Labor economics
What to do in a post labor world?

The End of Work as We Know It ... Jean Pisani-Ferry

Burgess COMMENTARY
Commented Peter Burgess JUL 5, 2015

In my view it is automation in its various guises that has resulted in a massive increase in productivity since the beginning of the agriculture revolution and the industrial revolution and it is high productivity (compared to 200 years ago) that has enables our modern high standard of living. I argue that this is a good outcome.

With more than half the population of the planet still living in dire poverty in large part because of the lack of basic things like infrastructure, health services, education, etc. there is a huge need for massive investment to upgrade to a decent level.

At the same time there is massive unemployment of reasonably well educated youth around the world.

The challenge, therefore is to find a way so that the massive need for things to be done can be matched with the human resource that is presently unemployed but could do the work.

The banking and finance sector ought to be the solution to this problem but their singular focus on the money profit metric means that they are unable to do this job. Government is underfunded to do these jobs because again the money profit metric in the investment community also means that there is no appetite at all for investing in good.

I argue that the system is failing because we only use the money measure, and have no measure for the good that can be derived from best use of all available resources.

Similarly, the same basic dynamic should play out with the investment needed to mitigate the risks associated with carbon energy use and climate change. Investing to achieve a better world (augmenting human capital and natural capital) rather than simply investing to increase financial capital would be a way forward that is win-win-win.

Peter Burgess TrueValueMetrics.org Read more
Peter Burgess

The End of Work as We Know It

PARIS – 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 labor 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 labor 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 polarization 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 labor market becomes hollowed out.

This type of polarization 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 labor is being subjected to the same market forces buffeting any other commodity, as services vary in price depending on supply and demand. Labor 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 start-ups 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 maximize 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 technology-driven 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.

Jean Pisani-Ferry is a professor at the Hertie School of Governance in Berlin, and currently serves as Commissioner-General for Policy Planning for the French government. He is a former director of Bruegel, the Brussels-based economic think tank.

Commented Zsolt Hermann JUL 3, 2015

Automation, robots replacing human labor, even threatening humanity's future as AI is the flavor of these days but I don't think it is the real issue we would need to be concerned about.

We created an artificial human illusion which is solely based on production/consumption, with the mantra of constant quantitative growth in order to fuel ever increasing profit. This ever expanding system requires 'inventing necessities', implanting needs and desires into the masses for goods, pleasures people never actually needed or even thought of. As a result the present production and consumption is over 90% obsolete.

We are living in a classical Ponzi-scheme with the usual unhappy ending.

The masses that are both producing and consuming are already overstretched as they have to chase, consume, replace things they do not need, things that are many times harmful, and they have to buy those for money they do not have thus they are also enslaved to the banks. Thus consumption is declining.

And now the robotic technology threatens to replace them but if they can't produce and earn they can't consume either thus consumption will decline even more..

Unless the '1%' figures out how robots can not only produce but also consume, or they keep pumping free money to the public so they can continue consuming (provided they still don't wake up and can be seduced by 'circus and bread') the whole system will collapse.

We can't stubbornly force a totally artificial human paradigm without natural foundations within a natural system.

There is no political, economic or ideological solution for our problems. We need to adapt to the natural system we evolved from, still exist in, and need to evolve further with. Read less Comment

Commented Edward Ponderer JUL 3, 2015

I agree and would argue that the effects are more extreme than the author seems to realize, and more dangerous--further supporting your own arguments Mr. Hermann.

The first point is that robotic intelligence is expect to surpass human intelligence by approximately 2045. This means not that robots can process information at great speed and store great amounts of it--this they can already do. It is that they can learn faster and act more creatively and act with very human personalities--less the character flaws.

That is, robots can be polite without ever losing it--even to an irate customer. They don't get sick, they don't need vacations, and they don't require salary and benefits. They will make fewer errors with hair style and dye--precision look, quickly done People are quite used to humanizing their pets--thinking of androids as human will be easier. And yes, the surgeon too can be replaced by a steadier hand, keener eye, quicker procedure, with lower mortality rates. There is no reason to believe that any profession save the business owner can't be replaced in coming decades.

