The Chancellor’s recent Autumn Statement recognised that there has been a collapse in productivity in recent years. He is right to worry, since productivity has fallen from an average of 2.2 per cent a year in the decades before the recession, to below 0.5 per cent a year since. The fall in productivity is reflected in a decline in average real wages. The Office of Budgetary Responsibility predicts that by 2021, real wages will still not have recovered to the levels that they were at in 2008.
In the short-run, the only way to get productivity up is to improve the quality of jobs being offered. This is really what industrial strategy is all about. But the long-term tendency is likely to be towards less work overall, as more work becomes automated. Even professional jobs are likely to become hollowed out as more and more of their automatable functions are fulfilled by algorithms.
It is of course possible that, as in the past, technical innovation will create new jobs for new markets. This is happening: the explosion of employment in data science is one example. We seem to have more paralegals, despite legal discovery software, and it is true that new products and skills are sure to be generated, which are scarcely imaginable now.
However, the concern this time is that new technology is too adaptable and too generalised. It is not a case of machines being able to replicate specific job functions, as it was with Adam Smith’s pin factory. Instead, we can now write programmes that are able to recognise and reason.
Finding work that such automated systems and robots cannot do will become increasingly difficult, as we run out of unique human capabilities: those that cannot be simulated.
The most optimistic forecast is that we will be able to use the capacity of machines to enhance our own – standing on their shoulders to reach greater heights. This is the prospect suggested by Brnyjolffson and McAfee in their book, Race against the Machine (2011).
Some will undoubtedly be able to take part in this ‘race’, though why we should want to go on racing with machines for ever and ever is less clear. However, we also need to recognise that the digital economy currently generates very few jobs overall.
Facebook has only 15,724 employees worldwide, and will never be a mass employer. In fact, the ratio of jobs it offers to markets it captures is bound to fall. Digital companies in the supposed ‘sharing economy’ such as Airbnb and Uber are modern middlemen. None of these companies have business models that allow them to create large numbers of good quality jobs with reasonable wages – even Uber argue that their main benefit to drivers is flexibility, not high pay or stability. They do, however, generate large profits for themselves.
At the moment, we top up low wages through the tax credit system, which is not much of an improvement on 19th Century Speenhamland, which indexed wages to the price of bread. Tax credits are a subsidy to low-wage employers and have helped sustain the growth in low-paid, part-time work over the past ten years.
Fewer and fewer supposedly ‘self-employed’ workers make enough money to qualify to pay tax at all. The better solution is to tax the winners in the digital economy and at the same time, institute a basic income, which will slowly increase and compensate for decreasing levels of paid work.
The main argument against this is a moral one: that paid work gives life meaning and purpose, and that to give people money decoupled from labour makes them listless, unmotivated and unable to improve their own lives.
While the psychological consequences of sudden unemployment can be severe, it is obviously not the case that people are generally unable to find meaning in life outside of full-time waged labour. People who spend their lives caring for small children or elderly family members have always been able to find meaning outside of the traditional labour market; nor does everyone who inherits an income succumb to listlessness and ennui. Whether they do depends mostly on their character and education. We have scarcely begun to think about educating people for leisure.
The shift from full-time employment to working less will not be immediate, so in future years most people will still spend much of their time ‘working for a living’ even as we slowly introduce a basic income.
In fact, there will always be paid work available, even though pay will become less of a motive for doing it. Nevertheless, as the scale of the low-paid and unpaid economy increases, we will need to find sources of meaning outside of full-time work. Introducing a basic income would allow people scope to expand their leisure and use it fulfillingly.