The Chief Economist of the Bank of England, Andy Haldane, has been in the news with his predictions that up to 15 million jobs in the UK are at risk of being lost to automation. This is a huge number, around half the total number of people in work today.
Haldane injected a note of humour into his address to the Trades Union Conference, by suggesting that his own job was not at risk. It was unlikely, he said, that an “Andy robot” would be giving this speech to the TUC even ten years from now. Given the Bank’s recent track record in economic forecasting, a cynic might respond in kind. Surely Ernie, the name of the original random number generator used to draw Premium Bonds, could do just as well.
His speech was far more thoughtful and balanced than the more lurid attention grabbing points seized on by the media. Haldane pointed out that since the start of the Industrial Revolution over 250 years ago, there has been a steady and continuous stream of labour-saving advances in technology. It is these which drive productivity, the amount of output produced per worker. This has risen at an annual average rate of 1.1 per cent since 1750. In the UK, the employment rate today as a proportion of the total population is around 50 per cent, very similar to levels in the early 19th century. The same is true in other countries.
The good news does not end there. The share of wages in the overall economy is very similar to what it was in the 18th century. Real wages, living standards, have risen in line with productivity, in complete contradiction to Marx’s prediction that capitalism would make workers worse off. And technology has enabled people to work fewer hours and have longer holidays. Compared to a century ago, the average working week has fallen from 50 hours to 30.
The potential problem, according to Haldane, arises through the sheer scale of disruption which might take place. Eventually, automation will benefit society. But it might take a long time for the effects to be absorbed. Such pessimism may not be justified. The labour market is far more dynamic and evolutionary than most people imagine. The US Bureau for Labour Statistics describes the ‘vast amount of job churn’ which takes place every single quarter. Millions of companies decide to either expand or contract their workforce on a quarterly basis. Hundreds of thousands of firms open or close from one quarter to the next. Even in recessions, large numbers of jobs are created.
The net changes in employment, the difference between jobs created and jobs lost, in any single quarter are small. But they conceal a vast whirlpool of constant change and flux. The old Soviet Union had ‘secure’ jobs, but eventually it collapsed. Towns in our regions have a large proportion of the workers employed in ‘secure’ public sector jobs, but they are poor. Western economies are used to change. It is their life blood and it is what makes them successful.
As Published in City Am on Wednesday 18th November