Confronting Dystopia

The New Technological Revolution and the Future of Work

Eva Paus

• Publisher: ILR Press
• Year: 2018
• ISBN:
  9781501719875
• Topic: Economics
• Subtopic: Labour Economics
• Index: Economics

In Confronting Dystopia, a distinguished group of scholars analyze the implications of the ongoing technological revolution for jobs, working conditions, and income. Focusing on the economic and political implications of AI, digital connectivity, and robotics for both the Global North and the Global South, they move beyond diagnostics to seek solutions that offer better lives for all. Their analyses of the challenges of technology are placed against the backdrop of three decades of rapid economic globalization. The two in tandem are producing the daunting challenges that analysts and policymakers must now confront.

The conjuncture of recent advances in AI, machine learning, and robotization portends a vast displacement of human labor, argues the editor, Eva Paus. As Confronting Dystopia shows, we are on the eve of—indeed we are already amid—a technological revolution that will impact profoundly the livelihoods of people everywhere in the world.

Across a broad and deep set of topics, the contributors explore whether the need for labor will inexorably shrink in the coming decades, how pressure on employment will impact human well-being, and what new institutional arrangements—a new social contract, for example, will be needed to sustain livelihoods. They evaluate such proposals as a basic income, universal social services, and investments that address key global challenges and create new jobs.

Contributors:
Vandana Chandra, Mignon Duffy, Dieter Ernst, Vincent Ferraro, Martin Ford, Juliana Martinez Franzoni, Irmgard Nubler, Robert Pollin, David Rueda, Diego Sanchez-Ancochea, Guy Standing, Stefan Thewissen

1 THE FUTURE ISN’T WHAT IT USED TO BE

Eva Paus

We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.

—KLAUS SCHWAB (2016)

Not a week passes without headlines predicting that the rise of robotization and digitization will have a profoundly unsettling impact on the economy and the world of work: “How Artificial Intelligence and Robots Will Radically Transform the Economy” (Maney 2016); “Six Jobs Are Eliminated for Every Robot Introduced into the Work Force” (Glaser 2017); “No One Is Prepared to Stop the Robot Onslaught. So What Will We Do When It Arrives?” (Levine 2017).

Prophecies about the devastating impact of new technologies on jobs and working conditions are not new, going back to at least the early nineteenth century, when the Luddites smashed the steam-powered looms that were threatening their jobs. Yet time and again, such prognoses were proven wrong. Now a growing number of voices contend that we are on the eve of a new wave of innovation and change, and that this time is different (Standing 2017; Freeman 2016b; Schwab 2016; Ford 2015; Brynjolfsson and McAfee 2014; Frey and Osborne 2013). The first industrial revolution was based on steam, water, and mechanical production equipment; the second came with electricity and mass production; the third built on electronics, information technology (IT), and automated production; and the new one, the fourth industrial revolution, will be driven by cyber-physical systems that are evolving exponentially (Schwab 2016).

The predictions are that the conjuncture of advances in artificial intelligence, digital connectivity, processing speed, big data, software, and robotics will have a profound impact on the availability of jobs and working conditions over the coming decades, and may lead to dramatic changes in people’s lives. In Klaus Schwab’s words above, the new industrial revolution will generate a transformation unlike anything we have seen before.

This book takes a comprehensive look at the implications of the new technological revolution for future jobs, working conditions, and livelihoods. It brings together diverse perspectives to explore economic and political ramifications for the Global North and the Global South. Three central questions lie at the heart of the issues raised: (1) Will the need for labor inexorably shrink in the coming decades, generating the technological unemployment that Keynes (1930) predicted nearly one hundred years ago? (2) What will be the impact on human well-being and inequality, within and between countries? (3) What are key elements of the new institutional and social arrangements needed to sustain livelihoods on a broader basis?

