AALTOUNIVERSITYSCHOOLOFBUSINESS

DepartmentofEconomics

Fall2016

TheImpactofAutomationandRobotizationonIncomeDistributioninPost-industrialCountries:WhoAretheWinnersandWhatStepsShouldSocietyTake?

Bachelor’sThesis

AaltoUniversitySchoolofBusiness4.1.2017

Author:ToniKokkonen

Opponent:AleksiRissanen

Instructor:PauliMurto&MikkoMustonen

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AbstractInthisthesis,Istudytheeffectsofautomationandrobotizationonincomedistributionandtheir

effectsonthesocietyfromaliteraryreviewpointofview.Themaineffectsofautomationand

robotizationseemtobetheaddedoutputandproduction,butatthecostofamorepolarized

incomedistributiontowardsthehavesandhave-nots.Thistectonicshiftintheworklandscape

mightbesomethingsimilartotherevolutionsbefore,butitseemstobehappeningatafasterrate

thanthepreviousonesandthistimeeffectingpeoplefrommorevariedbackgrounds,eventhe

topechelonsoftheincomedistributionseemtobegettinghit.Themostoftenproposedsolutions

totheseproblemsaretheimplementationofstrongtaxationpoliciesandtheadoptionofsome

formofUniversalBasicIncome(UBI).

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TableofContents

TableofContents

1. Introduction.........................................................................................................................31.1Comparingtoday’schangestopreviousones.................................................................................41.2Methods,Background&Findings...................................................................................................6

2. Historyofworkplaceautomatizationandtheageofrobotization........................................82.1Moore’slawanditseffectoneverything........................................................................................82.2Differencesintoday’sworkplaceautomation...............................................................................112.3Similaritiestowhathashappenedbefore.....................................................................................13

3. Likelyeffectsoftechnologicalchangeonincomedistribution............................................153.1.Thehavesandhavenots.............................................................................................................17

4. Gettingovertheperiodoftechnologicalchange................................................................184.1.AboutUniversalBasicIncome(UBI).............................................................................................19

5. Conclusion.........................................................................................................................21

References................................................................................................................................22

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1. Introduction

Technologicalchangehasalwayscauseddespairandhorrorregardingimminentmass

unemploymentthroughnewinnovationsbeingabletoreplacehumanlaboratanever-increasing

pace.Therehasalwaysbeenstrongoppositiontotechnologicalchangewhenworkersarescared

fortheirlivelihoods.Themostwell-knownearlyexampleisthatoftheEnglishtextileworkers

protestingchangesintheirjobsintheso-calledLudditemovement,bydestroyingautomation

machineryattheirownworkplacesintheearly19thcentury(Autor,2015).Thesesameconcerns

wereraisedthroughoutthelastnearlytwohundredyears,almosteverytimenewmachinerywas

developedtodothetasksthatusedtobeburdenedbyexcesshumanlabor.Mostpeopledon’t

seemtorememberorevenmoreso,mindthefactthatagricultureusedtoemploy20timesthe

portionofpeopleastoday(41%oftheUSworkforcein1900vs.2%today(Autor,2015)),orthat

horsesusedtodothejobsofcarsbefore,thuseliminatingtheneedforaplethoraofequestrian

occupations(Autor2014).Butnonetheless,duringthetimethatthosesectorswereamidchange,

theworkersandthesocietyaroundthemwouldbeatarmsoverthescaryfutureandthe

foreseeablelossofnowextinctjobs.

Mostofthebiggerchangesinworkplaceautomationinthepasthastakenplacefor

mundaneandlow-skilledmanualtasks,whichweremainlyemployingyoungoruneducated

workers.Thishaslargelybenefittedthoseinthetopandbottompartsoftheincomedistribution,

astheleastproductivejobshavebeentheeasiesttoautomatize,theirpreviousholdershave

generallyeithermovedintootherlowerpayingjobsorgoneupawrungontheincome

distributionladder.Likewise,theonesattheverytophaveusuallybenefitedgreatlyfromthe

automatizationofjobs,whichtheypreviouslyneededtopaysomeonetoattendtoconstantly.

Thishashoweverleftthemiddleclasswithoutgreatchangestotheirwaysofworking,whichin

turnhascausedashiftofsortsintheoverallincomedistributionofcountries.(Autor&Dorn,

2013.)Likewise,insomeoccupationsandlocationsthishasledtolongtermsustained

unemployment.

Duringallofthis,thereisdiscussionaboutthe‘impossibilityoftechnological

unemployment’aslaborisbeingsavedandthatinchangereducescostsandthepriceofthe

productsorcommoditiesbeingproduced.Which“frequentlyleadstoincreasesinoutputdemand;

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greateroutputdemandresultsinincreasedproduction,whichrequiresmorelabor,offsettingthe

employmenteffectsofreductioninlaborrequirementsperunitofoutputstemmingfrom

technologicalchange.”(BrynjolfssonandMcafee,2014),p.81.Thisviewextendsouttogarner

thatautomationshouldthereforecreatemorejobsthanitdestroys.Itismainlythesetwo

opposingviews,thatItrytopitagainstoneanotherinthisthesis,whileattemptingtoviewitin

today’satmosphereoftheever-increasingspeedofautomationtechnologywearefacing

currently.

1.1Comparingtoday’schangestopreviousones

Oneofthemostinterestingdifferencewithtoday’schangesincomparisontothosethat

havehappenedpreviouslythroughouthistory,isthattoday’schangesaffectamultitudeof

differentsocialclassesandaconsiderablymorevariedsetofincomeandeducationbackground

levels.Mostcommonlythoughtof“easytoautomatize”sectorsarebeingbunchedtogetherwith

sectorsthatwerethoughttobeveryhardtoautomatejustafewyearsago.

