Business Irish

Thursday 2 October 2014

The machines will take our jobs if we don't get smart

Published 31/07/2014 | 02:30

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Machines will take out jobs: Illustration: Stephen Byrne

What to do? Should I write this week about financial imbalances in the euro zone, or the threat to jobs from computerisation? One might be of more interest to me, but the other to almost everyone else.

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Then it dawned that the two were connected in a curious way by a single theme - education.

Education is, of course, the key to lifting undeveloped economies out of poverty. In future, it may also be the key to ensuring developed ones keep the living standards they currently enjoy.

The threat from computers is certainly the more entertaining of the two topics. One of the first technology programmes on television was called 'Tomorrow's World'. A more accurate title would have been 'Next Week's World'.

Many of the things trumpeted on the programme, from mobile phones to voice recognition, came to pass, but they took much longer than predicted. As for the threat to employment, the internet has done away with jobs in unexpected places such as bookshops and phone companies, and not in the timescale envisaged. We can be sure that the next wave will also contain surprises.

There is, therefore, a lot of interest in any claims to make make valid predictions about the impact of technology. These range, however, from the theory that low economic growth is here to stay because all the big productivity gains from technology have been made, to a belief that a new industrial revolution is on the way, bringing increased prosperity, as machines do more of the jobs of humans, and do them better.

There is no doubt the machines are acquiring that kind of ability. History suggests we are better off at the end of such processes, but that the changes involved can be painful for individuals and disruptive to society. Much recent work by economists tries to figure out just how painful and challenging this can be.

One of the more precise is an attempt by Carl Frey and Michael Osborne of Oxford University to identify the factors which machines will find difficult to replicate. They conclude that the main ones are creative intelligence, social intelligence and tasks requiring perception and manipulation tasks.

Jobs which require these abilities will be less vulnerable to the rise of the robots.

On this basis, recreational therapists look to have the safest job, while telemarketers - an important source of jobs in Ireland - are most at risk. Between those two extremes, the authors analysed 700 occupations in the US to try to work out which ones might be replaced by machines.

There is no precise timeframe - "perhaps a decade or two". Using the 'Tomorrow's World' example, it will be longer rather than shorter. Even so, it is still a shock to see their finding that almost half of American jobs could be done by machines in the future.

Researchers at the Bruegel Institute in Brussels have tried to do the same for Europe, which classifies jobs differently from the US. They come up with an even higher figure - that 54pc of the current mix of jobs are at risk from computerisation.

There is a relationship between the risk and GDP per person. This is because the changes will primarily affect low-skill, low-wage jobs.

Even in richer countries, 40pc of jobs face mechanisation, but this rises to over 60pc in poorer ones. Paradoxically, because the richer countries are expected to adopt new technologies faster, the pace of disruption may look much the same across the EU. If that disruption is to be manageable, education, training and even the way in which workers are hired and replaced, will require near-revolutionary change.

This is the connection between the two topics. The parameters of the other one - the issue of financial surpluses and deficits among euro zone countries - are much more definite and urgent than the challenge of computerisation. It keeps coming up because, while everyone agrees on the facts, there is no agreement on what to do.

A recent blog from the IMF tries to shed some fresh light on the topic. The indebted countries - including Ireland but especially Greece - have made remarkable progress in reducing their trade and payments deficits with the rest of the world by depressing demand. But the surplus countries have increased their surpluses as well, so the result is a fierce squeeze across the euro zone.

One might like to note that Greece and Ireland achieved their reductions with fairly equal cuts in both wages and jobs. In Spain, the adjustment was almost all via reduced employment. The question must be asked as to which approach is preferable.

That is not the main point here, though. As things stand, a decent recovery in domestic demand in the debtor countries would see the re-emergence of current account deficits, with unknown effects in the markets or on the new euro zone system of rules for regulating economies.

It would help if the creditor countries could increase investment and reduce private savings. The problem is that loss of confidence in the euro area is affecting firms and households in both creditor and debtor nations. The result is imbalances in both the core and the periphery, driving up the currency and leaving the prospects of a eurozone recovery as tentative as ever.

Even if recovery does somehow come, the external financial constraints on Ireland will not disappear. Irish growth based purely on domestic demand is likely to run into the sands of rising external deficits. The country will have to earn more than it currently does abroad to support a consistent increase in living standards.

That means looking closely at why there has been such limited success in this area over the past 50 years. One basic reason is that developing its own economy has never been Ireland's core objective, despite all the guff. The latest plan involves attracting more foreign manufacturers, now that foreign service companies are becoming a bit of an embarrassment.

That relentless focus on the foreign sector has left us with no clear view of the kind of world we expect to be in and the kind of education, training and employment systems which would fit us for it.

It may turn out to be a happy coincidence that efforts to improve our domestic productivity will also reduce the threat from robotics and artificial intelligence. Or an unhappy one, if nothing is done.

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