The future of work

“Zero-sum competition”, “distributional”, and “gig” jobs are what most of us can look forward to.

Stephen Grenville

25 July 20184 min read

The future of work

The future of work was on the agenda for the G20 economic ministers’ meeting in Argentina last weekend, but was overshadowed by the high-profile issues of tariff wars, currency manipulation, and the state of the current economy. The topic was sidelined because it is longer-term, hard to solve, and largely domestic. But it has important international implications as well.

The future high-tech world will be one of far greater intrinsic inequality.

Almost 90 years ago, British economist John Maynard Keynes foresaw a world where productivity would increase so much that working 15 hours a week would be enough to support a satisfactory material lifestyle. The challenge would be to find satisfying leisure pursuits.

As usual, Keynes got much of the story right. In practice, however, the usual working week has not diminished much. Even though productivity has grown even faster than Keynes predicted, human wants went on rising. For most of us, the productivity improvement was not taken largely in the form of leisure. Intellectual conversation in a Bloomsbury parlour doesn’t suit everyone.

Nevertheless, so far so good: workers displaced by productivity have generally found other jobs rather than idle unemployment. But will this continue with the accelerated pace of technological advances?

Productivity in the digital age provides a great puzzle. The puzzle also provides the key insight into the future.

In 1987, economist Robert Solow observed that: “You can see the computer age everywhere but in the productivity statistics”. Since then, despite huge advances of applied technology, we have seen productivity growth slow rather than accelerate.

Adair Turner, former head of the UK Financial Services Authority and now chair of the Institute of New Economic Thinking, has offered an explanation for the productivity puzzle.

The future high-tech world will be one of far greater intrinsic inequality. Owners of intellectual property, those who are pushing the technological frontier further, those who have special talents (for example, entertainers and sports stars) will do spectacularly well in this “winner takes all” world, but their numbers will be small because few are needed.

For some displaced workers, Keynes’s vision of ample leisure may be part of the answer, but only part. Others will still want to work, out of necessity or because work provides life satisfaction and social interaction.

Among those who work, some will find employment in jobs that still require humans – largely in services such as health and aged care. The nature of these service jobs means that they will be low paid and with low productivity, specifically because they are not easily replaced by productivity-enhancing technology.

Others will find paid employment in what Turner calls “zero-sum competition” jobs. These are not only the “bullshit” jobs that don’t need doing, which have always existed to some degree.

More important will be “distributional” jobs that determine how the economic pie is split up, but that don’t add to the pie.

Turner gives the examples of divorce lawyers, where the best will be paid inordinately, as they determine how the zero-sum benefit is distributed to one party or the other. He cites advertising as another example, which distributes demand among buyers but adds little to societal benefit. Many jobs in finance (asset management and trading) are also like this: what one party wins, the other loses, with huge rewards to any intermediary who can tip the balance towards winning.

Further types of zero-contribution jobs arise when security becomes more important in this increasingly unequal society. People find employment in cybercrime, fraud, or terrorism, and this has to be matched by greater resources combating these, with zero net societal benefit.

Turner argues that we have already seen some of this bifurcation of productivity, with some spectacular winners reaping the rewards (the tech billionaires). Others end up in “gig” jobs, delivering on low-tech bicycles for a pittance. The disparate mix of these outcomes largely explains why measured productivity has been so disappointing in the digital age.

The usual response – more education – will help people adapt to greater leisure, and is needed to foster equality of opportunity. But it doesn’t alter the key insight: that in this world, we won’t need many people to produce all the material goods we want.

If this is a problem for the advanced economies, it presents a far more intractable challenge for the least-developed economies, notably in Africa. The pathway from subsistence agricultural poverty to a reasonable living standard has, historically, been via raising agricultural productivity, shifting the labour thus released into higher-productivity manufacturing. Japan, South Korea, and Taiwan represent recent examples, but the narrative goes back to the British Industrial Revolution, copied by America.

Manufacturing is the sector most susceptible to automation, so this development “ladder” won’t be available. The outcome is not only worse income distribution within countries but also between them.

What might be the “equilibrium” in this unequal world? Perhaps the poor world tries harder to take a share of the enormous wealth of the advanced world, which spends more in protecting itself with security-focused jobs that add nothing to living standards.

It is understandable that the G20 economic ministers had nothing to say on these vexed issues. But the global “rules” (or absence of rules) will affect the outcomes. Who will own the intellectual property of artificial intelligence? Who will resolve distributional issues, not only within countries, but also between them? Turner’s provocative paper could well be the basis for a future agenda.

Stephen Grenville

About the author

Stephen Grenville

Dr Grenville is a Nonresident Fellow at the Lowy Institute.

Topics

Economy