With different entry points and foci, the contributors offer alternative answers to these questions. Nonetheless, a common thread that runs through their analyses and policy recommendations is that emerging dystopias of unravelling social contracts, insecure livelihoods, insufficient employment, and increasing divergence between the Global North and the Global South are not fated, but can and need to be countered with proactive strategies. Together, the authors’ policy suggestions translate into a bold agenda that seeks to redress the rise in inequality and precarious living situations and to leverage the potential of the new technological revolution to improve people’s lives. To implement such an agenda or parts of it, societies need to forge new social contracts with institutional arrangements that revise unfettered globalization and distribute the benefits of the technological changes broadly.

In this book, we situate the impact of the new technological revolution deliberately in the context of the globalization process since the 1980s. Technological advances in shipping and IT enabled the fragmentation of production chains on a global scale, leading to widespread outsourcing and offshoring, first in the manufacturing sector and more recently in services. The adoption of neoliberal economic policies resulted in large reductions of trade barriers and market liberalization more broadly. And the systemic collapse in Eastern and Central Europe, together with China’s opening to world markets, meant that the global labor force doubled (Freeman 2006). Together, these changes have led to an intensification of competition among producers (and workers) around the world and a weakening of labor, as capital has become increasingly mobile across national borders.

We emphasize three key characteristics of today’s global reality that shape the impact of the new technological revolution. First, globalization has had a different impact on productive capabilities, jobs, and social provisions within and between the Global North and the Global South. Thus, the ramifications of the new technological revolution will likely vary across regions and countries of the world. Second, globalization and technological change have led to rising inequality within and among countries, generating growing concerns at individual and national levels. The fact that economists’ books about inequality have become bestsellers (Piketty 2014; Milanovic 2011, 2016) shows how deeply the issue resonates. The fact that inequality and economic uncertainties figure prominently in political movements and campaigns in countries around the globe demonstrates more directly people’s growing frustration and quest for redress. While the speed and extent of its impact are subject to debate, the new technological revolution will exacerbate the current inequality trend unless countered by deliberate policies. But the current concerns about inequality and the rise in political discontent and polarization are a response primarily to trends that have unfolded over the past few decades and not to anticipated future developments. That means that new answers are urgently needed now, before the new technological revolution has made its impact fully felt. Third, countries around the world are facing serious challenges to future human well-being, most urgently global warming and—less visibly—a vast global care deficit. Constructive responses to these challenges are in societies’ long-term self-interest, irrespective of any impacts of the new technological revolution. That such responses also offer significant opportunities for the creation of new decent jobs is of particular interest for the issues discussed here.

The chapters in this book are organized in three interrelated sections. The first two focus primarily on the Global North and the third on the Global South. The four chapters in the first section, “Trends: Job Destruction and Job Creation,” explore the extent of job destruction and the possibilities for job creation under the new technological revolution. The three chapters in the second section, “Risks and Repercussions: Alternative Futures,” analyze the change in labor market conditions in the North under globalization and the new digitized economy, as well as political responses to growing inequality and economic insecurity. The three chapters in the final section, “The Global South: Challenges and Opportunities,” investigate different aspects of the impact of robotization, digitization, and globalization on the Global South.

In spite of all context-specific differences, common features cut across countries and regions in the Global North and Global South: most importantly, the link between having employment and enjoying a decent living is becoming ever more elusive. In many countries in the North, this link has already been weakening for years, with wages stagnating and jobs becoming more precarious. In the United States, for example, average wage growth has been decoupled from productivity growth since the mid-1970s (Economic Policy Institute 2016a). Labor’s share in national income has declined, and temporary employment has increased. In 2014, workers’ share in temporary employment was, on average, 11 percent in OECD countries; in some, it was considerably higher, e.g., 20 percent in Spain (O’Connor 2015).

