The workforce versus the machines
There is nothing new under the sun. In 1817 machines were being smashed because it was feared they destroyed jobs and economists debated whether mechanization was a good thing. In 2017 one still hears the “Lump of Labour fallacy”; the pessimistic view that there is only a fixed demand for work, so robots and Artificial Intelligence (AI) will inevitably reduce employment.
In 2014 Deloitte and two Oxford academics, B. Frey and M. Osborne argued that about one-third of UK jobs were threatened by automation over the next 20 years; particularly work in office and administrative support, sales and transport. And those with wages less than £30,000 were five times more likely to be automated than those earning more than £100,000.
Such gloomy headlines need to be qualified. Deloitte and Frey and Osborne said “threat” and not actual change. Their figures related to a 20 year period- not a single blow. Other researchers (Arntz, Gregory and Zierahn at the Organisation for Economic Co-operation and Development/OECD in 2016) took a different approach and said that we should ask instead what job tasks as opposed to broad occupational areas were liable to be automated. The OECD research suggested that only about 10% of jobs were threatened by automation.
In contrast to the old- Luddite type fears about machines and robots, there is a more optimistic view whereby machines become the delivers of wealth and prosperity. Automation should improve productivity. Higher productivity should produce lower prices and hence in turn lead to higher consumption and output.
In a report in 2017, PwC estimated that automation could grow the Northern Ireland economy by 5.4% by 2030; compared to 8.4% in Scotland, 9.8% in Wales and 10.6% in England.
However, just as we should beware of the Lump of Labour Fallacy, there could be another fallacy in this line of thinking. Automation certainly increases the productive potential of the economy (the maximum amount of goods and services which can be supplied) but it does not guarantee there will enough purchasing power to buy up all those extra goods and services. Some see automation as the ultimate Keynesian nightmare (See note 1); machines have wonderful productive potentials but they end up standing idle because so few people are left earning enough to buy what could be produced. I think this nightmare scenario is exaggerated but we should be cautious.
Clearly, this is a controversial area. In making predictions we are subject to three difficulties:
Some conclusions about the impact of automation on the Northern Ireland economy: