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Welcome to a world without work

We have written a few articles about the advent of artificial intelligence (AI), producing robots capable of carrying out many of the jobs currently done by humans. In his book, The Wealth of Humans, Ryan Avent investigates what the future of work may look like. This is an excerpt, which appeared in the Observer, on 09/10/16.

A new age is dawning. Whether it is a wonderful one or a terrible one remains to be seen. Look around and the signs of dizzying technological progress are difficult to miss. Driverless cars and drones, not long ago the stuff of science fiction, are now oddities that can occasionally be spotted in the wild and which will soon be a commonplace in cities around the world.

With a few flicks of a finger, we can use our phones to order up a meal, or a car, or a translation for a waiter’s query in a foreign country. Gadgets such as the Amazon Echo are finding their way into living rooms, where they sit listening, ready to comply with a voice command.

Just a few years ago, one could dismiss the digital age as consisting of little more than social networks and cat videos; no longer. Yet at the same time, many of the world’s fundamental political institutions look dangerously unsteady. Britain is preparing to crash out of the European Union. In America, Republicans have nominated for president a man with no regard for global norms and little enough for the American constitution.

What is important, but far from obvious, is that these two trends – this careening toward a new digital age on the one hand and this descent into political darkness on the other – are closely related.

History suggests that periods of great economic change are also times of political and social difficulty. We must recognise that the present is no exception. It is our failure to recognise and address the difficulties created by the digital revolution that has helped usher us to this troubling political moment. There could be more trouble ahead. The digital revolution is beginning to teach us what a tectonic economic transformation feels like. It is putting us in the shoes of our great-great-grandparents: those who first experienced the transmission of a human voice across an electrical wire, who watched as the time to travel from one city to a distant other shrank from weeks to hours and who found themselves displaced as smiths or farmhands by fantastic new technologies. We have all found our working lives altered by it.

Today’s technology is disrupting life, just as the machines of the Industrial Revolution destroyed the work patterns of our great-great grandparents.

Today’s economic revolution produces concern and not simply about the uncertainty of employment in the years to come. Those of us who currently appear to have job security can more than likely look forward to making less in the future than we had once hoped we might. Over the last couple of decades, wages, adjusted for inflation, have scarcely grown throughout a broad range of rich countries, longer in some cases. And this wage stagnation has occurred alongside other distressing trends. The share of income flowing to workers, as opposed to business and property owners, has fallen. And, among workers, there has been a sharp rise in inequality, with the share of income going to those earning the highest incomes increasing in an astounding fashion.

Then there is the sobering data on employment. In America, the share of adult men of prime working age who are working or actively looking for work has fallen steadily, in some cases dramatically, over the last generation. Among all men, the rate of participation in the workforce dropped from about 76% in 1990 to 69% in 2015. That may not sound especially worrying, but it corresponds to a difference of about 9 million men.

And those squeezed out of work often find their lives upended. Stuck in atrophying communities with few prospects, many struggle to find purpose and satisfaction in life; indeed, recent research has turned up an alarming rise in mortality since the late 1990s among middle-aged white Americans, mostly accounted for by an increase in suicides and in drug and alcohol abuse. The authors see economic insecurity as a contributing factor.

This trend is not limited to America and neither can it be explained away as the product of ageing and retirement. In Europe, one in five adults under the age of 25 is unemployed. Across the Organisation for Economic Co-operation and Development (OECD), 12% of people aged between 15 and 29 are neither in school nor work. Some are engaged in illicit activity or are in jail; others are in their parents’ basements playing video games. Much the same is true of the long-term unemployed, many of them older men without much education, who drift around, often drinking to pass the day, lacking much, if any, connection to society at large.

For an awful lot of people, work has become a less certain and often less remunerative contributor to material security. But work is not just the means by which we obtain the resources needed to put food on the table. It is also a source of personal identity. It helps give structure to our days and our lives. It offers the possibility of personal fulfilment that comes from being of use to others and it is a critical part of the glue that holds society together and smooths its operation. Over the last generation, work has become ever less effective at performing these roles. That, in turn, has placed pressure on government services and budgets, contributing to a more poisonous and less generous politics. Meanwhile, the march of technological progress continues, adding to the strain.

The digital revolution alters work in three ways. The first is through automation. New technologies are replacing certain workers, from clerks to welders, and will replace more in the future, from drivers to paralegals.

At the same time, the digital revolution has supercharged a second force: globalisation. It would have been nearly impossible for rich western firms to manage the sprawling global supply chains that have been wrapped around the world over the past 20 years without powerful information technology. And while China and other emerging markets might have become better integrated in the world economy even without companies such as Apple scattering production across the globe, such growth would have been much slower and less dramatic. Instead, global employment grew by over a billion jobs over the last generation, with most of the growth occurring in emerging economies.

Third, technology provides a massive boost to the productivity of some highly skilled workers, allowing them to do work that it might previously have taken many more people to accomplish. Technology enables small teams of money managers to run vast funds; it is increasingly allowing highly skilled instructors to build courses that can be taken and retaken by millions of students, potentially replacing hundreds or even thousands of lecturers. New technology is allowing fewer doctors and nurses to observe and treat many more patients, fewer lawyers to pore over vastly more trial-related evidence and fewer researchers to sift through massive amounts of data and test more hypotheses more quickly.

