Fear not automation but lack of vision and investment

Not a single day goes by without someone pointing out that automation kills the chances of employment but there is no reason to panic and distrust machines

Whilst it is a fact that the automation necessary for productivity increases can mean less people working in a particular discipline, there is no reason to panic and distrust machines, whether mechanical, electronic or smart ones. History too tells us otherwise. A more productive economy can create new sectors, new industries and lots of good new jobs. Here is an example to illustrate my point.

In the 1970s, Automated Teller Machines (ATMs) were introduced in the western economies. These machines handled dispensing cash and taking deposits. Today, over 400,000 have been installed in the United States. According to James Bessen writing for the IMF’s Finance and Development last year (‘Toil and technology’, March 2015) introducing ATMs did not eradicate bank tellers jobs. He points out that whilst each bank employed fewer tellers, the number of banks across the country increased — as a result employing more people than ever. Furthermore, whilst ATMs automated some tasks, other work taken on by people whose time was freed up was of higher value. Tellers upskilled and took on managing relationships with customers, especially with small businesses. Machines cannot do this type of interpersonal work — only humans can.

Automation is a boost to productivity so is bound to lead to a reduction in labour usage for the same level of output. But that is not the end of the story. Automation can bring about new jobs in related areas. An example is that of Elon Musk’s SolarCity, the rooftop solar power business recently acquired by one of his other companies, Tesla Motors. SolarCity’s plan is to bring on more automation. It has said it will employ about 1500 in the US city of Buffalo, though only about one-third will be production workers. So whilst there are relatively few new direct manufacturing jobs, there will be many more associated jobs created. David Autor, an economist at MIT, makes a similar point in explaining that whilst manufacturing accounts for 70% of all private sector research and development, manufacturing won’t employ many people again. However, there are many other jobs that are sustained by manufacturing facilities, including areas like design and engineering.

New technology can also increase the demand for new skills. We should welcome this, as what we need are jobs with high value and high skills that give people decent money and living conditions. This is a contrast to the current situation where although unemployment is low in the UK, many of the new jobs created over the past few years are low-skilled, low-productivity and low-paying.

As Marc Andreessen, founder of the early internet browser Netscape, astutely wrote, just as most of us have jobs that were not even invented 100 years ago, the same should be true 100 years from now. This is sound comment. We can have no idea now what those future jobs will be; otherwise they would not need to be invented.

Rather than worry because we don’t know what roles will replace those displaced by robots, what matters today — what should concern us — is less the jobs being lost but that the economy hasn’t been creating enough new high value, high productivity ones. The pace of investment, innovation and job creation has been too slow in recent decades, and this seems to have got even worse since the financial crash.

It is a wonderful thing if machines take over the drudge of routine manual and mental labour. It can open up new areas where human creativity can flourish. We should therefore focus less on machines’ effects in replacing old labour and more on there not being enough machines of all sorts generating new decent jobs.

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