Rage against the machine? By Laura Tyson and Susan Lund December 7, 2017 – Project Syndicate

Almost every aspect of our economies will be transformed by automation in the coming years. But history and economic theory suggest that fears about technological unemployment, a term coined by John Maynard Keynes nearly a century ago, are misplaced.

Intelligent machines are transforming the way increase. Many of the jobs created cannot even we produce, work, learn, and live throughout be imagined today, just as few people a century the world. Almost every aspect of our ago could have anticipated that automobiles economies will be radically altered. would give rise to drive-through restaurants and roadside motels. Major logistics companies and individual drivers are using new technologies to optimize A new MGI report finds that under a moderate their route planning. Companies like BMW and scenario for the speed and breadth of Tesla have already released self-driving automation, about 15% of the global workforce, features in their automobiles, which are or 400 million workers, could be displaced produced with the help of sophisticated robots. between now and 2030. A faster pace of The Associated Press is using artificial automation would trigger greater displacement. intelligence to help write news stories. 3D The good news is that as a result of projected printers are being used to produce replacement increases in demand for goods and services – parts – for both machines and humans. AT&T, driven primarily by rising incomes, the growing in collaboration with Udacity, is offering online health-care needs of aging populations, and “nanodegrees” in data analytics. Drones are investment in infrastructure, energy efficiency, delivering health supplies to remote locations in and renewables – enough new jobs are likely to poor countries. be created to offset job losses. But the new jobs These marvelous new technologies promise will differ mightily from the jobs displaced by higher productivity, greater efficiency, and automation, imposing painful transition costs more safety, flexibility, and convenience. But on workers, businesses, and communities. they are also stoking fears about their effects on Depending on the pace of automation, 75-375 jobs, skills, and wages. Feeding these fears is a million workers, or 3-14% of the global recent study by the University of Oxford’s Carl workforce, will need to change occupational Frey and Michael Osborne, and another by the categories by 2030. In the United States and McKinsey Global Institute (MGI), which find other developed economies where automation that large shares of employment in both is likely to occur more rapidly, 9-32% of the developing and developed countries could workforce may need to change occupational technically be automated. History and categories and the skills associated with them. economic theory, however, suggest that anxieties about technological unemployment, a In these countries, jobs in major occupational term coined by John Maynard Keynes nearly a categories like production and office support, century ago, are misplaced. and jobs requiring a high school education or less, are likely to decline, while jobs in In the future, as in the past, technological occupational categories like health and care change is likely to fuel productivity gains and provision, education, construction, and income growth, boosting demand for labor. management, and jobs requiring a college or Add to that lower prices and rising quality, and advanced degree, will increase. demand for goods and services will also 2

According to one recent survey, the majority of not in years, will be necessary, as will financial Americans are concerned that automation will support to undertake such training. Sending increase income inequality. Their concern people for two-year degrees at their own appears warranted. As many middle-wage expense is not the answer. occupations succumb to automation, income Instead, nanodegrees and stackable credentials polarization in the US and other developed are likely to gain in importance. German-style countries is likely to continue. If workers apprenticeships combining classroom work and displaced by automation are unable to find new practical work, and enabling participants to earn jobs quickly, frictional unemployment will rise, a salary while learning, could be important putting downward pressure on wages. solutions even for middle-aged displaced So, what can be done to speed and ease the workers. Collaboration between companies and occupational transitions that automation will educational institutions, as AT&T (on whose compel? For starters, fiscal and monetary board one of the authors serves), Starbucks, and policies to sustain full-employment levels of other firms are showing, can provide workers aggregate demand are critical. Policies to with the new or enhanced skills that are promote investment in infrastructure, housing, increasingly needed. alternative energy, and care for the young and Tax and other incentives to encourage more the aging can boost economic competitiveness business investment in workforce training, and inclusive growth, while creating millions of especially by small and medium-size jobs in occupations likely to be augmented, companies, may be necessary. Governments rather than displaced, by automation. will also need to offer universal and portable A second response must be a dramatic social benefits like health care, child care, and expansion and redesign of workforce training retirement security, as well as transition programs. Over the past two decades, support, to workers who are forced to change government outlays for skills training and jobs, occupations, and employers frequently. labor-market adjustment have fallen in most Sweden’s job-security councils, run by the OECD countries. That has been compounded in private sector and funded by a payroll tax on the US by a sizeable decline in business companies, provide displaced workers with a spending on training as well. comprehensive suite of income support, training, coaching, and assessment with These trends must be reversed. Lifelong caseworkers. learning needs to become a reality. Jobs will change as machines take over some tasks, and Like previous technologies, automation today human activities will require different skills. promises major productivity gains, benefiting MGI’s analysis shows that higher-level individuals, communities, and societies. But, cognitive abilities – such as logical reasoning, for millions of workers, the path to an stronger communication skills, and enhanced increasingly automated future could be long social and emotional skills – will become more and difficult. It is up to us to make the policy important, while machines take over routine and investment choices that can ease the capabilities common in the workplace today, transition, reduce its costs, and ensure that the including in cognitive tasks like data collection income gains are equitably shared. and processing. Laura Tyson, a former chair of the US President’s For mid-career workers with children, Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, mortgages, and other financial responsibilities, Berkeley. Susan Lund is a partner of McKinsey & training that is measured in weeks and months, Company and a leader at the McKinsey Global Institute.