ThisiscalledtheMoravec’sparadox,whichisdefinedbyitsauthor,HansMoravec,inthe

1980sasfollows:“Itiscomparativelyeasytomakecomputersexhibitadultlevelperformanceon

intelligencetestsorplayingcheckers,anddifficultorimpossibletogivethemtheskillsofaone-

year-oldwhenitcomestoperceptionandmobility."(Moravec,1988),p15.Meaninginmore

generalterms,thatcomputersarebeginningtoautomateandmakeredundantplentyofjobs

previouslyexpectedtoremaininhumancontrolforalongtime.

Suchsectorsincludedrivingcars,whichwasexpectedtostilltakedecadeswhenthe

DefenseAdvancedResearchProjectsAgency,DARPAforshort,issueditsGrandChallengefor

driverlesscarsin2004,withthegoaltoacceleratethedevelopmentofself-drivingcars.In2004

notasinglecarwasabletocompetetheirintended150-milecourseintheMojaveDesertandit

wasexpectedtotakemanydecadesuntilcarscouldsafelybeallowedtodrivewithinhuman

drivers.IttookwellundertenyearsforGoogletostartdrivingitsself-drivingcarsontheroadsin

theUS,infacttheyannouncedinOctober2010thattheyhadbeentestingself-drivingcarsonthe

roadsalreadyforsometime.(Brynjolfsson&McAfee,2014),p.13.Similarcoursesofactionhave

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takenplaceintheautomationofmanyfinancialsector,legal,accountingandtechnicalhighlevel

andverywellpayingjobsingeneral.

Moravec’sparadoxisonlybeginningtoshowitselfinfullforce,ascomputershavegotten

everincreasinglycheaperandmorepowerful.However,therearestillplentyoftasksthatmost

likelywon’tbegoinganywhere,foramultitudeofreasons.Fewarewillingtoflyonplaneswithout

pilots,eventhoughitwouldobjectivelybeconsiderablysafertodoso.AndjustlikeMoravic’s

paradoxstates,computerswillnotbegoodatdoingsometasks,eventhoughtheycanbeat

humansquicklyinothers.Acomputerwillnotbequicktolearnhowtocatchvisualcuesabout

peoplegettingannoyedorfrustrated,norwilltheybetooquicklyreplacingtasksthataredonein

conditionsnotexactlyspecifiable,suchaspickingupandfoldingtowelsorajobwhichrequiresits

doertobeabletopickupvarioussmallobjectsfromthegroundforexample.Eventhoughthese

tasksarepossible,theyarestilltoorandomoccurrencesfortherobots.Thetowel-foldingrobot

takeshundredsoftimeslongertofoldatowel,thanitshumancounterpart,atleastfornow.

(Brynjolfsson&McAfee),p.92.

Figure1.

Pajari&Rouvinen,ComputerizationThreatensOneThirdofFinnishEmployment,ETLABriefs,January2014.

PajariandRouvinen(2014)discusshowtoday’schangesintechnologicalchangeare

uniqueinitsmagnitudeandspeed,andhowitmightattesttoratherhighandsustainedlevelsof

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unemployment,duetoquiteseverejoblossincomparisontotheconcurrentjobcreationfrom

theongoingtechnologicalshiftandotherwise.Theyalsocontinuewiththeiranalysisofthe

situationathandandhowitislikelytoincreaseglobalwelfare,althoughtheeffectstoglobal

geographicaldistributionaswellasdistributionwithincountries’asis,areyettobeseen.One

optiontocounterthenegativeeffectscouldbethrougheducationandschooling,orthrough

variouschangestotaxschemes.OneofwhichisthesuggestedUniversalBasicIncome(UBI),which

tendstocomeupalmostalwayswhenlookingfartherintothefutureregardingautomation.

1.2Methods,Background&Findings

Thisthesisisapureliteraryreviewofmainlymodernliterature,bothbooksaswellas

scientificarticlesandpapers.Iwillattempttoborrowrelevantgraphsandtablesfromthe

literatureandbaseasmuchofthethoughtsaroundthese,butwillattempttorefrainfromdelving

toodeeplyintotheunderlyingstatisticalanalysisofsaidproblems.Aconsiderableamountofthe

literaturediscussesthelikelydividesintheeconomy,betweenthosewhowillalmostunanimously

benefitfromthechangesathand(stars&superstars)andthosewhocannotdomuchelsethansit

backandtakethebeating(have-nots)(i.e.Brynjolfsson&McAfee,2012&2014,andFord,2016.)

Inthisbachelor’sthesis,IwillattempttolookintotheproblemsPikettybringsupinhis

opus“Capitalinthe21stcentury,”ofwhichthemostinterestingtopicregardingthisthesisis

regardingtheReturnonInvestmentofcapital/wealth(r)andgrowthoftheeconomy(g)atlarge

beingoutoftunewithtoday’ssociety’sexpectationsregardingequalityandafairfutureof

capitalism.Iwillalsolookintothepossiblegovernmentalinterventionsthatmightbeneededin

theupcomingdecades,shouldthesituationregardingautomationleadtosocietalproblemsdue

toaquicklypolarizingwealthgap.

IwillattempttoexplainandresolvesomeofPiketty’sviewsthroughlargelythose

presentedinBrynjolfssonandMcafee’stwobooks“RaceAgainsttheMachine”(2012)and“The

SecondMachineAge”(2014)andMartinFord’sviewsinhisbook“RiseoftheRobots:Technology

andtheThreatofaJoblessFuture”(2016).Thesebooksoffergreatexplanationsofthelarger

expectedchangesboundtohappenduetomassautomatizationofjobsintheupcomingyears.

