Technology Versus the Economy: A Race Against Time
There’s a lot of talk these days about the environment and how we must preserve it for future generations. When this topic surfaces, can you not help but to envision the society your children, nieces or nephews will grow up in? Before I know it I’m in the black hole of my own vivid thoughts wondering what could be. I’ll admit, I soon get scared off so I snap out of it and get on with my life…
However, it’s things like this we need to be thinking about: the deciding factors of the world we live in. So how about technology as a key influencer? I can only imagine what’s going to happen to the world’s labour market, to economic policy and to my child’s employment prospects if robots and automated machines continue marking their territory in the workplace.
Before I continue along this long and winding road, I feel it’s necessary to plant a disclaimer here to recognise that historic advancements in technology have been incredible, and the feats they have unquestionably achieved for greater society are prevalent. From the introduction of electricity in the late 19th century, to radar in the 1930s, to fibre optics in the 1950s, to The Net in 1969, I would say we owe some 90% of our life experiences to these incredible inventions.
We also owe our life experiences to those companies enhancing and adding value to our daily lives. A great example of this is Google and Apple integrating map functions into smartphone apps and offering this service free of charge, a lucky opportunity says Forbes that was a result of many technology trends converging at once.
The only downfall of this innovation is that it eliminated the market for standalone GPS navigation devices such as the Garmin and TomTom. These products were the unlucky collateral damage, and this is the basis of my assertion: what becomes great pushes aside another. And that ‘other’ is now increasingly human-like. Is it possible we’re taking this technology thing too far?
The Institute for International Economic Policy Working Paper Series by George Washington University conceptualises this concern through preliminary observations of the economy writing that,
“The potential positive impact on economic activity, and hence economic growth, is clear even if magnitudes are at best guess; however, the issue of impact on labour markets is far more serious.”
This paper highlights the notion of ‘disruptive innovation’, coined by Harvard professor, businessman and author of The Innovator’s Dilemma Clayton Christensen, which refers to innovation that creates a new market by applying a different set of values, and which ultimately (and suddenly) overtakes an existing market. It does this by developing fresh business models and exploiting old technologies in new ways.
Products based on disruptive technologies are commonly cheaper to produce, simpler, better performing, and more convenient to use, so it’s only habitual that businesses seek to ‘employ’ them, right? The United Nations (UN) pinpointed in a 2017 Department of Economic and Social Affairs report that Artificial Intelligence (AI), robotics, automation and algorithms have shown they can now sometimes do work equal to or even better than humans who are dermatologists, lawyers and professions of the like.
In the same report, the UN estimated that the share of jobs at risk of being automated in the future could reach an astounding 80% and beyond! Technological progress like this is a disruptive force for labour markets because it affects the availability of employment from the perspective of supply and demand.
Consequently, technological unemployment is a real concern. Whilst new technologies are and will be beneficial to higher-skilled workers with a high level of flexibility, creativity and strong problem-solving skills, it is predicted they will leave low- to medium-skilled workers fending for themselves. Assertions like this anticipate a future reality of stagnant income and worsening equality, two societal issues we have never come close to solving.
Since 2000, we have seen the lines between productivity and employment diverge. By 2011, we saw a significant gap appear that shows economic growth with no corresponding increase in job creation. Eric Brynjolfsson and Andrew McAfee call this the ‘great decoupling’ which argues that technology is behind both the positive growth in productivity AND in the disappointing growth in jobs as illustrated by Harvard Business Review.
At the AI Now 2016 Experts Workshop, Brynjolfsson made a pivotal claim about the United States economy, saying median income was the lowest in 2016 than it had been in 15–20 years, revealing that at least half the US population is not participating in this ‘enormous growth’ recognised by many powerful entrepreneurs, including the likes of Bill Gates. Moreover, for the first time in history polls showed that Americans don’t believe their children will be better off than they’ve been themselves.
What does this mean moving forward? Well, a lot. But according to Partner at McKinsey Global Institute Michael Chui, the bottom line is: in order for the economy to grow, people need to work with machines. By understanding these shifts in the labour market, policy makers, business leaders and workers themselves can positively move forward.
There is no doubt this is and will continue to be a difficult transition period for the economy and for our future offspring. However, it’s not our first industrial revolution and I doubt it will be out last. If we keep workers doing meaningful work and if we consciously redeploy labour, we can manage the workforce for the better and ensure no one gets left behind.