These three trends – automation, globalisation and the rising productivity of a highly skilled few – are combining to generate an abundance of labour: a wealth of humans. In its struggle to digest this unprecedentedly enormous ocean of would-be workers, the global economy is misfiring in worrying ways. And the institution of work – apart from family, our most important piece of social infrastructure – can no longer be counted on to fulfil its many crucial roles, from the ordering of our days, to the allocation of purchasing power, to the strengthening of the social ties that are nurtured when individuals feel as though they are contributing positively to the community. Workers are unlikely to take these woes lying down. Something has to give. Either society will find ways to shore up work or develop substitutes for it or workers will use the political system to undermine the forces disrupting their world.

This should be a good problem for mankind to have. An abundance of labour is arguably the point, to the extent that there is one, of technological progress. It is the beginning of the end of the need to work hard to stay alive. A system in which people actively seek out labour they would strongly prefer not to do – manning call centres to handle the complaints of unhappy customers or carrying packages around a boiling warehouse, for example – is not one society ought to aim to preserve any longer than technologically necessary.

Yet the hardest part in finding utopia is not the figuring out of how to produce more. We’ve managed that. The hard part is the redistribution. Crafting a balance of work and redistribution that is sustainable is incredibly difficult. The rich and privileged don’t want to subsidise the poor. The poor may conclude that what redistribution the rich offer leaves an impossibly huge, even unfair gap in the incomes of the haves and have-nots. The poor may also not be content with an economy in which they are effectively unnecessary, kept at peace by a hand-out from the state. If redistribution is managed too clumsily, the incentive for clever or ambitious individuals to work to improve the economy might be lost, leading to stagnant growth and too little social surplus with which to provide all members of society with a rising standard of living.

The battle lines of the great social upheaval are already being drawn. Their defining questions: who deserves credit for generating economic bounty and who has the right to claim a share of that bounty once it has been generated? Many of those earning top incomes, in individualist America in particular, believe they are the overtaxed “makers” in society. But a makers-and-takers conception of the world is one that neglects the social foundation on which wealth is built. We aren’t merely divided into makers and takers. We are participants in societies, operating according to a broad social consensus. When that consensus breaks down, the wealth goes away. Society either agrees a way to share its riches that most members find acceptable or the system fractures and the social wealth available to everyone shrinks.

The social nature of wealth, always important, is increasingly critical. The long process of cultural development that eventually yielded the Industrial Revolution was in many ways the process by which humanity learned ever better ways of structuring society in order to foster the emergence of complex economic activity. The digital revolution is increasing the importance of social wealth in two key ways.

First, new technologies increase our potential productivity and output as a society; because we are capable of becoming richer thanks to digital technology, the economic return to economically important social institutions, such as a government capable of enforcing private property rights, is rising. The gap between the incomes of societies capable of supporting these institutions and those that cannot is growing. In 1980, Americans were 30 times richer than residents of the Central African Republic. In 2015, they were 90 times richer.

And second, the small-scale economic processes that generate new knowledge and turn it into profitable, welfare-enhancing activity are also becoming more social, and less individual, in nature. The value-generating pieces of successful companies were once satisfyingly tangible, consisting of buildings and machines, patents and people. That is ever less the case. Company cultures, which shape worker incentives and determine how a business reacts to changes in the marketplace, have become much more important in the digital age. Today, more than 80% of the value of Standard & Poor’s 500 firms is “dark matter”: the intangible secret sauce of success; the physical stuff companies own and their wage bill account for less than 20%, a reversal of the pattern that prevailed in the 1970s.

A large proportion of that dark matter is an amorphous “know-how”: the culture, incentives and tacit knowledge that make a modern company tick. Successful companies, be they Goldman Sachs or BuzzFeed, evolve a way of gathering, processing and acting on information that is critical to their success and which cannot easily be replicated. The value generated by a firm’s culture, just like the value generated by networks of people within cities, or by a country’s economic institutions, is social rather than individual.

As social wealth becomes more important, fights about who belongs within particular societies – and can therefore share in that social wealth – will intensify. To take full advantage of its promise, countries must become better at sharing social wealth. Yet the better countries become at sharing social wealth among members, the greater the pressure to shrink the circle of social membership.

Today’s political disturbances reflect the opening exchanges in a long societal negotiation over just what the state and the economy ought to do, and for whom, in the digital era. If the industrial era is any guide, this negotiation will last for decades to come and will occasionally result in dramatic, and possibly even violent, changes to the structure of global politics. Political systems are stubbornly resistant to change. Political parties are massive social institutions that persist for decades or centuries by building and maintaining connections with collections of smaller interest groups and individuals. Those people and interest groups come to define their political identity through their association with the party. Identities are not rewritten on a whim. Yet long-term changes in economic fundamentals do eventually force change.

