Technology development is growing at a very fast pace. Its application into the means of production is making the processes more efficient and more productive. But at the same time, it is also bringing fears of negative impacts for people due to the potential of technology to replace human labor. For example, Carl Benedikt Frey and Michael Osborne, researchers from the University of Oxford Martin School, state that 47 percent of the US workforce is at risk of automation in the future (Frey and Osborne, 2013). Developing countries are even more susceptible to automation than high income countries like the US. You can see in the chart below, countries like Ethiopia could reach up to 85% susceptibility to computerization of the labor market. Similarly, China has high susceptibility of 77%, and India is at 69%.
One of the reasons that countries of the developing world have higher susceptibility to automation is that cheap labor is still abundant in these countries. However, once the price of labor increases, firms are likely to revert to automation to compensate for the increase in labor costs. This is something that will not only happen in the developing world, but also in high income countries like the US. We can recall, for example, some reports from the Wall Street Journal about the reaction of some fast food chains and retailers to the demands of an increase of the federal minimum wage to $15 an hour. Companies like McDonalds, Wendys and Walmart are looking into automation to balance the future increase in labor costs. Ordering a Big Mac through a tablet, instead of a human being through the counter, might be the norm sooner than later.
The fears of machines replacing human labor are not a new phenomenon. Dean Baker, founder economist from the Center of Economic and Policy Research (CERP), refreshes our memory by pointing out that this conversation was a trend during the fifties and sixties, and reports were written about the best way to react in case of mass unemployment caused by robots (Baker, 2014). In the United States, for example, a report called “Unemployment and the Impact of Automation” was issued by the House of Representatives Committee on Labor and Education in 1961 (Impact of Automation on Employment, 1961). The trend of technological improvements have continued since then, however, no mass unemployment has occurred. Why should we be worried now? What is different this time?
Citi Group, in conjunction with the University of Oxford Martin School, issued a report called “Technology At Work”, which is part of their Global Perspectives & Solutions (GPS) series (Frey and Osborne, 2015). In this report, they suggest that the impact of technology on the economy (and labor specifically) is different now because of three main reasons:
It is really not difficult to see how technology is changing the labor market. Here are just some examples of what technology can accomplish today:
As one can see, the list includes tasks that one could have never imagined could be accomplished by a computer or machine. What will happen with the thousands of UPS and FedEx drivers (and why not, USPS drivers as well) when driverless trucks (or drones) deliver the packages to our front door? What will happen with the amount of journalists needed to write articles when software like Narrative Science get better (and cheaper)?
“For example, back in the day, the elevator man was displaced by the automated elevator that didn’t require an operator anymore. He then went to look for another job, let’s say, the post office.”
Where have all the gains from productivity increases gone? The following chart suggests that the gains have gone to increase the income of the top 1% of the population.
One of the ways to revert this scenario is by implementing work-time reductions. If technology is increasing productivity and enabling us to produce what we need to produce in a shorter period of time, then let’s use that increase in productivity to reduce the amount of time we spend at work, instead of using it to work more and produce more output.
If wages would have kept pace with productivity, workers would have been able to choose whether they wanted to take that increase in higher income or more leisure. It would be up to each worker to decide. Of course, some of them would choose more income, but others would choose leisure. Since their income has kept up with inflation and they are able to afford paying their bills and treat themselves every once in a while without putting more hours of labor, it will send the signal to the other group that it is not necessary to increase consumption to achieve happiness. This scenario will begin to change the mentality our society has in regard to overconsumption and overproduction of goods. It all starts with reducing the work-day to a new standard.