Brian Fallow: Looking for an alternative to the jobs apocalypse

A robot barkeeper dispenses drinks in London.Photo / AP

COMMENT:

Any task a machine or algorithm can do is something a person is wasted on.

But that is cold comfort to someone who loses his or her job and struggles to find another.

The challenge in shaping the future of work is to ensure people can earn a decent living doing things only people can do.

What prompts these observations are a couple of pieces of work on the future of work, which appeared this month.

The first is a report by the Prime Minister's Business Advisory Council, in collaboration with the international consultancy McKinsey and Co, titled A Future that Works: Harnessing Automation for a More Skilled and Productive New Zealand.

The second is a book by Kiwi economist Kinley Salmon, which examines the same issues at greater length and depth: Jobs, Robots and Us: Why the Future of Work in New Zealand is in Our Hands.

The Business Advisory Council's report takes what might be called the conventional view.

"By 2030 perhaps one in three adult workers will need to reskill to change occupations in order to adapt and keep pace with the coming wave of transformation."

Failure to rise to this challenge, it warns, could see inequality rise to levels that exceed those we see in the United States. A gruesome prospect.

On all the scenarios McKinsey models — which vary according to how soon and how much New Zealand firms harness the potential of advances in artificial intelligence, machine learning, robotics and so on — productivity and gross domestic growth rates rise.

But on the downside, rapid churn in the labour market sees unemployment climb too, before falling back again as higher productivity flows through into higher incomes, demand and ultimately employment.

It talks about the development of more "agile" workplaces — more flexible, less hierarchical and potentially more satisfying.

The report makes some recommendations. It calls on Kiwi employers to pledge to double their investment in annual employee training, retraining and upskilling, and to publicly report on this investment.

It warns that a strategy of firing people who no longer have the skills required, in the hope of hiring those who have acquired those skills at someone else's expense, isn't going to work.

It recommends a "KiwiSaver for Skills" mechanism — lifetime learning accounts people can tap into throughout their careers to acquire new skills or pursue higher education.

It also recommends a policy that requires anyone under a certain age (and who meets fair and reasonable criteria) be in work or in training; a pure unemployment benefit would not be an option.

Salmon, however, is sceptical of the impending jobs apocalypse story frequently portrayed in headlines.

Typically, claims about how some scary percentage of jobs are "at risk of automation" omits the crucial caveat — if cost were no object.

So, for example, while fully automated milking systems have been commercially available since the 1990s, by 2017 only 20 New Zealand farms used them, the rest finding the cost prohibitive.

Salmon points out that the forecasts of rising unemployment and productivity are the opposite of what we actually see right now. The proportion of adult New Zealanders employed is close to an all-time high, while productivity levels and growth rates are weak.

And as for rapid labour market churn, research at the Reserve Bank last year found that the flow of people quitting a job to immediately start another is quite subdued compared with what we saw between 2000 and 2008.

That does not mean these things won't happen, Salmon says, but that we have a window of opportunity to figure out what policy choices would shape a more attractive future.

It turns out it would require getting a whole lot of difficult things right. So possible, but challenging.

One place to start would be tax policy.

Taxing things we want less of, like carbon emissions, rather than things we want more of, like working, would help foster innovation in decarbonising, rather than labour-saving technology. The current incentives have given us DIY check-in at airports, while the planes we then board still run on fossil carbon.

Where governments direct their research and development spending matters too. Italian economist Mariana Mazzucato has chronicled how many technological breakthroughs have been state-funded, among them the internet, wireless networks and the global positioning system (GPS).

An education system that equips the young with the foundation skills they will need is clearly essential. "But the likelihood of children getting that education is undermined by rising inequality and falling social mobility," Salmon says.

Inequality is also a problem in another way, if it leads to secular stagnation.

Technological advances which mean the economy can produce more at full employment, are little use unless people have the income to consume it.

If too much of the financial fruits of investment in that technology flows to wealthy providers of capital, with a low propensity to spend their marginal dollar, rather than through wages and taxes to the rest of us, then maintaining sufficient demand and therefore employment could become a real challenge.

Larry Summers, the former US Treasury Secretary who is the most famous proponent of this view, argues that rising inequality has already made it more difficult for central banks to lower interest rates enough to overcome that effect.

Salmon also points to the importance of cities as the most likely places for the kind of innovation that creates new markets (and jobs).

"So important have cities been to our prosperity that Edward Glaeser, a Harvard economist, argues that they are our greatest invention."

But Auckland's ability to achieve a critical mass of high-productivity, highly paid jobs is stymied by unaffordable housing and a dysfunctional transport system.

Finally there is what Salmon calls the big green elephant in the room: how to decouple growth in economic output from ever-greater use of finite resources like land and water, and from pollution including greenhouse gas emissions.

In that context, prices that tell us the environmental truth, loud and clear — rather than diffidently murmuring something that obliquely hints at it — are an essential missing element.

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