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Jobs, technology and lessons of history

If the effects of technology on employment – especially the job-generating qualities – are so unpredictable, are there any durable lessons that can be gleaned from history?

Deloitte analysis from most recent employment data reveals a clear pattern to the way in which technology has affected work. Routine jobs, both cognitive and manual have suffered most, because technology can readily substitute for labour. Job losses in white collar occupations involving the processing of framework and in manufacturing speak to this. By contrast, technology is highly complementary to cognitive, non-routine tasks such as management consultancy where employment growth has been strong.

 

1.     Technology substitute labour as a source of energy

Perhaps the most obvious area is where technology directly substitute human muscle power, in so doing raises productivity and shrinks employment. In the UK, the first sector to feel this effect on any scale was agriculture. In 1871, 6,6% of the workforce of England and Wales were classified as agricultural labourers. Today that has fallen to 0.2%. The same forces have been at work in manufacturing, where the employment rate has fallen from 38% of the workforce in 1948 to 8% in 2012.

 

2.     Jobs are created for the drivers of technology change

Technology directly created jobs in new sectors. In the last 35 years, two of the top ten fastest growing occupations in the UK have been in technology sector. The number of information technology managers has risen by a factor of 6.5, to over 327,000; and the number of programmers and software development professionals has risen by a factor of almost three, to 274,160.

But, history shows this is a dynamic process, in which, in time, technologies become obsolete and are supplanted. The number of people employed as telephone and telegraph operators rose by a factor of forty in the 100 years to 1971. Since then employment has shrunk as automated switchboards, the internet and mobile telephony have taken off.

 

3.     Technology creates jobs in knowledge-intensive sectors

The direct job-creating and job-destroying properties of technology are relatively clear and well understood. What is less obvious is the way in which some technology and knowledge-using sectors combine rising productivity and higher employment over time.

Demand for specialist services, such as medicine, business and professional services, marketing design and education have increased as incomes have risen.  These sectors help customers benefit from improvements in specialist knowledge and assist them in navigating complexity. The application of technology to these sectors has risen productivity and improved outcomes. This can be seen most spectacularly in medicine; but easy access to information and the accelerating pace of communication has revolutionized most knowledge-based industries.

 

4.     Technology change lowers expenditure on essentials, creating new demand and jobs

Technology-driven declines in relative prices, often a side-effect to the mechanism described above, increase consumer spending power which, in turn, creates new demand and new jobs. Technological progress allows consumers to meet existing needs at lower cost, enabling them to spend on more discretionary goods and services.  Some of these are burgeoning, technology-driven sectors, such as communications and home entertainment. Rising disposable incomes bring what was once the preserve of the well off to a mass market and enable consumers to increase spending on non-essentials.  These are the two examples:

 

a)     Despite the decline in traditional pub, data show that the number of people employed in bars rose four-fold between 1951 and 2011.

b)     Rising incomes have enabled consumers to spend more on personal services, such as grooming, driving employment of hairdressers.  In 1871, there was 1 hairdressers/barber for every 1793 citizens of England and Wales, today there is one for every 287.

 

Conclusion

Technology has transformed productivity and living standards, and, in process, create new employment in new sectors. Machines will continue to reduce prices, democratising what was once the preserve of the affluent and furnishing the income for increased spending in new and existing areas. Machines will take on more repetitive and laborious tasks, but seem no closer to eliminating the need for human labour that at any time in the last 150 years.

History offers important lessons on how technology interacts with employment. And it also points to two central policy challenges. If the pace of adoption of technology is accelerating, society will need to prepare for higher levels of technological unemployment. And the way in which change increasingly rewards high-level education and skills suggests that income inequality may yet widen. Rapid advances in technology mean that education, training and the distribution of income are likely to be central to the political debate for any years to come.

 

Source: Deloitte, 2018 

Wednesday Dec 5, 2018