Especiallythenewertwobooksconceptualizetheeconomicsituationwithupcomingsuperstars

andthehave-notsandhowatsomepointduetoeconomicrealitiesliterallyalljobsthatsomehow

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canbeimaginedtobeautomatablewillbeautomatedaway,quickly.Thiswillmostlikelyalsobe

supplementedwithconsiderableautomationoftasksthatwon’tbeautomatedforalongtime,if

ever,butcanstillbestreamlinedthroughautomationofvarioustasks,suchasdrivingworkers

aroundandlettingthemworkwhileonthemove,causedbytheautomatizationoftransportation.

ThisliteraturewillbegreatlycontrastedbyespeciallyDavidH.Autor’swork,whohas

writtenamultitudeofpapersinthefieldsofautomation,robotization,incomedistributionand

polarizationoftheworkforce.Autor’spapersarenottheonlyscientificpapersbyanymeans,but

perhapsthemostinfluentialonestothis.

Itseems,thatsocietywillbeevenmorepolarizedinthenearfuture.Inthelongerterm,there

mightneedtobesomesortofgovernmentalinterventiontohelpthosewhohavebeendislodged

toofarfromcomfort.Oneofthealwayssuggestedoptionsisthepossibilitytoimplementsome

formofUniversalBasicIncome(UBI).

Societyasawholehasbenefittedgreatlyfromtheexponentialcomputingpowerandthose

whohavealreadymasteredits’mysterieshavebeenabletobuildupmassivefortunes,the

superstars.Thesesystemshavebeenquicktolaywastetocompletesectorsoflabor,justasthe

cardestroyedmostoftheequestrianoccupations.

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2. Historyofworkplaceautomatizationandtheageofrobotization.

Sincethedawnoftime,humanshaveattemptedtoautomatemostofthemundane,dangerousor

dirtyjobstofreeuptimetoraisetheiroffspringbetterortospendtheirprecioustimeworkingon

moreeffectivework.Asacommunitygetsi.e.aflourmillsetup,theycouldthenspendagreat

amountofnewlyacquiredtimeworkingonothertasks,thusoutputtingconsiderablymorethan

previously.ThisisthebasisoftheSolow-Swaneconomicgrowthmodel,andisconsideredasone

ofthepillarsofalleconomicgrowthmodelsineconomics.PertheSolow-Swangrowthmodel,all

economicgrowth(intermsofGDP/Capita)inthelongtermcomesfromaddedproductivitycaused

bytechnologicaladvances.

Autor,LevyandMurnane(2003)distinguishtwobroadsetsoflaborthathavebeenseenas

verydifficulttoautomate:theabstract,coveringtasksrequiringproblem-solving,intuition,

creativityandpersuasion.Andthemanualwhicharecharacteristicofcustomerservicejobs,such

asfoodpreparation,cleaningandelderlycare.However,noteventheselookstobetoofarfrom

beinginthecrosshairsofcommonautomation,thesethoughtsareratherliketheonespresented

intheMoravec’sparadox.

2.1Moore’slawanditseffectoneverything

Thesegmentoftechnologicalprogressionencompassingcomputers,internetand

telecommunications,hasbeenfullofvariousguessesattimelines,ofwhichalmostallhavebeen

somehowtooconservative,eitherintheexpectedgrowthfiguresbeingtoolow,orthenthe

expectedoutlookhasbeenprojectedtolastonlyafewyears,notdecades.Themostfamousof

theseiswithoutdoubtMoore’slaw,sonamedafteritsconceptor,GordonMoore,theco-founder

ofFairchildSemiconductorandIntel,who’spaper“Crammingmorecomponentsontointegrated

circuits,“publishedin1965,describedthedoublingofcomponentsperintegratedcircuitevery

year.InthispaperMoorepredictedthatthisrateofgrowthcouldcontinueforanotherdecade,

butlaterchangedhisestimatetothedoublinghappeningeverytwoyears.Nowadaystheperiodis

oftenquotedas18months,andisonlynowseemingtoreachMoore’spredictionofhappening

everyotheryear.

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Onecanonlywonderatallthesuperfluousthingshappeninginasectorwhichis

responsibleforsuchalargepartofoureverydaywellbeing,whilesimultaneouslyexperiencingreal

worldexponentialgrowthovermultipleconcurrentdecades.Noothertechnology,ever,hascome

close.

WhatwearemoreusedtoarevariousshortS-curves,whichoftentimestendtobecoupled

tooneanother,suchasthefollowinggraphwithairplanetechnologyfromMartinFord’s2016

bookRiseoftheRobots:TechnologyandtheThreatofaJoblessFuture.Itshowsandemphasizes

thefact,thatwhileairplanetechnologyhasgrownconsiderablymorerobust,fast,safe,betterin

everymeasure,itstillhasonlyhadafewmajorbreakthroughselevatingittoaclearlysuperior

levelwhencomparedtoapreviousstatusquo.

Figure2.AircraftTechnologyS-Curves

MartinFord,2016,RiseoftheRobots:TechnologyandtheThreatofaJoblessFuture.p.67.

