Tag Archives: labour market

Recent robot round-up

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I’m looking forward to reading Martin Ford’s [amazon_link id=”0465059996″ target=”_blank” ]The Rise of the Robots[/amazon_link] – it gets a good review in the FT today. Edward Luce calls it “well researched and disturbingly persuasive.”

[amazon_image id=”0465059996″ link=”true” target=”_blank” size=”medium” ]Rise of the Robots: Technology and the Threat of a Jobless Future[/amazon_image]

I’m still a robo-sceptic in the sense of thinking there is nothing inevitable about the employment and income distribution outcomes of skill-biased automation. It’s technological determinism to think otherwise, as the underlying technological waves are channelled through economic and political institutions. That’s not to say we shouldn’t be concerned. After all, there was a wave of automation in manufacturing in the late 1970s/early 1980s and the social consequences of that were devastating – the institutions handled the transition very badly.

There is an interesting recent (free) e-book collection of essays (including one of mine) from the IPPR, Technology, Globalization and the Future of Work. Also this recent paper, Robots at Work, by Georg Graetz and Guy Michaels. They find in a panel of data across industry in 17 countries, robotization increased total factor productivity and wages, although with some adverse effects on hours worked by low-skilled workers.

Robots for all!

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Yesterday I took part in a fascinating Resolution Foundation discussion, Equity in the Age of the Robot. It was an apt day to be debating the impact of automation on jobs and equity, as the Tube strike probably left half the audience wishing those jobs were already being done by robots and the other half pleased the union is still holding out for the humans.

My contribution was to point out that although we can be concerned about the speed at which automation is going to be able to replace a lot of middling-skill, middling-income jobs, with all the transitional problems that brings, the UK economy needs more robots. That’s the message of the low labour productivity problem. Real wages can’t rise over the long term unless investment in capital and productivity improve. Having said that, we need to worry about

(a) the distribution of the productivity gains, and ensuring these aren’t all extracted by over-paid executives – perhaps thinking about robot ownership; and

(b) equipping people with skills that could be useful and managing the transition in the labour market better than in the past. As Conrad Wolfram pointed out in a recent article, we’re teaching children to be not very good and expensive versions of Siri when it comes to the maths curriculum; they need to understand how to solve quadratic equations but they key skill they need is not memorising and replicating that. Like Professor Alan Manning, I think we should not be resisting the robots but focusing on the institutional and political arrangements that ensure fair outcomes.

I highly commend the work of Michael Osborne, who was presenting new data for the UK showing which jobs are vulnerable to automation by 2020 – mainly in sectors like retailing, logistics, transport. (Here’s the paper he wrote with Carl Benedikt Frey, The Future of Employment: How Susceptible are Jobs to Computerisation?) The whole panel discussion is worth a viewing.

The books cited in the discussion were – of course – Bynjolfsson and McAfee 1 and 2, [amazon_link id=”0984725113″ target=”_blank” ]Race against the machine[/amazon_link], and [amazon_link id=”0393239357″ target=”_blank” ]The Second Machine Age[/amazon_link].

[amazon_image id=”0393239357″ link=”true” target=”_blank” size=”medium” ]The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies[/amazon_image]

Minimum wages and robots

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This morning I read a good article in The New Republic about the Silicon Valley jobs market and the exercise of power in the labour market. It describes documents showing that the tech giants in 2005 colluded to keep wage rates down. This was news to me and seems pretty scandalous.

The article goes on to discuss in general why labour markets are not like goods markets, although most economics courses, and many grown-up economists, often speak as if they are. The fact that searching for a job is costly gives all employers a bit (or a lot) of monopsony power (or buyer power). And the prevalence of monopsony power needs to be taken into account in analysing the effect of an increase in the minimum wage: it will slightly decrease the employers’ power and reduce both job turnover and vacancies in low-wage jobs. There is some evidence to support this. The article also cites Alan Manning’s excellent book on this subject, [amazon_link id=”0691123284″ target=”_blank” ]Monopsony in Motion[/amazon_link].