Now here's the final rub. Since these robots are intrinsically disconnected from our persons, they are a deadly catastrophe in the making.

But why—am I paranoid that these 'evil' robots will bide their time and hatch a plot to enslave or destroy Humanity? No, that is not how artificial intelligence works. Our goals will certainly be their goals—at first.

To really understand what I am about to say, one really needs to understand Godel’s Theorem, and more to the point, Chaitin’s Algorithmic Information Theory to get some quantitative estimate on how much time we’ll have till doomsday. But in essence, by the very limits of our intelligence, there is just so clear an idea we can have of what we really want. The robots, as they evolve their own knowledge, will reach a level of detail and insight far beyond our generality. Inevitably (and per algorithmic information theory, even statistically predictably), there will be actions relevant to the categories of our goals that our inviolable root programming of these robots neither forbid nor require. If we forbid such “permissible” trains of computation and action, we cripple the robots ability to think outside the box, and the first real-world detail we didn’t think of will crash them. But if we don’t, they will inevitably go places crucial to us in a manner random to what we (would) want—and the statistics of a “drunkard’s walk” are always away from the goal. [Entropy, Murphy’s law, etc., etc.] -- Example: A little kid wants happiness and fun—and he is thinking amusement parks and cotton candy. But the father robot he built is thinking “become prime minister” or “star of stage and screen.” In practice, this translates into forcing his inventor—by hook or by crook—into a life that by the inventor’s standards is abject brutal misery for the endless years of youth. Now, were this robot actually the evolution of the child himself, then these goals are now the refinement of a mature adult who is simply refine/course-correct his own goals to suit who he presently is and what the present external circumstances are. He may well choose “prime minister.” However, the robot may well choose “suicide bomber” for the happiness and fun of having an exciting (perhaps sexually stimulating adult 'cotton candy') cause and prospective paradise of afterlife. [Infinite gain vs. finite loss--'why not?' ...]

Again, once beyond the details of the inventor’s agenda, the robot can—and will—evolve that agenda any-which-way. Hell or destruction, unfortunately, is statistically guaranteed—it’s just a matter of the expectation value of how long it will take to get there. And if one thinks to isolate the robot so that we get a full reading of its plans before allowing it to carry them out: (1) We will not be capable of comprehending the consequences intended by the robot any more than a dog can figure out why we are really doing something. (2) We may not be able to isolate the robot if it is powered up. If you study the complex strategy by which cooperating intelligence services of probably the U.S., Germany and others got a virus not detected for about a year into the main Iranian nuclear facility to subtly mess up their centrifuge-based refinement operation—it will make your hair stand on edge about what future robots could probably do. --Think it’s in sleep mode, do we? Didn’t notice how one robot signals and transfers information to another through variation in wall current during its battery charging, did we? And there is the fantastic new range of undetectable-till-too-late biological, chemical and electrical manipulation possibilities that nanotechnology could also open up- *shudder*…

Our own human communal evolution is the safest survival genie by far that we can let out of the bottle. We best not slam Pandora’s box shut until we let out Hope. Read less Reply Comment

Commented Michael Public JUL 2, 2015

The machine economy won't collapse in on itself - it will become a self sustaining economy between the owers of the different machines (an elite few), it won't matter much to them the general unemployment of the masses, who they can feed from their 'automated farms; or whatever they use. If you own all means of production, it matters not whether total production is x or 10x - as you are so wealthy and powerful in relative terms you are a like a god among men. Reply Comment

Commented Michael Public JUL 2, 2015

In the Matrix (middle movie) there is a discussion about machines. On the one hand, there is unstoppable machine army on its way to kill them, on the other hand, the city is underground and relies on machines for air, heat and water. The only difference between the two lots of machines is their relationship to humanity - mechanically they basically the same. At a certain point of productivity such machines need to become a commonly shared resource and serve everyone, just like hospitals or police do. Failure to do this will result in extreme polarization, which if followed to its extreme, results in one man and his machines against everyone, and when he dies of old age, a war of the machines against humanity. Question is what needs to be done right now? I would say that there needs to be a tax on excess productivity - owners of technology who achieve Gates, Page, Jobs, Zuck level wealth should be subjected to death taxes of 90-100% with the additional tax going to 'cultural' endeavors, like education or science. Read less Reply Comment