Obviously,Moore’slawisn’talawinthetermsoflegallaw,norisitalawinthesenseof

scientificlaws,suchasthefourlawsofthermodynamics.Neitherisitnecessarilyagoodideain

generalsensetopredictthefuturebygreatlyextrapolatingfromasomewhatshortspanof

historicalgrowthfigures.Itisstillperhapsoneofthegreatestdrivingforcesintheworldof

automation.Moore’slawhasbeenworkingduetoconstantR&Deffortandsmallimprovements

onpreviouswaysofdoingthings,“brillianttinkering,”findingdetoursaroundwhathadbeen

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previouslythoughtofasabsoluteroadblocks.Firsttheengineerscrammedcircuitryascloseas

possibletooneanotherandthencameupwithasolutiontostackthemontopofeachother,to

beabletocramevenmoreintothesamespaceandsoon.Itistrulyremarkable,howexactithas

beentopredictthegrowthofahugegenreofelectronicsforsolong.

Figure3.Moore’sLawasaStaircaseofS-Curves

MartinFord,2016,RiseoftheRobots:TechnologyandtheThreatofaJoblessFuture.p.70.

Thepossibilitiesbroughtupontheownersofmachinery,wheretheeffectiveness

continuesgrowingatanexponentialratefordecadesatatimeissomethingtomarvelat.Noother

fieldeverhasseenanythingclosetothis.Thiscombinedwiththewinnertakesallworkingsofthe

technologysector,haswidenedthegapbetweenthehavesandhave-nots.

Itislargelythisgrowth,thathasenabledthedecouplingofmedianincomepercapitaand

therealGDPpercapita,alsocalled“TheSpread”byBrynjolfssonandMcAfeeinThesecond

MachineAgeandhasthe9thchapternamed“TheSpread.”

Those,whohaveeitherownedthemachineryorcompanieswhichcouldmostbenefitfrom

technologicalautomationnaturallycouldpartakeinauniquegrowthintheirpersonalwealthdue

totechnologicaladvance.Butjustastheownersofwealthhavebeenabletogreatlyoutpacethe

generalpopulationinwealthcreation,sohastheownersofhumancapital,thewell-educated

workers,asisapparentinthefollowinggraph.

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Figure4.RealGDPvs.MedianIncomeperCapita(intheUS)

Brynjolfsson&McAfee2014,TheSecondMachineAge,p.63.

2.2Differencesintoday’sworkplaceautomation

Theideathattechnologicalchangecausesunemploymentisinnowaysanewone,evengoing

backalmost200years,butitisespeciallyinterestingnow,asautomatizationisquicklyreplacing

largeamountsofnotonlyunskilledandlowincomesectors,butalsosweepingthroughtheupper

echelonsoftheincomehierarchy.Thereisnoagreeduponreasonforcurrentquitehighlevelsof

persistentunemploymentinlargepartsofthedevelopedworld,butperBrynjolfsson&McAfee

(2012)manyscholarshavepointedfingersatautomatizationandrobotizationasapossible

explanationfortherecentgrowthinjoblessness.

Autor(2015),p.27,stressestheimportanceoftheadaptabilityofeducationtothe

changingneedsoftheworkplaceasacriticalsteptowardssurvivingthepossibleapocalypseofa

considerableportionoftoday’smiddleclassjobs.Thefuturewillneedanewsortofworkforce,

whichwon’tbeonewecanpredictwithmuchcertaintytoday.Autor’sconclusionsincludehis

predictionsthatthetasksofthefuturewillhaveahardtimeunbundlingthemanymiddle-class

jobswithoutaconsiderabledropinqualityandthusthesejobswillmostlikelyhavetowork

alongsideautomatedprocedures.Thisdoesbringforwardapossiblenewsetofproblems,asthe

currentlowermiddleclassoccupantmightnotbesuitabletowardsthenewtaskswhichneedto

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combinebothtechnicalandinterpersonaltasksas“thenewartisans.”Itisproblemssuchasthese,

thatabsolutelymustbeaddressedbyeducationintheupcomingdecades.

BrynjolfssonandMcafee(2014,p84)describeathoughtexperimentintheirbookabouta

future,wherewecouldhaveself-replicatingandroidstoworkflawlessly,aroundtheclock,and

howtheywouldratherquicklytakeovertheentireworkforceasfollows.

“Imaginethattomorrowacompanyintroducedandroidsthatcoulddoabsolutelyeverythingahumanworkercoulddo,includingbuildingmoreandroids.There’sanendlesssupplyoftheserobots,andthey’reextremelycheaptobuyandvirtuallyfreetorunovertime.Theyworkallday,everyday,withoutbreakingdown.

Clearly,theeconomicimplicationsofsuchanadvancewouldbeprofound.Firstofall,productivityandoutputwouldskyrocket.Theandroidswouldoperatethefarmsandfactories.Foodandproductswouldbecomemuchcheapertoproduce.Inacompetitivemarket,infact,theirpriceswouldfallclosetothecostoftheirrawmaterials.Aroundtheworld,we’dseeanamazingincreaseinthevolume,variety,andaffordabilityofofferings.Theandroids,inshort,wouldbringgreatbounty.

They’dalsobringseveredislocationstothelaborforce.Everyeconomicallyrationalemployerwouldpreferandroids,sincecomparedtothestatusquotheyprovideequalcapabilityatlowercost.Sotheywouldveryquicklyreplacemost,ifnotall,humanworkers.Entrepreneurswouldcontinuetodevelopnovelproducts,createnewmarkets,andfoundcompanies,butthey’dstaffthesecompanieswithandroidsinsteadofpeople.Theownersoftheandroidsandothercapitalassetsornaturalresourceswouldcaptureallthevalueintheeconomy,anddoalltheconsuming.Thosewithnoassetswouldhaveonlytheirlabortosell,andtheirlaborwouldbeworthless.“

Thisquoteisthemostlikelythemostquotedfromtheirbook,andonethatmosteasily

driveshometheinterestingproblemspossiblycausedbyautomatization.Thatquotewasalsoone

ofthemaindriversformewritingthisthesis.

