Don't blame the robots

Moore’s Law—the idea that computing power doubles every two years—means that robots have enormous potential to transform many human industrial activities. Classic blue-collar jobs will disappear or be taken over by machines, as robot miners and driverless cars replace humans. White-collar jobs will be threatened too. Traditional journalism is already being eroded as smart software generates reports on the weather or company results. Lawyers are being replaced by machines able to scan legal documents.

This has resulted in significant disruption in the job market as the manpower employed in particular industries shrinks. All the technological advances since the industrial revolution have led to some job losses. A century ago we had half a million miners digging coal; now there are a few thousand. At the start of my career in the Treasury we had staff in typing pools; now they are a thing of the past.

The disappearance of these jobs may have been painful for individuals and the places left stranded by changes in the job market, but it did not lead to long-term unemployment. Instead new jobs were created—from personal trainers to software engineers. We are told by those sceptical of the robotics revolution that this time it is going to be different, but I am not persuaded of that. Human wants are infinite and as robots liberate us from old tasks so new and productive uses of our time will emerge.

My colleague at the Resolution Foundation, Gavin Kelly, has investigated the pessimistic interpretations of the Organisation for Economic Co-operation and Development (OECD) and others, and shows that they have been exaggerated. Many jobs may not disappear entirely, but instead could change radically as some elements go and new tasks are added. Allowing for this effect dramatically reduces the OECD’s estimates: for example, instead of 47 per cent of American jobs going because of robotics, it could be just 9 per cent.

In any case, we are not sitting around twiddling our thumbs as conventional work disappears—far from it. Our labour market is operating at historically high levels of adult employment—with almost 75 per cent of all adults aged 16-64 in employment. Our problem is not that there are only a few high-value jobs and everyone else is unemployed. Our problem is the opposite: low productivity and insufficient investment in skills and human capital—other than through the excellent and effective route of higher education.

The argument that robots are taking our jobs is most vigorous in the US, and one reason for this is that their employment rate is significantly lower. Their labour market used to be one of the most flexible and successful in the west but now it is performing poorly. If you are unemployed in Detroit or Pittsburgh, it can easily look like the fault of technological change and the rise of the robots. But there are other factors at work.

Mass prison incarceration does not just take millions of young men out of the jobs market, it makes it harder to employ them after their release. The lack of early years child care provision makes it harder for women to have good careers while having children. The funding pressures on community colleges and state universities makes it harder to raise skills to match job opportunities.

The debate on robotics taking our jobs should not distract us from the bread and butter policies needed to improve western jobs markets. Recent decades have left labour market economists with pretty good evidence of what these policies should be—the right balance of flexibility and security, together with active measures aimed at marginal groups. Those policies are as necessary today as ever. It might not be as exciting as contemplating the march of the robots, but it is just as important.