Robots may spell “Control-Alt-Delete” for workers

October 23, 2014

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Human beings can never run out of work. Adam Smith held that cheery view, and so far he has been proved right. But can the invisible hand match up to the robotic arm? About 47 percent of existing U.S. jobs are at risk from computerisation, according to an Oxford University study published last year. If wage incomes were to disappear in a short time, the results could be cataclysmic for prosperity and peace.

Technology improves living standards. Why will robots threaten them?

From steam engine to the Internet, technological progress has been an expansionary force. Smith’s conviction that workers will benefit from technological change has been a clear winner over the idea that work is finite. Though old jobs have vanished, new and better ones have been created.

The massive and rapid rise of robots could challenge this happy state. For example, carmakers could use robots to make cars cheaper for checkout clerks. But if department stores are replacing those clerks with their own robots, then who will buy the cheaper cars? The benign view that new work will appear in unforeseen, and unforeseeable, ways is shaky at best.

Surely a modern, capitalist society can absorb a technology shock?

Reallocating displaced labour is a messy process. The industrial revolution required colonial conquests to create demand. On the supply side, it has taken revolutions, political agitation and an ever-expanding sense of moral outrage to set norms for who can work, for how long, and at what wage.

Smith’s intellectual victory depended on these social devices, which allowed workers to keep a part of the increase in income from mechanisation. Robotics will force societies to make similarly deep changes, but far more quickly.

Why will societies have so little time to respond?

Very often, the automation won’t even be a machine; just a piece of software. Nor will finite land and energy resources constrain growth: robots can work hanging from walls and without ambient electricity.

The proportion of U.S. workers employed in easily automated “routine” occupations like bookkeeping and assembly-line production shrunk between 1999 and 2012. These workers are now crowding into “manual” jobs like personal care and security services, pushing down wages. The other haven for humans is what economist David Autor calls “abstract” tasks. Alas, demand for historians and M&A bankers isn’t growing fast enough.

Can income redistribution give labour a better deal?

Tax policies are hopelessly ineffective. Labour’s share of national incomes is falling globally, while smaller elites pocket the faster-rising returns from capital. Lawmakers worry about inequality, but aren’t using taxation to redistribute income.

Governments believe that as long as they welcome more overseas capital while restricting the entry of foreign labour, their workers will be better off. Politicians haven’t begun thinking about how to tweak taxation and immigration policies for an age when both labour and capital will be in surplus. This will catch societies off guard.

Isn’t abundant capital a blessing?

No. When capital is in short supply it creates the prospect of a positive return, which drives investment in factories, machines and inventions. But now the world has aged. More people are preparing for retirement and a smaller cohort of youngsters is not able to use up the savings. Capital can only be productive by eliminating wage costs – hence the lure of robots. But when work and wages disappear, deflation sets in.

Won’t it be nice, though, to have cheaper goods and more free time?

In 1930, John Maynard Keynes predicted that the problem for mankind in 100 years would be ”how to occupy the leisure”. His sanguine prophecy was for a scenario in which a society is producing all it wants.

In the age of robots, even societies capable of producing more may fail to do so. People will want to work but won’t find jobs. Nor will falling prices bring much joy. With customers delaying purchases of goods that keep getting cheaper, entrepreneurs will fire workers and embrace labour-saving technology. That will further depress demand.

Surely governments can do something?

Governments can temporarily make up for a demand shortfall by borrowing and spending. However, they will need to pay the debt with future revenue – and robots don’t pay taxes.

Harvard University economist Richard Freeman has a good solution: Give working-class families ownership rights over robots. That will protect demand even when machines drive men out of work. The politics of allocating these new property rights will be a minefield; enforcing them won’t be easy either.

But only if labour has the income security of “robot rentals”, can the rise of the machine become peaceful. With no class warfare between capitalists and workers, it might even be fun.

2 comments

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In a new age of bread and circuses, people who want to work will just spend their time entertaining everyone else by making You-tube videos. The bread will be delivered by robots and we’ll be each others’ circus.

Posted by Pro.gnosis | Report as abusive

If true, there will be a large upper class and large lower class, not much middle class. Lower class will find jobs giving the rich massages, sex, and butlers.

Hopefully robots will take over fast food and fruit/vegetable picking SOON. That’ll end the liberal politicing over them.

Posted by Factoidz | Report as abusive