Onecanquiteeasilyimaginetheconvergenceofmultiplehumaneandpoliticalproblems

causedbyasituationsuchastheoneexplainedabove.Whowouldmakesureeveryonehad

enoughtosurviveon?Theworldwouldbeproducingenoughtofulfilallneeds,butwithoutsome

sortofredistributionofwealthorre-imaginingofoursociety,manywouldsuffer.

Themostcommonsuggestionstotheseproblemsininequalitywouldbeaprogressive

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taxationofamultitudeofdifferentformsofwealthandcapital,perhapsalandtaxandahighly

progressiveincometax.(Piketty,2014)Otherrealisticsolutionsmightincludetheuseofuniversal

incomeorshorterworkweeks.Afinalpoint,typicallyneglectedinrecentdismalprophesiesof

machine-humansubstitution,isthatifhumanlaborisindeedrenderedsuperfluousby

automation,thenourchiefeconomicproblemwillbeoneofdistribution,notofscarcity(Autor,

2015)Thiscausesaveryinterestingdivideintotheliteratureregardingthistectonicshiftin

automationandthereforeinownershipofproductionfacilities,aswithlessneedforworkers

meanscontrollingthefactorygrowstohavecruciallymoreimportanceovertheoutput.Perhaps

themostcommonsolutionfortheseproblemstendstobetheimplementationofaUniversal

BasicIncome.ItismostinterestingtoseethatUBIhasacquiredsuchalargeideologicalfollowing,

evenbeforeithasbeentrulytriedonalargescalealmostanywhere.Finlandisoneofthefirst

countriestotrialit,buteventhatisasmalltestrunwith2,000participants.

Wemustalsotakeintoconsiderationthefact,thatpriortoeveryotherlargershiftin

workplaceautomation,thesamekindsofpredictionsofmassunemploymenthavebeencast,with

notmuchtoshowforintheirdefencewhenlookedatafterthechangeoccurring.Usuallythe

changeinjobshasn’tcausedtoomuchcauseforalarm,buttherehasalwaysbeenatransitionary

periodoftechnologicalunemploymentin-betweenthestages.

2.3Similaritiestowhathashappenedbefore

Obviously,thedoomsdaypredictionscanbeavoidedifjobcreationwilloffsetthejobdestruction

causedbythecurrentwaveofautomation.Thisdoeshoweverrequiretheworkerstobeableto

moveintousuallysomewhathighereducatedprofessionsandindoingsoatamassivescale,they

shouldlowerthewagesinthosefieldsduetosuddensurgeinsupplyintheworkforce.Theother

endofthespectrumarethehighlypaid,highlyeducatedworkerswhomightbefacinganew

threatfromunemploymentduetoautomatizationoftheircareers.Inthisendofthespectrum,it

issomewhatlikely,thatthenowunemployedduetoautomationmightneedtotakealower

payingjobthroughperhapssometimesasomewhatlargecareershift.(Brynjolfsson&McAfee,

2014),p.92.Ashistoryhasshownus,ittendstotakepeoplequitealongtimetoaccepttheirfate

beforetheyarewillingtoevenconsidergoingdownarungontheincomedistributionladderand

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beginningoverinanewfield.BrynjolfssonandMcAfee(2014)havearguedthatthismightbe

amongstthereasonsforthestagnatingdownturninwesterneconomiesduringtheongoing

recoveryfromthegreatrecession.

Ofcourse,theneedforre-educatingworkersdoesn’tseemtoolikelytohappenwithoutat

leastsomefriction,asmanyprofessionsrequireyearsofschoolingsotheeducationofthenewly

unemployedmighttakemanyyears.EvenifallofthiswaspossibleAutor(2014)arguesthatthe

newUSworkforcehasbeenlacklusterinitsabilitytoeducateitselfthroughthehighereducation

curriculumwhencomparedtopreviousgenerations.Especiallytheportionofmengraduating

fromuniversityintheUShasalmosthaltedtothe1975levels.Luckilytheshareofwomenhas

grownconsiderablymore,buteventhatisfarfrombeingabletofilltheneededgapbetween

lackingsupplyandgrowingdemand.Thepoorlevelofexistingeducationhasbeenarguedasa

majorlimitingpointtofillingongoingvacanciesinthejobmarket.

Whileaconsiderableamountofworkcanandmostlikelywillbeautomatedandoffshored,

abigpartofthenewandalreadyexistingjobscannotandwillnotbetakenaway.Mostoften

thesejobsincludesomeformofinteractionandperhapsanemotionalorone-on-oneaspectto

thejob.Thesesamedemandsforinteractionfrequentlyprivilegeface-to-faceinteractionsover

remoteperformance.(Autor,2015)Thesekindsofjobsmightincludeearlyeducationandelderly

care,oraconsiderablepartofthesalesprofessionals,whomightvalueface-time.

Thisrevolutioncouldbepittedagainsttherevolutionsbeforeit,beittheinventionof

electricityortherailroadortheindustrialrevolution,allofwhichhavegreatlyreshapedsociety

aroundthem.ButTherearelotsofreasonswhythistimetrulymightbedifferent.

Eventhoughthistimemightbedifferent,mostlikelyitwon’tbethatmuchdifferent.Just

likealwayspreviously,employers,entrepreneursandsocietyhasbeenquicktoadapttothenew

rulesandwaysofworking.Ifthereisahighlevelofunemployment,usuallylaborgetstobecheap,

andprojectswhichpreviouslymighthavebeenunattainableduetolaborcosts,suddenlybecome

atleastviabletoattempt.

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3. Likelyeffectsoftechnologicalchangeonincomedistribution

Oftencomputerstendtoaddbeneficiallytowardsmostjobs’laboroutput,insteadof

merelyreplacingthem.JustasWikipediasavesdaysoffofeveryyearfrompeoplehavingtolook

updefinitionsfromencyclopediasorGooglesaveshoursofffromeverydaybyprovidinganeasy

waytolookupinformation.Neitherofthesetechnologieshasinanygreaterwayreplacedwork,

onthecontrary,theyhaveopenednewfieldsofbusinessandaddedvastamountsofwealthinto

theworld,notjustfortheirowners(WikipediaisoperatedbytheWikimediafoundationand

doesn’tbenefititscreatorsatallgreatlyinmonetaryterms)butforeveryonewithaninternet

connectionthroughsimplythemusingtheseservices“forfree.”

Aspreviouslydiscussed,thecomingofrobotslookstoaddatleastsomenegativeaspects

intopeople’slivesbyputtingplentyofpeopleoutofwork.Butthesituationisn’tasclearcutasit

wouldatfirstthoughtseem.Manyworkersliketoimaginethattheirindustryissomehowsafe

fromautomation,orthatsomesubsetofindustrieswillbeautomatedwithoutiteffectingothers

intheindustry.

Itseemstobetrue,thatsomesegmentsofthepopulationseemtobelessatriskofhaving

theirjobsbeingautomatedaway.Butisthistrulyagoodtraitinthelongrun?

Themiddleclasseshavebeenratherunaffectedbythechangessofar.Themostwelloff

portionofthepopulationiseitherowningthe“machinery,”andbenefitsthroughthecostsavings

andaddedproduction,ortheyhavethebestknowledgetoworkwith,insteadofagainst,new

technology.Theirjobsareoftenalsolessfocusedonone-on-oneinteraction,suchasanursesor

shopclerkswouldbe,andtheycanoftentimesbescaledtomultiplepeopleatonce,especially

withnewtechnology.

Theslightlysurprisingtrendthathasbeennotedpreviouslyinthisthesisalready,isthat

thelowestclassestendtohaveusuallybenefittedquitewellfromtheautomationtechnologyas

well.Brynjolfsson&McAfee(2014)writehowthelowestpaidproductionworkersoftentimes

can’tgoanylowerandastheirjobsgetautomated,manyofthemendupeitheronthesamelevel

theyareat(wherethereusuallyisatleastsomeworkopen)orendupoverseeingthemachines

theyusedtooperate,usuallywithasomewhatsignificantraisetogowithit.

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Figure5.

Autor,2015,WhyAreThereStillSoManyJobs?TheHistoryandFutureofWorkplaceAutomation.P.15.

Aswecanseefromthegraphabove,themiddleclassseemstobedisappearingatarapid

paceintheEU.Inmostcases,mostofthemiddle-classjobshavemovedintothehigherclass,but

notalways.Andplentyofthemiddle-classjobshavealwaysanywaymovedtothelowerclasses,

meaningpeoplehavebeenforcedtotakelowerpayingjobsthentheypreviouslyheld.

Thisisadifficultpointformany,asnoteveryonehastheneededskillstomoveonhigherin

thepaybrackets.Withouttheneededskillsandtheirjobsbeingtakenoverbyrobots,theyhave

nowheretoturnbutthelowerpaidjobs.WhenonecomparesthisdatatothatofFigure4,wecan

seeadarkpictureforming.Obviouslythedatasetsareofdifferentcountriesandthesituationat

largeisn’tquitethesameintheEUasitisintheUS,theUSwouldfallsomewhereinthemiddleof

thepackinFigure5.

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3.1.Thehavesandhavenots

Aswehavealreadywitnessed,theageofrapidautomationseemstoquitelargelyfavorthe

superstarsattheverytop,withnotmuchcaregiventothosewhoarenotuptopartodealwith

theever-fasterchangestotheworkenvironmentaroundthem.Ithasbeennotedaswell,thatthe

societyaroundushasbeengettingmoreandmoreaccustomedtotheideaofsuperstarshaving

earnedtheirsuper-pays.(Brynjolfsson&McAfee,2014)Chapter10.

Wealthtendstogetdistributedinanevenmorepolarizedwayduetothewinnertakesall

ecosystemofthetechnologicalage.Ifonerobotoralgorithmisatinyfractionbetterorfasterthan

therunnerup,wouldthatbestonestilltakeoverbasicallytheentireeconomy.Thereissimpleno

roomforsecondbestanymore.Thismakeslifeawfullydifficultforthemajorityofplayersout

there,astheydonotevenknowthegamethepeopleatthetopareplaying.Mostofthemiddle-

classwouldmostlikelybefinewiththewaythingsarerightnow,withthemgettingtousethenice

technologicaladvancesastheworldmoveson,butwithoutmuchelseontheirplatereally.

Inthewinnertakesalleconomy,theownerofawinningcompanycomesuponincredible

amountofwealth,quiteoftenbybeingabletoautomatetheservicewhichusedtobecarriedout

bymanypeoplepreviously.Justaspreviouslyaspinningjennycouldautomatethejobsofdozens

ormorepeoplewhenitcameout,cannowTurboTaxdothejobofvirtuallylimitlesstaxadvisors.

Althoughjustaswiththespinningjenny,donewtechnologiesneedpeopleoperatingthem,taking

careofproblemsorbugsoredge-casesanddevelopingthemfurther.Still,itseemsthatthejobs

losttendtofaroutnumbertheonescreatedbysuchprogress.

Allthisautomationofpreviouslyneededjobswillatsomepointcauseseriousproblemsif

thejobcreationsidedoesn’tendupgrowingfasterthanitisgrowingnow.

18

4. GettingovertheperiodoftechnologicalchangeAutor(2013)arguesthatemploymentpolarizationwon’tcontinueforever,whichisquite

understandable.Healsopointsoutthatevenmoreofthemiddle-classjobsofthefuturewill

requireamixtureoftasksfromacrosstheskillspectrum.Thisdoesgivehopetotheriseofthe

middle-classonceagain.

Acrucialpartofgettinganyonebackontheirowntwofeetaftertheirjobshavebeen

outsourcedormadeextinctduetotechnologicalchangerushingpastthem,hasalwaysbeentore-

educatetheworkforcesotheyareuptoparinthenewemploymentmarkets.Educationhas

alwaysbeenthemainwaythroughwhichwehavegotovertechnologicalchangesinthepast.Not

justeducationofthenewlyunemployed,butlargelyeducationstartingfromchildhoodand

continuingallthewayupthroughtheuniversities.Thispartoftheeducationpuzzleshouldbethe

simplesttosolveasitalreadyexistsandatleastshouldbesubjecttoconstantchangeinthewinds

oftheconstantlychangingworldinwhichitoperates.Therealityofthesituationisn’tquiteas

clear,especiallyintheever-fasterchangeshappeningintheworkplacearoundus,withevenless

predictabilityinthemostindemandjobsofthefuture.Whatshouldwebeteachingourchildrenif

don’thavetheslightestcluewhattheymightneedtodoinameretenyears?Thesortofgood

newswiththisisthefact,thatthisisn’tanythingnewtothisgenerationofchildren,mostpeople

whowereintheschoolsystemalreadyattheturnofthemillenniawerefacedwithsimilar

problems.Nobodycouldimagineforexamplesocialmediaormobiletechnologytobethislarge

beforetheyexistedforthemasses.

Intheshorttermtherearebigsocietalproblemsregardingthewell-beingofcitizens.This

hasbeenbroughtupbynearlyeveryoneI’vecitedsofarinthistext.Everyonetendstohavetheir

slightowntwistastowhattheirpersonalremedytowardsfixingtheproblemmightbe:Piketty

(2014)suggesttryingtocurbtheowningelite’sgripofowningeverythingthroughmoreaggressive

andassertivetaxregimes.Ford(2016)talksabouttheneedtoimplementuniversalincomeand

thepossibilitiesoflongtermchangeinthemeaningofworkandworkingingeneral.Autor(2013)

remindsusthatagoodwaytooftentimescurbthemassiveconsolidationofwealthistoraisethe

minimumwage,thusautomaticallyloweringthereturnoninvestmentinhighemployingfields.

Thisdoeshoweverbackfirequitequicklyonceaconsiderableamountoftheworkforcehasalready

beenlaidoffinpreferenceforanautomatedrobotarmyofemployees.Oncethetrainhasbeen

setinmotiontowardsautomatization,raisingminimumwageswillmostlikelymerelyfastenthe

19

adaptionofrobotsintheworkplace,astheheightenedlaborcostsmaketheinitialvast

investmentstowardsautomatizationevenmoreworthit.

4.1.AboutUniversalBasicIncome(UBI)

UBIisdiscussedinlengthinboththeRiseoftheRobots(Ford,2016)andtheSecond

MachineAge(Brunjolfsson&McAfee,2014)andthistopicisbasedmainlyadialogueontheir

observationsonthetopic.UBIisafascinatingtopicthattiestogetherbasicallyallliteratureIhave

comeacrossthistopicsofar.Itisofgreatinteresttoanyonestudyingthesetopicswithaslightly

longertimeframe,asaworldwheremost,ifnotall,workisbeingdonebyrobotsisreallynotonly

sciencefictionanymore.Iaminnowaytryingtoguessontheprobabilityofthisscenario,butit

hasgrowntothepointthatUBIisoneveryone’slips.

Fromaneconomicspointofview,UBIisquiteinterestinginthesensethatitisquite

literally“helicoptermoney,”inasensebecauseitwouldbecashthatwouldbegiventoeveryone.

Clearlythis“helicoptermoney,”couldbeoffsetbytaxschemesandtheliketoremovetheadded

inflationaryelementsofit,butitstillisratherdifferentfromwhatmostnationsareusedto.

ThebasicprinciplesofmostUniversalBasicIncome–schemesarethateveryone,

regardlessoftheirneedforsuchassistance,wouldbereceivingafixedamountofmoneyfromthe

governmentmonthly.Otherproposedsolutionshavebeentofunda“megafund”ofsorts,and

giveeverycitizenapartofthat,ortosimplytransfercashtoone’sownbankaccountwhenthey

reachmaturity,butthesehaven’tbeenquiteaspopularinthelateryears.

Greatthingsabouttheideaofaunifiedbasicincomeschemewouldbeitssimplicity,no

moreneedfortheamountsofbureaucratsandthefactthatitwouldn’tcreateharmfulobstacles

toentryregardingemployment.Itwouldbeautomaticallyself-regulatingtoadegreeanditcould

befine-tunedquitesimplythroughout.Asomewhatofagoodthing(moreonthisnext)isthatit

doesn’thavetobeverystronglyideologicallydriven,ithasquitemanysupportersonallsidesof

thepoliticalsphere.

Negativesontheotherhandwouldbeitsquitevocaloppositiononallsidesofthepolitical

landscape.Therightsaysit’ssocialismandwouldleadtoevermoresocialism,eitherthroughUBI

beingtoosimpletoadjustuporthenthroughotheralternatives.Theleftisscaredforthepublic-

sectorjobsandtheneedsbasedsystemsinplacenow,UBIwouldbetooeasytotonedowntothe

pointthatitwouldn’tprovidealivablewage.

20

AsomewhatofabigproblemwithimplementingUBIisitscost.Itwouldneedtobefunded

bytaxes,butwhatshouldbetaxedforoptimalperformance?Therehavebeentalkofsuchradical

ideasastotaxtheworkrobotsandalgorithmsdo.Butmorelikelythetaxedassetwouldbeprofits

orwealthofoneformoranother.Itisalsoasystemthathasn’tbeentriedandtestedanywherein

alargeenoughscaleandscope,thatonecouldbesureastowhatwouldhappentotheeconomy

oncesomethingthislargeischanged.

However,thisisquiteacomplexpoliticaldecisionandtopicandasalwayswithpolitics,

nothingdifficultevergetspushedthroughunlessitabsolutelymusthappen.ItislikelythatUBI

wouldonlygetimplementedquitequicklyasalastresortoptionandwouldneedtobereadjusted

asitisalreadyinplace.Thechangeistoobigforanypoliticiantobewillingtotakesuchariskfor

theircareerswithhavinganotheroptiononthetable.

21

5. Conclusion

Thenatureofworkischanging,whetherwewantittoornot.Whatwecando,isbraceforimpact

andpreparefortheaftermath.Overallitlookslikethereshouldn’tbemanyotheralternativestoa

splendidfutureofplenty,ifhumanitycantakecareoftheplanetandits’citizens.Intheshortterm

however,wecanendupinquiteapicklewithmassivetechnologicalunemploymentandlarge

sectionsofthepopulationwithoutmeanstosupportthemselves.

Itlookslikethegovernmentandpoliticianswouldneedtobeinvolvedinthesechanges.

Tax-schemesandwelfareneedsneedtoberelookedat.Thefuturemightbeofsuchextravagant

plenty,thatitwouldbemainlyaproblemofdecidinghowtosplitallthatbetweenthecitizensina

fairmanner.

Thelargestwinnersofthewaveofrobotizationwillwithoutdoubtbethesuperstarsof

todayandtomorrow,theonesmostcapableofwieldingthetechnologyandtheoneswhohold

themostcapitalingeneral,bothwealthandinformation.Whileoveralltheoutputofmost

economiesshouldskyrocketlikeneverbefore,itsbountywillmostlikelynotbesplitupevenly.

Therewillbefattailsonbothsidesofthedistribution,ofpeoplefallingconsiderablybehindor

wayaheadofthemean.

Thisshouldbenefittheentrepreneurialandmightleadtogreaterrisktakingandmaybe

eveninnovationsthatwouldn’totherwisegetresearched,butitlookslikethesebenefitswouldbe

splitupbetweenanevensmallercircleofelites’asdotoday.

Theseproblemscouldbefoughtthroughtaxationofwealth,landorincome,assuggested

byPiketty(2014).OrtheycouldbefoughtagainstwitharobustUniversalBasicIncome(for

exampleFord,2016)orevenhigherminimumwages(Autor&Dorn,2013),althoughthismight

merelyfastenthetimelinetowardstheautomationoftheselowwagesectors.

It’simportanttoremember,thatsimilarideastothesehavebeenbroughtupmultiple

timeseverygenerationasnewtechnologiesemergeanddisruptthesafeandsoundwaysofdoing

business.Sofarthecapitalistsocietyhasbeenabletosortoutthedisruptionswithoutmuchharm

toanyone,butthistimemightbedifferent.Probablyitwon’tbe,hopefullyitwon’tbe,butwe

shouldbepreparedforthechangetocauseradicaldisruptions.Nobody’sbeensorryforbeing

prepared.

22

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Autor,D.H.(2015).WhyAreThereStillSoManyJobs?TheHistoryandFutureofWorkplaceAutomation,JournalofEconomicPerspectives–Volume29,Number3,Summer,p.3-30.

Autor,DavidH.(2014)“Skills,Education,andtheRiseofEarningsInequalityamongthe‘Other99Percent.’”Science344(6186):843–51.Autor,DavidH.,FrankLevy,andRichardJ.Murnane.(2003)“TheSkillContentofRecentTechnologicalChange:AnEmpiricalExploration.”QuarterlyJournalofEconomics118(4):1279–1333.Brynjolfsson,ErikandAndrewMcafee.(2012),“RaceAgainsttheMachine”,TheMITCentreforDigitalBusiness.

Brynjolfsson,ErikandAndrewMcafee.(2014),“TheSecondMachineAge”,WWNortonandCompany,NewYork.

Ford,Martin.(2016)RiseoftheRobots:TechnologyandtheThreatofaJoblessFuture,BasicBooks.

Frey,C.B.,&Osborne,M.A.(2013).“TheFutureofEmployment:HowSusceptibleareJobstoComputerisation?”,OMSWorkingPapers,September18.

Moore,GordonE.(1965)."Crammingmorecomponentsontointegratedcircuits",Electronics,Volume38,Number8,April19,1965.Moravec,Hans.(1988),“MindChildren”,HarvardUniversityPress Pajari,M.&Rouvinen,P.(2014)“ComputerizationThreatensOne-ThirdofFinnishandNorwegianEmployment.”,ETLABriefs,22,January13.

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