what would happen.

      In any event, we won't get there because we have hit the End of CHEAP Energy ... and growth and innovation will end as our supply of cheap energy runs dry


        CommentedJose araujo

        Would they just sit around all day watching Dancing with Stars while getting chits from the govt for free products and services?

        Or would these people live in squalor like base animals?"

        Aren't these the same scenarios?

        For sure you can imagine different scenarios where workers aren't treated like animals

    15. CommentedProcyon Mukherjee

      Robert Skidelsky is right but the rise of robots is an imperative, not a curse. If we look at the number of people who would be in the working age group versus the number who would not be, the ratio is changing dramatically over the next twenty to thirty years. In some developed countries the ratio is going to be as low as 1:3 going by demographic trends.

    16. CommentedDominic Albino

      Here's the key, buried at the bottom: "if the gains from automation were not mostly seized by the rich and powerful".

      Trading returns to capital for returns to labor is only a fair trade to those who have a fair share of each. Those who control only capital get an overwhelmingly good deal and those who control only labor get a poor one indeed.

      We do indeed "need a revolution in social thinking." We live increasingly in a world of tournament payoffs, where many have little and few have overmuch. This is no longer represents the American ideal that success rewards hard work and competence. Instead, success rewards past success, and luck.

      In such a world, rising average income means little because most people see no rise at all, and those who benefit the least from the increase receive almost the entirety of it. And it leads to a corrupt system, where effort is no longer directed towards productivity and increasing the size of the pie, but towards gaming the system to capture a larger and larger slice of the same pie.

    17. CommentedFrank O'Callaghan

      There is a logic to this that is both powerful and beautiful. I am aware that the road to utopia can be rocky.

    18. CommentedStepan February

      Brilliant. I would not mind spending more time with my kids, so that they grow up more intelligent, creative and productive than the public education warehouse will make them.

      The freed up time should be dedicated to production of knowledge. We then can create efficient interstellar travel. THEN there will be enough planets for everyone to get work again... and the cycle continues.

    19. CommentedLuke Ho-Hyung Lee

      The current economic crisis including the job crisis actually has a dimensional problem, more specifically, the lack of appropriate real world process systems in the Modern 3-D Information Age. We cannot resolve the crisis only through the existing obsession with efficiency so characteristic of 2-D real world processes. It can only be resolved by developing and implementing 3-D systems in the real market. The “technological unemployment” problems could also be resolved by doing that.

      Only 2-D real world processes in the Modern 3-D Information Age? It’s the Dimensional Problem! Strangely, nobody has considered this in his (or her) ruminations about the economy.

      Please take a look at http://www.ubims.com/2012/12/supply-chain-revolution-how-3-d-supply.html

    20. CommentedJose araujo

      Economic science moves at different speeds, unfortunately macro and economic politics are anchored in the 19 th century, but other disciplines have move further from the dogmas that haunt our science.

      From marketing we know that consumers are the real value creators, and unless you manage to invent consumer robots you are going to stick with people for a while.

      Value (price, utility, or whatever you want to call it) is a human construct, a virtual construct anchored in our social values. Production is only potential value transformed into kynetic by the act of consumption.

      So in a robot world you would only have potential value, who would remain idle until someone had the means to transform it into kynetic value, if nobody consumed the goods and services then they had no value at all.

      But not only value is a virtual construct. Capital and wealth are only bits and byts in a system or piles of useless rare metals on a basement. Wealth and property are social contracts that can be easily transformed.

      Adds that we live in democracies, consumers are the ones who vote, so unless robots had the right to vote, society would have to appropriate the potential value created and transform it into kynetic value.

    21. CommentedSachin Agarwal

      Is the real challenge with automation the loss of jobs, or is it the concentration of wealth? If the scenario that you envision does play itself out, it will mean more wealth creation than we have seen before. However it will also concentrate ownership into the hands of fewer people thereby concentrating wealth. With automation economies of scale are also somewhat increased, leading to further concentration within each sector.

      The problem then is that it'll leave a lot of people with nothing to do, not a lack of resources for them. This then becomes a social problem rather than an economic problem.

    22. CommentedFrank Pasquale

      Everyone who is on Twitter works for it--we create the content, hashtags, etc. But only 400 people get paid. It's digital sharecropping--identified by Nick Carr back in 2006, and discussed in detail here http://www.routledge.com/books/details/9780415896955/

    23. CommentedMike Chu

      What if we go oen step further. What if there is no ownership to capital. All capital, and debt, is to be owned by the king. And the society becomes the king. This would remove the profit motive. I wonder what happens then.

    24. CommentedPaul Jacobson

      The issue remains the institutions to support a "fair" division of returns. What is the appropriate reward to capital