In most countries in the Global South, on the other hand, the link between economic growth and the growth of decent jobs in the manufacturing sector never developed extensively in the first place. In contrast to China and other Asian latecomers in the development process, most countries in sub-Saharan Africa and Latin America never generated large numbers of jobs in labor-intensive manufacturing. Instead, the widespread adoption of free-market policies in the 1980s resulted in premature deindustrialization and an expansion of the informal sector. The commodity price boom of the 2000s, fueled by China’s high growth, accelerated the re-primarization of exports. The diffusion of robotization-cum-digitization will likely make it harder for middle-income countries to create a link between economic growth and the creation of decent jobs on a large scale (Paus 2017). The big question for low-income countries is whether they can leverage low wages to jump-start an industrialization process via labor-intensive manufactured exports before robots transform those sectors as well.

In this global context of multiple decouplings, societies have to find new institutional arrangements that provide for basic human well-being, even if people are not employed. These may include more security for the new jobs in the “platform economy,” a basic income in one form or another, provision of universal social services, or more inclusive ownership of key assets.

Ultimately, the impact of the new technological revolution is a political question, not an economic one. A constructive answer to the challenges posed will require forging a social contract in support of a new institutional architecture. That is a long-term and arduous process. Avoiding dystopias will require redistribution on a significant scale, whether of hours worked or the benefits of technological change. Governments, the business sector, unions, and civil society groups have to discuss which aspects of jobs and livelihoods are most challenging given a country’s economic and social conditions, and which institutional responses are necessary in the short and the long run.

An important step toward starting the dialogue is a greater awareness that the future isn’t what it used to be. This book aims to advance our understanding of the complex of the effects of the new technologies and of their universal and country-specific nature.

Trends: Job Destruction and Job Creation

“Creative destruction” is the term Joseph Schumpeter (2008 [1942], 83)) introduced to describe the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” This process of creative destruction invariably destroys existing jobs in some areas, modifies jobs, and creates new jobs in other areas. History suggests that, at least in the Global North, major technological changes have had a positive impact on job creation, when we take a sufficiently long view.

But looking ahead from the present, predictions about the destructive and creative impact of a new technological revolution are inherently fraught with uncertainty and, not surprisingly, contested. Any prognosis depends on an assessment of the likelihood that the new technologies will affect a wide array of economic activities and the development of demand for more, often new, goods and services, which could create new jobs.

In his widely acclaimed book The Rise and Fall of American Growth (2016), Robert Gordon contends that the century from 1870 to 1970 was a unique period of transformation, with the conjuncture of the impact and diffusion of electrification, cars, indoor plumbing, air transportation, antibiotics, and other innovations. Gordon argues that innovation has been slower since 1970 and that the higher productivity growth during 1994–2004 was a one-time boost due to the introduction of the internet. He is highly skeptical of a broad-based impact of the new technologies that would be a game changer for productivity. Robots, he argues, often complement jobs rather than substitute for them; the benefits of big data have been limited mainly to marketing so far; and the realization of driverless cars, for example, still faces many technical and regulatory challenges.

By contrast, Ford (2015), Brynjolfsson and McAfee (2014), Frey and Osborne (2013), and others argue that the new technological revolution will be transformative. Computers and digital devices are doing for mental power what steam did for muscle power. Nonroutine tasks have become computerizable at remarkable speed and thus opened up, for the first time, a slew of manual and cognitive tasks to displacement. Advances in artificial intelligence, with increasing machine-learning enabled by the exponential growth of big data, may generate the possibility for previously unseen large displacements of human labor. It is the combination of these factors that makes the new technological paradigm a general-purpose technology with unprecedented potential for the destruction of jobs and tasks. That is why this time is different.

One of the reasons why technology pessimists such as Gordon are skeptical of the widespread impact of a new technological revolution is that it has not made an impact on aggregate productivity growth, which—in the United States and other countries of the Global North—has been rather anemic for the past few years. This argument echoes a concern Robert Solow (1987, 36) expressed thirty years ago when he wrote, “You can see the computer anywhere but in the productivity statistics.”

The technology optimists counter that many of the benefits of IT-based innovation to date are not captured by output data,1 and that it may take a generation or two for a general-purpose technology to become diffused throughout the economy. History shows that the diffusion of major technological changes takes time and is contingent on context. David (1990), for example, offers a fascinating account of the lengthy and complex process of the diffusion of electricity and the dynamo.

