“The COVID-19 pandemic-induced lockdowns and related global recession of 2020 have created a highly uncertain outlook for the labour market … millions of workers have experienced changes which have profoundly transformed their lives within and beyond work, their well-being and their productivity,” said the World Economic Forum (WEF) in The Future of Jobs Report 2020, published in October, 2020. “Comparing the impact of the Global Financial Crisis of 2008 on individuals with lower education levels to the impact of the COVID-19 crisis, the impact today is far more significant and more likely to deepen existing inequalities.”
The Economist was considerably more optimistic in a special report on The Future of Work in its April 10 issue, which included several articles on the subject. “A jobs rebound, shifting politics and technological change could bring a golden age for labour in rich countries,” said the overview article. “It might seem premature to predict a wonderful world of work only a year on from a labour-market catastrophe. But America is showing how rapidly jobs can come back as the virus recedes. In the spring of 2020 the country’s unemployment rate was nearly 15%. Now it is already just 6% after a year containing five of the ten best months for hiring in history.”
The key reason for The Economist’s optimistic outlook is that as labor markets recovers, two deeper shifts are unfolding: a political environment which is becoming friendlier to workers than it’s been in decades; and an accelerated digital economy which promises to bring about faster productivity growth. Let me briefly summarize each of these two shifts.
Political environment - Workers the world over have had a torrid year. But the future is bright
Covid-19 took a terrible toll on the world’s workers. Unemployment rose to levels last seen in the 1930s, especially among lower-skilled workers. The pandemic also accentuated existing inequalities. While many office-based workers were able to protect themselves by working from home, workers in health care, food, agriculture, transportation, first responders, and similar essential services, “had to continue travelling to and from their workplaces, exposing themselves to the virus and dying in great numbers.”
Before the advent of the pandemic, both the right and the left felt that “21st-century workers were stuck in insecure and badly paid jobs, if they could find them at all - and that many faced an even worse future, as ever-smarter robots pushed them aside.”
However, based on data from the 37 mostly-rich OECD countries, The Economist argues that popular perceptions about the world of work have been largely misleading. In 2019, for example, the unemployment rate in the OECD countries was lower than it had been since the 1960s. “In America joblessness among black people was the lowest ever, as it was in Britain. Youth unemployment, which had once seemed intractable (especially in Europe) was also down.”
In addition, the share of 16- to 64-year-olds in a job was at an all-time high in over half of these countries. “A great surprise for many economists on the right was that this jobs boom occurred even as minimum wages rose smartly across the rich world and as immigration soared. A similar shock for those on the left was that capitalism was delivering clear gains for those at the bottom end of the labour market.” While pay was not rising as fast as many would have wished, in late 2019 earnings were growing by nearly 3% a year in OECD countries, and “The wages of the worst-paid Americans were increasing 50% faster than those of the best-paid.” According to a recent Gallup poll, the share of Americans completely or somewhat satisfied with their jobs are among the highest since Gallup began polling work and workplace satisfaction in 1993.
“The labour market before covid-19 was far from perfect, but it was better than many critics were claiming - and it was getting better still. The pandemic has been a catastrophe for many, … But its lasting legacy may be a better world of work, as it speeds changes that were already under way and highlights those places where further improvement is needed.”
Technology and automation - Recessions and pandemics accelerate automation. Yet warnings of a jobless future are overblown
“Many people expect the pandemic to accelerate automation,” notes The Economist. “Anecdotes abound of robots being brought in to reduce risks of infection, from automated slaughterhouses to do-it-yourself baggage drop-offs at airports. This wave of automation, some fear, will eliminate jobs, especially for those with less marketable skills, meaning more unemployment and inequality. … Recessions often lead to a burst of automation, and they do not come bigger than this one. … Yet doom-mongers struggle to point to actual evidence of accelerating automation.”
The Economist tried to track down some evidence of accelerating automation, but what they found actually pointed in the opposite conclusion: “American imports of industrial robots fell by 3% in 2020”; “The growth of spending on automation slowed in 2020”; and “Rockwell Automation, the world’s largest company dedicated to industrial automation, saw sales decline by 5.5% last year.”
“If a pandemic-induced wave of job-killing robots does not happen, that is just one more example of misplaced fears about machines.” Such fears are not new, going back to the so-called Luddites, - textile workers who in the 1810s smashed the new machines that were threatening their jobs, and continued to resurface in the 20th century, right along with advances in technology. In a 1930 essay, English economist John Maynard Keynes wrote about the onset of “a new disease” which he named technological unemployment, that is, “unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.”
Automation fears have understandably accelerated in recent years, as our increasingly smart machines are now being applied to activities requiring intelligence and cognitive capabilities that not long ago were viewed as the exclusive domain of humans. “Previous technological innovation has always delivered more long-run employment, not less. But things can change,” said an Economist article from January, 2014. “Nowadays, the majority of economists confidently wave such worries away. … Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently.”
A major reason for these recurring fears is the so-called lump-of-labor-fallacy, the misconception that there is a finite amount of work, so if some is automated there’s less to go around. Automation does indeed substitute for labor. However, automation also complements labor, raising economic outputs in ways that often lead to more long-run employment, not less. Automating the more routine parts of a job will often increase the productivity and quality of workers, by complementing their skills with computers and robots, as well as enabling them to focus on those aspect of the job that most need their attention.
“If the pandemic has not so far led to robots taking all the jobs, it is still early days. And some believe this time will be different. Technology is so sophisticated it is difficult to split jobs into those that can and those that cannot be automated. … Perhaps, then, this is a tipping-point for humans’ relationship with machines. If anything could cause such a wholesale change in labour markets, a once-in-a-generation pandemic might be it. Yet it would still be wise to hold off from fretting about the future of work. Given the history of outlandish and failed predictions, it is hard on principle to take the worst predictions too seriously.”
“People tend to be sentimental about how wonderful work used to be, grumpy about how it is and fearful of what it will become,”notes The Economist in conclusion. “In fact, working life has improved over the ages - and the promise today is as bright as it ever was.”
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Posted by: Nirvi B | July 25, 2021 at 10:31 AM