January 25, 2019 / 5:58 PM / 23 days ago

Breakingviews - Review: The hollowing out of white-collar work

DAVOS, Switzerland (Reuters Breakingviews) - The robot that comes for your job might be called Poppy. Or Amelia. The former helps process insurance contracts at Lloyd’s of London. The latter handles calls from customers of Sweden’s SEB. Neither conforms to the popular image of an android waving its metallic arms. Yet both perform tasks previously done by human office workers.

SoftBank Robotics Robot Assistants Pepper (L) and NAO (R) are pictured in Paris, France, March 9, 2018. Picture taken March 9, 2018. REUTERS/Regis Duvignau

Poppy and Amelia appear in Richard Baldwin’s “The Globotics Upheaval: Globalization, Robotics, and the Future of Work”. The clunky title masks a provocative argument: that the current wave of automation will be faster and more disruptive than the world has ever experienced.

Baldwin is an economics professor who has spent most of his career studying trade. His last book, “The Great Convergence”, examined the evolution of global supply chains. To understand where trade and globalisation go next requires an understanding of technology.

As Baldwin explains, advances in international trade have often followed technological leaps. The Industrial Revolution shifted labour from agriculture to factories. With it came the quest for new markets for manufactured goods. The growth of computing and communications allowed manufacturing jobs to be automated or shifted to cheaper locations.

Many contemporary discussions about automation tend to ignore that, in sectors like the car industry, the robots have already taken over. Other factories moved to countries where labour is cheaper. This change is not so evident in unemployment statistics: the U.S. jobless rate is no higher than it was five decades ago. But it shows up in stagnant real wages and the erosion of benefits. With the benefit of hindsight, it’s easy to see the source of U.S. President Donald Trump’s electoral appeal.

Yet Baldwin argues this is just a warm-up act for what is to follow because advances in machine learning and artificial intelligence are happening on a global scale. Even as algorithms replace human tasks, technology will make it easier for people in distant countries to compete for work in Western services industries.

The author reckons this is potentially even more disruptive than in manufacturing. For one, the services industry in most developed countries is much larger – and employs many more people – than manufacturing. Moreover, many services are not currently traded. The shift will be fast and seem monstrously unfair.

Change will go far beyond the self-driving cars and trucks. Office administrators, salespeople, cleaners, teachers and healthcare workers are among those who could find part of their job becomes obsolete, or can be performed by someone with fewer skills and experience.

Of course, these shifts may create yet-to-be-invented new jobs. As recently as a decade ago, few would have imagined that the computer games would spawn a cadre of professional players, competing for prize money. Or that fitness trainers would conduct remote spin classes by video conference.

Nevertheless, it’s reasonable to wonder whether new jobs will be created as quickly as old ones disappear, how easily workers will be able to move between them, or how well they will pay. Baldwin points out that roles which require physical proximity and human intuition or empathy will be hard to automate.

He comes up with some counterintuitive solutions for governments. The old mantra of equipping workers with better skills is no longer good enough. Better to use existing rules and regulations to slow progress and give industries more time to adapt, an approach Baldwin calls “shelterism”. The reaction of some city authorities to the arrival of Uber falls into this category. There are those who have tried to ban the ride-hailing service; others have forced it to comply with local regulations.

Some industries seem well-prepared to erect virtual barriers. Even in the European Union’s single market, licences and local qualifications protect some professions from cross-border competition. The author also advocates state support to help workers adapt, though he stops short of embracing the idea of a guaranteed national income.

But state intervention may be slow to come. It took decades for governments to regulate factories after the Industrial Revolution, and much longer for them to install social safety nets. In the interim, many countries succumbed to revolution, political extremism, and war.

The latest wave of global technological change promises similar challenges. The dysfunctional democracies of the United States and Western Europe show little sign of being able to cope. It may not be until accountants and lawyers join the yellow-vested protesters on the streets of Paris that governments react.

Breakingviews

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