Internet Penetration vs Use of Cash

The Economist produced some interesting statistics about how the most digitised countries use less cash and the impact of government in moving towards as cashless society. Most transactions are still carried out with cash but the use of it has fallen:

Use of cash – 2013 = 89% and 2019 = 77%

The graph shows the correlation between Internet users and the % of transactions conducted in cash. Nordic countries lead the way and by 2016 it was estimated that 4 out of 5 transactions were done online. In Denmark the extent of the cashless environment has led the payment app called MobilePay to be the top spot as the most “indispensable” app on smartphones – overtaking Facebook, Messenger etc. MobilePay was launched by Danske Bank in 2013 as a peer-to-peer transfer service.

Italy still had 85% of transactions done by cash with 61% internet penetration. Greece with its significant informal economy still has a very high percentage of cash use as it is very hard to trace.

How do countries promote less use of cash?

  • Banks can improve systems that make transfers faster and cheaper
  • Firms promoting the use of credit cards with loyalty schemes
  • Banning the use of cash on public transport – London and Amsterdam
  • Filing tax returns – payments or refunds by Internet banking
  • Making goods cheaper if paying by card

Source: The Economist – August 3rd 2019

Technology, jobs and the universal basic income

Tech and JobsIt is nothing new to consider how machines can perform the tasks done by the layout force. Experts believe that it is not blue collar or white collar jobs that are at risk but those jobs that are routine or non routine. Manual labour tasks have been constantly under pressure from technology but now more jobs that have cognitive tasks are now feeling the pinch.

Jobs said to be under threat from computerisation are:

  • taxi and delivery drivers
  • receptionists and security guards
  • cashiers, counter and rental clerks, telemarketers and accountants

It is estimated that the development of machine learning will impact 35% of the workforce in Britain and 49% for Japan. See chart from The Economist – Computerisation of different occupations.

Job Polarisation – Middle Skills Jobs v Low-Skill and High-Skill Jobs

Economists are already worrying about “job polarisation”, where middle-skill jobs (such as those in manufacturing) are declining but both low-skill and high-skill jobs are expanding. In effect, the workforce bifurcates into two groups doing non-routine work: highly paid, skilled workers (such as architects and senior managers) on the one hand and low-paid, unskilled workers (such as cleaners and burger-flippers) on the other.  

Source: The Economist June 25th 2016

Universal Basic Income

After two centuries in which capitalism has dominated the western world, this economic system has become desperately dysfunctional: inequality is growing, climate change is accelerating and nations are beset with bad demographics, debt burdens and angry voters.

Paul Mason – Channel 4 economics correspondent and author of ‘PostCapitalism: A Guide to Our Future’ states that:

“information technology has reduced the need for work” — or, more accurately, for all humans to be workers. For automation is now replacing jobs at a startling speed

“information goods are corroding the market’s ability to form prices correctly”. For the key point about cyber-information is that it can be replicated endlessly, for free; there is no constraint on how many times we can copy and paste a Wikipedia page. “Until we had shareable information goods, the basic law of economics was that everything is scarce. Supply and demand assumes scarcity. Now certain goods are not scarce, they are abundant.”

“goods, services and organisations are appearing that no longer respond to the dictates of the market and the managerial hierarchy”. More specifically, people are collaborating in a manner that does not always make sense to traditional economists, who are used to assuming that humans act in self-interest and price things according to supply and demand.

There is concerns in many countries as to what can be done with a growing labour force with limited job prospects. There have been call for more money given towards social welfare to protect those impacted by the changes to the labour market and assist them move to new jobs. Some have favored a universal basic income instead of the welfare system that involves paying a fixed amount each year to all citizens to actually exist – rather than tax to exist. Supporters of this idea argue that:

  • People who are not working, or are working part-time, are not penalised if they decide to work more, because their welfare payments do not decline as their incomes rise.
  • It gives people more freedom to decide how many hours they wish to work, and might also encourage them to retrain by providing them with a small guaranteed income while they do so.
  • Those who predict significant job destruction see it as a way to keep the consumer economy going and support the non-working population.
  • If most jobs are automated away, an alternative mechanism for redistributing wealth will be needed.

However those against this idea argue that:

  • It is regressive as spending on existing welfare schemes would reduce income for the poorest, while giving the high incomes money they do not need.
  • Furthermore funding such a venture would require a much higher tax rate that at present.
  • The basic income would discourage some people from retraining, or indeed working at all—why not play video games all day?—though studies of previous experiments with a basic income suggest that it encourages people to reduce their working hours slightly, rather than giving up work altogether.

Whether technology will take over jobs and ultimately humanity is dependent on the rate of change and how we live through the long transition from capitalism (the state and the market) – to post capitalism (the state, the market and the shared collaborative economy).

Human nature is not a machine to be built after a model, and set to do exactly the work prescribed for it, but a tree, which requires to grow and develop itself on all sides, according to the tendency of the inward forces which make it a living thing.  John Stuart Mill

Source: The Economist June 25th 2016

Labour v Machines – from the developing world to Wall Street

Labour v MachinesBoth 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:

  1. Jobs in the developing world tend to be less-skilled
  2. 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

Grand Central Station becomes 3D movie theatre

The Financial Times has produced a series of three interactive 3D infographics covering business, economic and technological topics demonstrating the global breadth and expertise of the Financial Times. What is unique about these is that they are displayed in the Vanderbilt Hall in New York’s Grand Central Station so commuters can catch a glimpse of them on their way to catch that train. It is brilliantly done by David McCandless. If you heading to New York soon you must go to Grand Central and see for yourself. You can view the 3 presentations at FT Graphic World. They are on the following topics :
Global Economy
Money Talks
Recession & Recovery
– see below.