In 1955, Walter Reuther, head of the US car workers’ union, told of a visit to a new automatically operated Ford plant. Pointing to all the robots, his host asked: “How are you going to collect union dues from those guys?” Mr Reuther replied: “And how are you going to get them to buy Fords?” Automation is not new. Neither is the debate about its effects. How far, then, does what Erik Brynjolfsson and Andrew McAfee call The Second Machine Age alter the questions or the answers?
I laid out the core argument last week. I noted that the rise of information technology coincides with increasing income inequality. Lawrence Mishel of the Washington-based Economic Policy Institute challenges the notion that the former has been the principal cause of the latter. Mr Mishel notes: “Rising executive pay and the expansion of, and better pay in, the financial sector can account for two-thirds of increased incomes at the top.” Changing social norms, the rise of stock-based remuneration and the extraordinary expansion of the financial sector also contributed. While it was a factor, technology has not determined economic outcomes.
Yet technology could become far more important. Professor Brynjolfsson and Mr McAfee also argue that it will make us more prosperous; and it will shift the distribution of opportunities among workers and between workers and owners of capital.
The economic impacts of new technologies are many and complex. They include: new services, such as Facebook; disintermediation of old systems of distribution via iTunes or Amazon; new products, such as smartphones; and new machines, such as robots. The latter awaken fears that intelligent machines will render a vast number of people redundant. A recent paper by Carl Frey and Michael Osborne of Oxford university concludes that 47 per cent of US jobs are at high risk from automation. In the 19th century, they argue, machines replaced artisans and benefited unskilled labour. In the 20th century, computers replaced middle-income jobs, creating a polarised labour market. Over the next decades, however, “most workers in transport and logistics occupations, together with the bulk of office and administrative support workers, and labour in production occupations, are likely to be substituted by computer capital”. Moreover, “computerisation will mainly substitute for low-skill and low-wage jobs in the near future. By contrast, high-skill and high-wage occupations are the least susceptible to computer capital.” This, then, would exacerbate inequality.
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