Scotland's Economy

Automation set to hit middle class jobs – cue the new economics

Governor of BOE Mark Carney – 15 million UK could be lost to automation

Since my first newspaper column in 2002 I have been raging against the orthodox. Firstly trying to explain how broadband connectivity and the internet would change economics, then how ageing populations would make pensions unaffordable. In the last decade I pointed out that personal debt would create a consumer credit crunch if wages stagnated (it will and they have), I called for quantitative easing for capital expenditure, a basic income and most recently I started to support sovereign money creation. Change has been painfully slow, the establishment wasn’t listening and it seemed it never would. Now everywhere you look there are heterodox campaign groups such as Positive Money and the Basic Income Earth Network, think tanks such as The New Economics Foundation popping up everywhere and even basic income pilots. In the UK we even have Labour adopting QE for the people and the Tories introducing a Living Wage, never mind that they are watered-down window dressing compared to the ideas that inspired them, the direction of travel in economic thinking is changing.

Such change is partially motivated by the absolute failure of the neo-capitalist economic system, its inability to recover from 2007 and the knock-on effect of popular dissent against the establishment in referendums and Presidential elections. However it is also driven by the paradigm-changing rapid expansion in technology and automation at a time when job creation is set to stall and wages stagnate. We may even be looking at the emergence of a new economic age, a change as profound as the industrial revolution, the promise of the dotcom futurist gurus writ-large, only on a slower timescale than they predicted. This week the Governor of the Bank of England said: People’s attitudes towards trade shocks are being hardened by the effects of accelerating technological innovation. As my colleague Andy Haldane has explained, up to 15 million of the current jobs in Britain could be automated over time.

Pause for a moment, the BOE Governor just told us that they think one in three people in employment will lose their jobs to automation. Frey and Osborne (University of Oxford) say that timescale will be 10-20 years. We already have massive sovereign debts, unsustainable deficits, slowing global growth, massive property bubbles in cities such as London and Hong Kong. Add to that the spectre of rapid job losses from automation in the midst of a growth slowdown and you have an economic problem that cannot be solved using the tools of neo-capitalism. Hence the rapid rethinking and popularisation of all the left-field has to offer. Basic Income being tried somewhere on a national basis soon is close to becoming a racing certainty.

Even the most mundane household technologies have destroyed whole areas of employment

People have complained about technology costing jobs probably since archers did away with the need for sling-shots. It’s nothing new, even the most mundane household technologies have destroyed whole areas of employment. In 1900 roughly 240,000 people were employed washing clothes in the UK. Now, despite a rapid population rise, the fact that we all now own ten times more clothes and wash them more often, nowadays there are fewer than 36,000 people doing that job. The humble washing machine has a lot to answer for, except it doesn’t because technology in the past has always created more jobs than it has cost. Sure, 10 farm workers lost their jobs for every new combine harvester, but overall the resultant economic growth created more but different employment. As wages rose and wealth became more equally shared (a process that is now reversing) the concept of disposable income created the service industry. This move from someone who produces to someone who serves others is what I call the dead-end job revolution. In my lifetime there has been a 400 per cent increase in the number of bar tenders and a doubling of hairdressers, both sectors where the hours can be punishing and the wages low.

However professional services also boomed, creating a the new middle class who became the champions of conservatism. In 1900 there were less than 10,000 accountants: now it’s upwards of 250,000, and that’s the problem: Frey and Osborne calculated what jobs were most at risk and accountants sit at a 95.3 percent likelihood of being automated.

When joblessness starts to threaten the middle classes, then the establishment takes notice. One in three jobs are in the most at risk category including: typist or related keyboard worker, 98 per cent, administrative worker 92 per cent, sales and retail assistant 95.1 per cent, and telephone sales person 99 per cent. So many of the jobs most at risk are in the service economy, whilst the safest jobs include nurses, doctors, social workers, teachers and psychologists (all under one per cent). In other words the private sector will shed jobs and those private sector taxes pay for are likely to expand. If you can explain how the economy survives that change without a complete restructuring of all economic thinking and political governance then you are either nuts or next year’s winner of the Nobel prize for economics.

This revolution will be different: automation will lower costs and increase margins not grow the economy. Economic stagnation and inflation are now built into the failing economic model of our lifetime and so indirect job creation from technology will be limited. Add to that the fact that when machines can program, repair, learn from experience and even manufacture themselves, they don’t directly generate new employment either.

When the vast majority of people are going to be retired or unemployed, corporations avoid paying taxes and all employment is in the public sector, how do people pay for food and a place to live? How does the Government generate revenues in a post tax, post job economy?

Basic income where everyone whether they work or not gets enough money to live from the state seems to be the lead option. People who work have more money even if they have a low-paid job, slowing down service-sector job losses. Those that don’t work would be free to volunteer and gain more pleasure from that than dead-end employment (living a bucket list life), freeing up jobs for those that want them. The well-paid and the rich would get a bonus making them happier to pay taxes and mass poverty and even Great Depression levels of hunger and alienation won’t destroy society, “priceless”! There are lots of suggestions as to how we can afford basic income.

A tax on financial trades, negative interest rates, all money creation and so all interest payments going to the government to replacing taxation, a land and property tax, a global agreement on new money creation for basic income… there are lots of suggestions as to how we can afford basic income and some might even work.  See what I mean about a complete restructuring of all economic thinking?  That I am thinking this way should not surprise you. That Mark Carney seems to be starting down that road is intriguing.

About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland he ran a small social media and sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.

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