Labour v Machines – from the developing world to Wall Street
Both The Economist and The New York Times magazine have touched on the issue of machines now taking over the jobs of humans with the developing economies being especially vulnerable. A study from by Carl Benedikt and Michael Osborne of Oxford University found that 47% of jobs in the US were at risk to technology. However the same authors found poorer countries are at a much greater risk e.g.
% of jobs at risk
- India – 69%
- China – 77%
- Ethiopia – 85%
There are two reasons for this:
- Jobs in the developing world tend to be less-skilled
- The vast majority of the production of goods and services have not yet embraced technology on a significant scale and therefore are open to change.
Having surplus labour is attractive to manufacturers as this will keep wages suppressed. However investment in robots can be repaid in less than two years so labour can become obsolete. But this does not mean that poorer countries will see a massive increase in technology as:
1. This is dependent on the size of companies and if investment in machines is economically viable long-term – if output is small investment in machines might not be worth it. Farms in many poor countries are often too small to benefit from capital.
2. Deregulating their labour markets i.e. making it easier to hire and fire workers and therefore attracting manufacturers.
3. Having no minimum wage or regulations on working conditions, age etc. also attracts manufacturers.
Higher income countries have more jobs that can’t be replicated by machines. These jobs involve social interaction, empathy, psychology, high skills. These include teachers, lawyers, surgeons, advertising etc.
Financial markets and Software
On Wall Street many jobs are now being replaced by software programmes that can do the job much more efficiently than humans. IT company Kensho provides Goldman Sachs and other investment companies with software that replaces the work of employees. For instance when the US Bureau of Labour Statistics releases its monthly employment report, within two minutes an automated Kensho analysis with predictions of performance of investments based on their past response to similar employment reports is sent to clients.
In the financial sector software is increasingly doing the work that has been domain of the highly educated. The vulnerability of these jobs is due to:
1. The easy availability and rapidly declining price of computing power,
2. The rise of ‘‘machine learning’’ software, like Kensho, that gathers and assimilates new information on its own.
‘We are creating a very small number of high-paying jobs in return for destroying a very large number of fairly high-paying jobs, and the net-net to society, absent some sort of policy intervention . . . is a net loss.’ New York Times Magazine – 25th February 2016