[amazon_image id=”0691123284″ link=”true” target=”_blank” size=”medium” ]Monopsony in Motion: Imperfect Competition in Labor Markets[/amazon_image]

The US and UK minimum wages are middling by OECD standards (this chart from the OECD database deflates the statutory minimum by the national CPI and uses PPP for private consumption exchange rates to convert to US dollars). There is no obvious correlation with unemployment rates at this headline level.

OECD real hourly minimum wages

Labour market economics is one of the areas of the subject where economics most needs input from the other social sciences. Jobs and pay can’t really be understood without thinking about factors such as institutions, power, psychology and social norms. Never forget this when next reading about the way technology means inequality is inevitable.

Eric Schmidt is wrong – the robots are not drinking champagne

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I’ve not yet read [amazon_link id=”1480577472″ target=”_blank” ]The Second Machine Age[/amazon_link] by Erik Brynjolfsson and Andrew McAfee but am eager to do so. This question of what technology is doing to jobs and living standards is the issue of the moment. It’s obviously tempting for people to reach for the extremes (The robots are eating our jobs! We wealth-creators are being unfairly attacked!), when the truth will be nuanced, as it always is. Of course some comment has been more thoughtful. Gavin Kelly of the Resolution Foundation wrote a measured survey of the debate (its balance belied by the headline The Robots are Coming!). This Wonkblog column (Will Robots Steal Our Jobs?) pushes back against the robo-phobia in a reasonable way by looking at the history of the first Industrial Revolution.

[amazon_image id=”1480577472″ link=”true” target=”_blank” size=”medium” ]The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies[/amazon_image]

What I do know is that Eric Schmidt is wrong. The Google chief presented this at Davos as “a race between computers and people”. On the contrary, it’s a battle between people and people. I see no robots drink champagne and nibbling canapes at the World Economic Forum. The technology creates the potential for great advances in living standards, almost always in the recent (past 250 years) past shared widely. The sharing is done by society, and the institutions that govern it.

One key institution is public education, so the masses have skills that complement technology rather than competing with it. Our education systems are struggling to adapt from the age of mass production to the modern industrial system. Another set of institutions consists of those that redistribute – collective bargaining, the welfare state since the mid-20th century, in need of reinventing. There is also the question of the ownership of the machines. The invention of the joint stock company is often overlooked as an important mechanism not only for raising capital but for sharing ownership among the growing middle class. There’s a very good book about the co-evolution of institutions and technology during the Industrial Revolution, [amazon_link id=”0226014746″ target=”_blank” ]The Institutional Revolution[/amazon_link], by Douglas Allen – well worth a read for those pondering what institutions might stop the triumph of the robots, or rather their gilded owners.

[amazon_image id=”0226014746″ link=”true” target=”_blank” size=”medium” ]Institutional Revolution: Measurement and the Economic Emergence of the Modern World (Markets and Governments in Economic History)[/amazon_image]

Imperfect Labor Markets

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It isn’t my normal practice to review technical books or textbooks on this blog, so here I’m just flagging up new edition of [amazon_link id=”0691158932″ target=”_blank” ]The Economics of Imperfect Labor Markets[/amazon_link] by Tito Boeri and Jan van Ours. My PhD thesis many years ago was about the macroeconomic applicability (or not) of various labour market models, and whether there were meaningful links between the market analysis and the aggregate, so I was interested in this book.

[amazon_image id=”0691158932″ link=”true” target=”_blank” size=”medium” ]The Economics of Imperfect Labor Markets: Second Edition[/amazon_image]

While I haven’t read it from cover to cover of course, it looks like a fantastic resources for labour market economics courses. It weaves together data and theory, and the presentation is grounded in actual labour market institutions and policies – minimum wages, unions, anti-discrimination laws, active labour market policies, returns to training. There is a lot of cross-country comparison, a welcome changed from mainly US-centric books. The new edition updates the empirical sections. The book ends with a summary of available data. Really well worth a look if you are teaching or studying this field.