Home' Trinidad and Tobago Guardian : January 23rd 2014 Contents BG22 | THE ECONOMIST
BUSINESS GUARDIAN www.guardian.co.tt JANUARY 2014 • WEEK FOUR
Innovation, the elixir of progress, always has cost people
their jobs. In the Industrial Revolution artisan weavers
were swept aside by the mechanical loom. During the
past 30 years, the digital revolution has displaced many
of the mid-skill jobs that underpinned 20th-century
middle-class life. Typists, ticket agents, bank tellers and many
production-line workers have been dispensed with, the same
way the weavers were.
For those who believe that technological progress has made
the world a better place, such churn is a natural part of rising
prosperity. Although innovation kills some jobs, it creates new
and better ones, as a more productive society becomes richer
and its wealthier inhabitants demand more goods and serv-
A hundred years ago one in three American workers was
employed on a farm. Today less than two per cent of that
number produce far more food. The millions freed from the
land were not consigned to joblessness, but found better-paid
work as the economy grew more sophisticated. Today the pool
of secretaries has shrunk, but there are ever more computer
programmers and Web designers.
Optimism remains the right starting point, but for workers
the dislocating effects of technology may make themselves
evident faster than its benefits. Even if new jobs and wonderful
products emerge, in the short term income gaps will widen,
causing huge social dislocation and perhaps even changing
Technology s impact will feel like a tornado, hitting the rich
world first, but eventually sweeping through poorer countries,
too. No government is prepared for it.
Why be worried? It is partly a matter of history repeating
itself. In the early part of the Industrial Revolution, the rewards
of increasing productivity went disproportionately to capital.
Later on labor reaped most of the benefits. The pattern today
The prosperity unleashed by the digital revolution has gone
overwhelmingly to the owners of capital and the highest-
skilled workers. During the past three decades, labor s share
of output has shrunk globally from 64 per cent to 59 per cent.
Meanwhile the share of income going to the top 1 percent in
America has risen from around nine per cent in the 1970s to
22 per cent today. Unemployment is at alarming levels in much
of the rich world, and not only for cyclical reasons. In 2000
65 per cent of working-age Americans were working, but since
then the proportion has fallen, during good years as well as
bad, to the current level of 59 per cent.
Worse, it seems likely that this wave of technological dis-
ruption to the job market has only begun. From driverless cars
to clever household gadgets, innovations that already exist
could destroy swathes of jobs that hitherto have been untouched.
The public sector is one obvious target. It has proven singularly
resistant to tech-driven reinvention, but the radical changes
in what computers can do also will have a powerful effect on
middle-class jobs in the private sector.
Until now the jobs most vulnerable to machines were those
that involved routine, repetitive tasks. Thanks to the exponential
rise in processing power, however, and the ubiquity of digitized
information as so-called "big data," computers increasingly
are able to perform complicated tasks more cheaply and more
effectively than people. Clever industrial robots can quickly
"learn" a set of human actions.
Services may be even more vulnerable. Computers already
can detect intruders in a closed-circuit-camera picture more
reliably than a human can. By comparing reams of financial
or biometric data, they often can diagnose fraud or illness
more accurately than any number of accountants or doctors.
One recent study by academics at Oxford University suggests
that 47 per cent of today s jobs could be automated in the
next two decades.
At the same time the digital revolution is transforming the
process of innovation itself. Thanks to off-the-shelf code from
the Internet and platforms that host services, such as Amazon s
cloud computing, that provide distribution a la Apple s app
store and that offer marketing, as Facebook does, the number
of digital start-ups has exploded.
In the same way that computer-game designers invented
a product that humanity never knew it needed but now cannot
do without, so these firms no doubt will dream up new goods
and services to employ millions. For now, though, they are
singularly light on workers. When the popular photo-sharing
site Instagram was sold to Facebook for about US$1 billion in
2012, it had 30 million customers and employed 13 people.
Kodak, which filed for bankruptcy a few months earlier,
employed 145,000 people in its heyday.
The problem is one of timing as much as anything. Google
now employs 46,000 people, but it takes years for new indus-
tries to grow, whereas the disruption a start-up causes to
incumbents is felt sooner. Airbnb may turn homeowners with
spare rooms into entrepreneurs, but it poses a direct threat
to the lower end of the hotel business, a massive employer.
If this analysis is halfway correct, the social effects will be
Many of the jobs most at risk -- logistics and transportation,
for example -- are lower down the ladder, whereas the skills
that are least vulnerable to automation, such as creativity and
managerial expertise, tend to be higher up, so median wages
are likely to remain stagnant for some time and income gaps
are likely to widen.
Anger about rising inequality is bound to grow, but politicians
will find it hard to address the problem. Shunning progress
would be as futile now as the Luddites protests against mech-
anized looms were in the 1810s, because any country that
tried to stop would be left behind by competitors eager to
embrace new technology. The freedom to raise taxes on the
rich to punitive levels will be similarly constrained by the
mobility of capital and highly skilled labour.
The main way in which governments can help their people
through this dislocation is through educational systems. One
of the reasons for the improvement in workers fortunes in
the latter part of the Industrial Revolution was because schools
were built to educate them, a dramatic change at the time.
Now those schools themselves need to be changed, to foster
the creativity that humans will need to set them apart from
computers. There should be less rote learning and more critical
thinking. Technology itself will help, whether through "MOOCs"
(massive open online courses) or even video games that simulate
the skills needed for work.
The definition of "a public education" also may change.
Far more money should be spent on pre-schooling, since the
cognitive abilities and social skills that children learn in their
first few years define much of their future potential. Adults
will need continuous education. Public education may well
involve a year of study to be taken later in life, perhaps in
However well people are taught, though, their abilities will
remain unequal, and in a world which is increasingly polarised
economically, many will find their job prospects dimmed and
The best way of helping them is not, as many on the left
seem to think, to push up minimum wages. Jacking up the
floor too far would accelerate the shift from human workers
to computers. Better to augment low wages with public money
so that anyone who works has a reasonable income, through
a bold expansion of the tax credits used in countries such as
Britain and the United States.
Innovation has brought great benefits to humanity. Nobody
in their right mind would want to return to the world of hand-
loom weavers. The benefits of technological progress are
unevenly distributed, however, especially in the early stages
of each new wave, and it is up to governments to spread them.
In the 19th century it took the threat of revolution to bring
about progressive reforms. Today s governments would do
well to start making the changes needed before their people
@2014 The Economist Newspaper Ltd. Distributed by the New
York Times Syndicate
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