Prognoses of job destruction resulting from the new technological revolution differ considerably depending on the methodology used. Using 2010 data, Frey and Osborne (2013) suggest that 47 percent of the US labor force works in occupations that have a more than 70 percent chance of being automated. Arntz et al. (2016), on the other hand, focus on tasks within occupations rather than occupations and conclude that only 9 percent of US workers have a high probability of losing their jobs to automation. The two methodologies generate similar differences in estimates for other industrialized countries.

These projections indicate the potential for job destruction based on technological factors. But whether jobs will actually be displaced depends on cost and other factors. With respect to 3D printing, for example, Citi (2016, 87) concluded, “Today’s 3D printers have yet to achieve the speed, capacity, and most importantly the price to rival traditional manufacturing processes such as injection molding and milling.” How quickly job destruction will materialize depends also on the policies that shape the transformation process.

Studies of actual job destruction in the United States on account of automation and robotization find a relatively small impact to date. Analyzing changes in manufacturing employment in the United States during the period 1980–2007, Autor et al. (2015, 624) conclude, “Whereas import competition leads to sharp declines in local manufacturing employment and corresponding growth in local unemployment and nonemployment, exposure to routine task specialization has largely neutral overall employment effects.” Acemoglu and Restrepo (2017), on the other hand, estimate that in the period 1990–2007 the aggregate job loss in the United States due to robots was between 360,000 and 670,000. At the upper end, that means a loss of forty thousand jobs per year. In the scheme of things, that is not a very big number, and substantially smaller than the job losses due to outsourcing to China. That leads Mishel and Bivens (2017, 1) to argue that the limited job growth and stagnant wages in the US have other underlying causes, such as “intentional policy decisions regarding globalization, labor standards, and unemployment levels.”

With respect to the creation of new jobs in the future, the contributors to the first section of this book highlight the need for new public policies and major institutional changes. Two of them advocate different ways to share the fruits of technological change, whether through some form of basic income or other ways of redistribution. The other two, on the other hand, focus on the opportunities for the creation of new jobs by tackling major global challenges.

In “The Rise of the Robots: Impact on Unemployment and Inequality,” Martin Ford argues that we are at an inflection point where the combined effect of advances in artificial intelligence, machine-learning, and software automation will lead to rapid technological change with widespread impact on jobs and living standards. Unlike technological changes in the past, machines are now not only replacing routine manual and cognitive tasks, but also starting to take on nonroutine cognitive tasks. The combined result will be a significant displacement of wage workers with limited skills and education (both in manufacturing and services) and also of workers in tasks that require more education. Ford predicts that inequality will continue to increase and flags the danger of slow growth or stagnation due to insufficient demand. After all, robots do not create final demand. He advocates leveraging the power of the new technologies for the benefit of society and establishing a basic income.

Irmgard Nübler offers a more nuanced view. In “New Technologies, Innovation, and the Future of Jobs,” she suggests that the impact of technologies on jobs is a nondeterministic process that will differ across countries, and that countries that proactively shape this process can create good new jobs. Because the composition of tasks varies within a given occupation as well as across occupations and industrial sectors, Nübler argues that the job impact of these new technologies will vary with the skill composition of the manufacturing sector and the structure of workers’ educational attainment in different countries. Furthermore, compensating effects may counter the destruction of jobs, including the growth of the skilled-craft sector. The expansion of markets for existing goods and services and the creation of new products and services will generate more jobs. But such compensatory effects, she submits, are contingent upon the distribution of the benefits from technological change. For Nübler, the impact of robotiz...

Table of contents

• Acknowledgments
• 1. The Future Isn’t What It Used to Be
• Part I. Trends: Job Destruction and Job Creation
• Part II. Risks and Repercussions: Alternative Futures
• Part III. The Global South: Challenges and Opportunities
• Notes
• References
• List of Contributors
• Index