The end of work as we know it

Financial Mirror (Cyprus) - - FRONT PAGE -

In 1983, the Amer­i­can economist and No­bel lau­re­ate Wass­ily Leon­tief made what was then a star­tling pre­dic­tion. Ma­chines, he said, are likely to re­place hu­man labour much in the same way that the trac­tor re­placed the horse. To­day, with some 200 mil­lion peo­ple world­wide out of work – 30 mil­lion more than in 2008 – Leon­tief’s words no longer seem as out­landish as they once did. In­deed, there can be lit­tle doubt that tech­nol­ogy is in the process of com­pletely trans­form­ing the global labour mar­ket. To be sure, pre­dic­tions like Leon­tief’s leave many econ­o­mists skep­ti­cal, and for good rea­son. His­tor­i­cally, in­creases in pro­duc­tiv­ity have rarely de­stroyed jobs. Each time that ma­chines yielded gains in ef­fi­ciency (in­clud­ing when trac­tors took over from horses), old jobs dis­ap­peared, but new jobs were cre­ated. Fur­ther­more, econ­o­mists are num­ber crunch­ers, and re­cent data show a slow­down – rather than an ac­cel­er­a­tion – in pro­duc­tiv­ity gains. When it comes to the ac­tual num­ber of jobs avail­able, there are rea­sons to ques­tion the doom­say­ers’ dire pre­dic­tions. Yet there are also rea­sons to think that the na­ture of work is chang­ing.

To be­gin with, as noted by the MIT economist David Au­tor, ad­vances in the au­to­ma­tion of la­bor trans­form some jobs more than oth­ers. Work­ers car­ry­ing out rou­tine tasks like data pro­cess­ing are in­creas­ingly likely to be re­placed by ma­chines; but those pur­su­ing more cre­ative en­deav­ors are more likely to ex­pe­ri­ence in­creases in pro­duc­tiv­ity. Mean­while, work­ers pro­vid­ing in-per­son ser­vices might not see their jobs change much at all. In other words, robots might put an ac­coun­tant out of work, boost a sur­geon’s pro­duc­tiv­ity, and leave a hair­dresser’s job un­al­tered.

The re­sult­ing up­heavals in the struc­ture of the work­force can be at least as im­por­tant as the ac­tual num­ber of jobs that are af­fected. Econ­o­mists call the most likely out­come of this phe­nom­e­non “the po­lar­i­sa­tion of em­ploy­ment.” Au­to­ma­tion cre­ates ser­vice jobs at the bot­tom end of the wage scale and raises the quan­tity and prof­itabil­ity of jobs at its top end. But the mid­dle of the labour mar­ket be­comes hol­lowed out. This type of po­lar­i­sa­tion has been go­ing on in the United States for decades, and it is tak­ing place in Europe too – with im­por­tant con­se­quences for so­ci­ety. Since the end of World War II, the mid­dle class has pro­vided the back­bone of democ­racy, civil en­gage­ment, and sta­bil­ity; those who did not be­long to the mid­dle class could re­al­is­ti­cally as­pire to join it, or even be­lieve that they were part of it, when that was not the case. As changes in the job mar­ket break down the mid­dle class, a new era of class ri­valry could be un­leashed (if it has not been al­ready).

In ad­di­tion to the changes be­ing wrought by au­to­ma­tion, the job mar­ket is be­ing trans­formed by dig­i­tal plat­forms like Uber that fa­cil­i­tate ex­changes be­tween con­sumers and in­di­vid­ual sup­pli­ers of ser­vices. A cus­tomer call­ing an Uber driver is pur­chas­ing not one ser­vice, but two: one from the com­pany (the con­nec­tion to a driver whose qual­ity is as­sured through cus­tomer rat­ings) and the other from the driver (trans­port from one lo­ca­tion to another).

Uber and other dig­i­tal plat­forms are re­defin­ing the in­ter­ac­tion among con­sumers, work­ers, and em­ploy­ers. They are also mak­ing the cel­e­brated firm of the in­dus­trial age – an es­sen­tial in­sti­tu­tion, which al­lowed for spe­cial­iza­tion and saved on trans­ac­tions costs – re­dun­dant.

Un­like at a firm, Uber’s re­la­tion­ship with its driv­ers does not rely on a tra­di­tional em­ploy­ment con­tract. In­stead, the com­pany’s soft­ware acts as a me­di­a­tor be­tween the driver and the con­sumer, in ex­change for a fee. This seem­ingly small change could have far-reach­ing con­se­quences. Rather than be­ing reg­u­lated by a con­tract, the value of labour is be­ing sub­jected to the same mar­ket forces buf­fet­ing any other com­mod­ity, as ser­vices vary in price depend­ing on sup­ply and de­mand. Labour be­comes marked to mar­ket.

Other, less dis­rup­tive changes, such as the rise of hu­man cap­i­tal, could also be men­tioned. An in­creas­ing num­ber of young grad­u­ates shun seem­ingly at­trac­tive jobs in ma­jor com­pa­nies, pre­fer­ring to earn much less work­ing for star­tups or cre­ative in­dus­tries. While this can be ex­plained partly by the ap­peal of the cor­re­spond­ing lifestyle, it may also be a way to in­crease their over­all life­time in­come. In­stead of rent­ing their set of skills and com­pe­tences for a pre-set price, these young grad­u­ates pre­fer to max­imise the life­time in­come stream they may de­rive from their hu­man cap­i­tal. Again, such be­hav­ior un­der­mines the em­ploy­ment con­tract as a ba­sic so­cial in­sti­tu­tion and makes a num­ber of its as­so­ci­ated fea­tures, such as an­nual in­come tax­a­tion, sub­op­ti­mal.

What­ever we think of the new ar­range­ments, we are un­likely to be able to stop them. Some might be tempted to re­sist – wit­ness the re­cent clashes be­tween taxi and Uber driv­ers in Paris and the law­suits against the com­pany in many coun­tries. Uber’s ar­range­ment may be fraud­u­lent ac­cord­ing to the ex­ist­ing le­gal frame­work, but that frame­work will even­tu­ally change. The trans­for­ma­tive im­pacts of tech­nol­ogy will ul­ti­mately make them­selves felt.

Rather than try to stop the un­stop­pable, we should think about how to put this new re­al­ity at the ser­vice of our val­ues and wel­fare. In ad­di­tion to re­think­ing in­sti­tu­tions and prac­tices pred­i­cated on tra­di­tional em­ploy­ment con­tracts – such as so­cial se­cu­rity con­tri­bu­tions – we will need to be­gin to in­vent new in­sti­tu­tions that har­ness this tech­nol­o­gy­driven trans­for­ma­tion for our col­lec­tive ben­e­fit. The back­bone of to­mor­row’s so­ci­eties, af­ter all, will be built not by robots or dig­i­tal plat­forms, but by their cit­i­zens.

Which coun­tries pro­duce the most en­gi­neer­ing grad­u­ates ev­ery year? Ac­cord­ing to re­search car­ried out by the World Eco­nomic Fo­rum (ex­clud­ing China and In­dia due to lack of data), Rus­sia is in first po­si­tion, churn­ing out over 454,000 grad­u­ates in en­gi­neer­ing, man­u­fac­tur­ing and con­struc­tion on av­er­age ev­ery year. The United States is in sec­ond po­si­tion with nearly 238,000, while Iran rounds off the top three with 233,700. De­vel­op­ing economies are pro­duc­ing more grad­u­ates than ever with both Viet­nam and In­done­sia mak­ing the top ten list.

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