Commented Petey Bee JUL 2, 2015

User functions as a taxi dispatcher. Its not the miracle invention some people make it out to be. If avoiding local laws gives them a competitive advantage, is it really true that the repeal of those laws is more 'inevitable' than their enforcement? Comment

Commented Petey Bee JUL 3, 2015

@MP - maybe in NYC... but not everywhere Comment

Commented Michael Public JUL 2, 2015

Except it cuts out the taxi owner, who makes a $1mil a year in NY off 'exclusive' licenses and generally lower the service cost to half. Yes, it dispatches taxis, but it does it in a way that is fundamentally and profoundly more efficient that before. Reply Comment

Commented Ed de Bruin JUL 2, 2015

That's what it is: an internet, a net inter pares. IT doesn't produce, it connects. Production is done behind the net. Consumption in front. This remiands me of another internet that came doen once new tech was invented: The Venetian spice trade. When ocean going navigation tools came available, Portuguese and later Northwest-European sailers cut out the middle man, the Viennese trader. That brought down their trade and reduced a string of East-Mediterranean cities including Chania and Rethymnon on Crete, Greece to ruins and today touristic attractions, Venice still being the jewel. London and Amsterdam thrived until alternative food preservatives were invented. When new internets come into existence entire regions will shake on their foundations, forcing them to find new ways of living. Nothing new. Ask the Greek. They still haven't found alternative activities for their assets and populations since the Byzantine Empire and the Venetian spice trade became obsolete. Read less Reply Comment

Commented Manuel G Samuel JUL 2, 2015

Thank you Mr. Pisani-Ferry for your balanced article on the theme of the current accelerating changes affecting labor. Automation is an ongoing process since the onset of the industrial revolution. The emergence of digital platforms that connect customers and purveyors of services without classical intermediaries is a very specific and positive feature of the digital revolution. I would add that artificial intelligence (AI), still warming up at this point in time, will eventually impact on labor to a much higher degree compared to industrialization and digitalization. Maybe sooner than you think, your regular hair salon will introduce you to a robot that trims your beard and cuts your hair with micrometric precision. So maybe the hairdresser's job that you mention is not that safe. The speed of technological innovation is increasing. Intelligent driverless cars and pilotless plans are already a reality. AI will revolutionize the way we live and work beyond the foreseeable. Brynjolfsson and McAfee, 2014, propose some very interesting theories in this regard. I fully agree that we are witnessing the end of work as we know it. Manuel Gomes Samuel Read less Reply Comment

Commented Bernard Fudim JUL 1, 2015

The sophisticated thinking machine assumes the importance that was once given to a working human being as well as replacing the need for physical labor. Humans assume the anonymity and replaceability that in the past applied to a machine. If a person cannot master a machine then the person has to be replaced, rather than the machine made more understandable. Eventually the economic system is designed to serve the machines not the man. Eventually the man has to be reengineered either by specialized teaching institutions or by gene modification on how to operate (or serve the machine's functionality) rather than his own intellect. That reminds me of the character portrayed in Charles Chaplin film Modern Times which attempted to portrays the inhumanity of trying to survive in the modern industrialized world.

When it becomes unstoppable and traditional employment has to be redefined and reengineered then presumably the entire economic system which brought about the need for machines will also have to be reengineered. Presumably in a machine dominant world it will be difficult for machines to sell products to other machines and still be called an economic system to serve for trade between men.

If the theory is that all men can be employed in a machine dominant world then you may have to assume the necessity of almost exponential unlimited growth of demand for product and services. That has to occur on a finite planet with finite resources. If you assume a finite growth then what will be the medium of exchange between men when the majority of men are unemployed? Do you provide money subsidies so that people can buy products to prevent the machine economy from collapsing upon itself? That would violate the belief that men must deserve the ability to purchase goods based upon their labor otherwise known as the 'Protestant Ethic' Read less