Among the many aspects of the digital revolution, the speed with which it is diffusing stands out as a distinct feature. While it took decades or even centuries for the steam engine and electricity to diffuse to some parts of the world, the internet, robots, and automation are being adopted at a much faster pace. How are countries responding to this ongoing transformation? Are there lessons to be drawn from this process that could help societies better manage the transition?
In the sixth episode of the Future of Work webinar series organized by the Institute for New Economic Thinking, Richard Baldwin of the Graduate Institute Geneva, Leif Pagrotsky, former Minister of Industry and Trade in Sweden, were joined by Gillian Tett of the Financial Times, in a discussion on comparison of national approaches to the digital disruption.
The mismatch between the speed of job creation and job displacement is a primary reason for government policies to smooth the transition. Throughout history, human needs and ingenuity have always created new jobs when old ones were destroyed by technological changes, but this usually happened at a leisurely pace. The rapid adoption of digital technologies has the potential of wiping out large number of jobs before workers could find new opportunities. As Richard Baldwin described in his book The Globotics Upheaval, this shock is not only happening to factory or manufacturing jobs envisioned by many, but increasingly to office and service sector jobs as well, given the advancement in software tools and “white collar robots”. This could be good news for some developing countries, as services become more easily traded across borders and “telemigrants” participate in global markets without leaving home. But for developed nations, governments will have to step in to ease the transition, before news jobs could emerge.
While much blame has been heaped upon globalization, and now on digital technology, for causing increased inequality and stagnant wages, the link between these social malaises and structural changes in economies could be a false one. Leif Pagrotsky, reflecting on the Swedish experiences, points to passive social policies and governmental inactions for workers’ misfortune at times of rapid changes. Since the mid 1990s, Sweden was affected by entry into EU common markets, open borders, and increased competition from China as well as neighborinig countries in Eastern Europe. While these changes were nothing short of dramatic, Sweden has nevertheless seen 25 percent gain in total employment and 55 percent real wage increase in private sector blue collar jobs. To achieve this, the Swedish government put in place generous unemployment insurance, ambitious worker upskilling programs, high quality basic education for all, a tight labor market, and power to labor unions to ensure a fair distribution of productivity gains. Writing in the Financial Times, Gillian Tett has discussed why Japan is also not afraid of robots. Besides social safety nets, the country’s slow population growth and media’s portrait of robots as a source of pride, not terrors, have increased general acceptance and adoption of digitalization. Experiences from both countries may provide lessons to governments looking to manage social disruptions while reaping the digital dividends.
The COVID-19 pandemic has dramatically accelerated the digitalization trends across countries. Social distancing measures and cost cutting pressure are increasing the cost of hiring workers relative to automation and offshoring solutions, and shift in consumer behaviors is similarly hastening the process. While many changes are expected to revert to normal when the virus is brought under control, a lot of shifts caused by the pandemic are likely to remain permanent. Government efforts are badly needed to bring the overall economy back on its feet and moderate the shocks workers are bound to experience in the short run. Meanwhile, it is also important to recognize the fundamental role new technologies have in raising productivity, thus providing resources for upgrading the infrastructure and tackling environmental problems, among others. Many tasks will be performed by machines, robots and software tools, whereas for human, the future of work will likely involve more compassion, empathy, and face-to-face interactions. All of us should prepare for this eventuality.
As new technologies are being invented and adapted in real time, the future of work for large parts of our economy remains uncertainly. Are we likely to achieve meaningful integration between humans and robots, or is a jobless future lurking on the horizon? In the future episode of this webinar series, we will explore how economies can shift the odds to our favor.