In America, where the political structure strongly favours a two-party system, the rise of fundamentalist factions has led to partisan polarisation. Intense, intra-party battling could eventually lead to irreconcilable differences, prompting a major party shake-up (or break-up). Such shifts are extremely rare in American politics, however. It is more probable that ascendant ideological camps within the Republican party, such as those with nativist passions, will come to dominate the party leadership, displacing the former establishment bosses. And the former establishment will then mostly accommodate itself to the new order, an easier trick, for most partisans, than flipping to the other side of the aisle entirely.

Separatist and nationalist parties are on the rise across Europe. Le Pen’s Front National is ascendant. Radical parties in Hungary and Poland are pushing for significant political change: to undermine existing democratic institutions and to edge away from the EU. In Britain, nationalist political elements, within the Ukip and the Conservative party, astonished the world by calling and winning a popular vote to remove Britain from the EU. Brexit will encourage Scottish nationalists, who may ultimately demand to leave the United Kingdom.

Radical factions and parties battling for supremacy each have at their heart a particular conception of the “good life”. Writers and thinkers, like me, try to imagine post-work utopias, in which, for example, sensibly structured social safety nets could free people of the constraints of the typical job. These people could then offer their services by the hour or the job on newfangled market-making apps, among other things, or they could even abandon labour markets altogether, as new forms of social institution encouraged them to volunteer their time to the community or otherwise engage in pro-social behaviour – while also living alongside people from vastly different backgrounds and perhaps nationalities, if some of us get our way.

But that is possibly not what the typical rich-world citizen would consider the “good life”, however much we might want that to be the case. We should instead anticipate that voters in many countries, rich and poor alike, will want something more predictable than life governed by supply-and-demand matching apps; more structured than life on the perpetual dole; more comfortable and familiar than life surrounded by people who do things in different ways, speak different languages and worship different deities.

In any future in which technology frees workers of the need to spend most of their daytime hours on the job, many people will opt for much more down time, often spent in rather aimless fashion. Yet people of all backgrounds also seem to value narratives of personal ambition and responsibility. People wish to have control over their economic lives and to be seen as contributing both to society and to the wellbeing of their families. People desire agency. They do not wish to be forced into unpleasant work by the need to feed their families, but neither do they want to be written off – or assigned meaningless work as the price of a generous welfare cheque. It isn’t clear that the digital economy can provide the working conditions needed to extend the possibility of bourgeois comfort and status to a broader class of people. That will not stop them desiring it.

The conflict between what people want and what economic and political systems are able to provide will play out in the political arena. Political battles will increasingly feature narratives about how to restore us all to a world in which people work at purposeful jobs for good pay. Those narratives will be thick with bogeymen: the malevolent forces denying voters access to that “good life”. Conniving foreign governments, job-stealing immigrants, greedy bankers and incompetent politicians all star in such roles. Demagoguery can be a compelling political force.

Reformers can compete in this arena. There will be room for leaders willing to say that the “good life” of misty memory cannot be brought back; who promise instead to push forward modest, incrementalist policies, such as more generous state benefits and increased investment in training and infrastructure.

The difficulty the reformers will face is that the global economy will tend to punish such effort. Labour abundance and structural demand weakness are not the sorts of things national politicians working in isolation can fix. They can ameliorate the worst effects, but that will leave voters disappointed. Moderate reformers will find themselves losing ground to politicians keen to unpick elements of the era of moderation, from the move towards freer trade and capital flows to the elimination of labour-market protections.

Could there be a constituency for a more radical set of policy innovations: for generous, universal basic incomes, for example? Political interest in these sorts of reforms is growing. Yet generous welfare policy might struggle to emerge outside of places where political units are more ethnically or nationally coherent: where an absence of tribal suspicion facilitates the sharing of social wealth. It is no wonder that experimental, generous welfare policy has tended to emerge in Nordic countries, where ethnic and communal ties are strong (but where openness to immigration has begun to tear at the social consensus).

Indeed, the creation of such communally coherent groups in an effort to protect social safety nets often seems to be the point of the new nationalist politics. What separatist quasi-nations seem to want is a world in which they enjoy the economic benefits of global integration, but in which critical political and economic decisions are made by societies with a high degree of national or ethnic coherence: a future of Irelands and Estonias rather than of Britains and Spains: larger states with more diverse populations. The institutions of the EU or, indeed, the world economy as a whole are not built to handle waves of fracturing nations.

Italian, Belgian and even German leaders are understandably reluctant to sign off on Catalan independence, given the damage regional separatism could do to their own states. Rich-world ethno-nationalism could destroy the economic integration on which its prosperity depends. Even if it doesn’t fail before it begins, the model of highly redistributive, ethno-nationalist mini-states will depend for its success on the exclusion of outsiders, condemning much of the world’s population to poverty.

Some time in the future, a wonderful new politics might well emerge that provides a robust minimum standard of living to all regardless of race or nationality, which supports a multitude of different conceptions of the “good life” and which does not rely on some underlying fear of some outside other to maintain its popularity. We are not yet able to conceive of such a system or to understand what balance of political forces needs to emerge to bring it into existence and sustain it. And so, for the time being, we are stuck in a world of nasty political trade-offs. We can but hope this era will prove a fleeting one. History suggests it will not be. But perhaps we will get lucky.

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