Mark Carney made the front pages this week. On Monday in Liverpool he gave a strange speech about automation and the future of work.
Daily Mail: Mark Carney declares that robots could put 15m Britons out of work
The Sun: Mark Carney warns robots could steal 15m jobs from Brits as roles could be taken over by machines
The Mirror: Robots to steal 15 MILLION British jobs in coming decades, warns Bank of England boss
Here’s how Carney put it himself:
“The fundamental challenge is that, alongside its great benefits, every technological revolution mercilessly destroys jobs and livelihoods – and therefore identities – well before the new ones emerge.
“This was true of the eclipse of agriculture and cottage industry by the industrial revolution, the displacement of manufacturing by the service economy, and now the hollowing out of many of those middle-class services jobs through machine learning and global sourcing.”
Carney’s sort of right about this. In theory, automation can wreck lots of old jobs and old business models. And it can take a while for the “jobs of the future” to show up.
But there’s a problem: this story just doesn’t describe what’s happening in the UK.
Productivity = automation
Because you read the newspapers and Risk and Reward, you already know that automation is a big idea in the world of politics and policy at the moment. If you’ve been following closely, you might have also heard about Britain’s productivity crisis.
Britain has a productivity problem. Productivity means output per hour worked. For a hundred years, productivity in the UK has risen by a couple of percent per year. For the most part that’s down to technology: every year the tools we use get a little better, so we can produce more with less. And it’s very important. Productivity growth is the reason living standards go up over time.
In the UK, productivity hasn’t gone up for ten years now. That’s a strange and worrying development. It has big implications. And government doesn’t really know what to do about it, since productivity growth has been assumed to happen automatically.
Mark Carney is worried about it. Here’s what he said about it in a 2015 interview:
“[Productivity] has been worse than we had expected and worse than we had expected for the last several years. We have been successively disappointed.
“It matters for… the speed rate of the economy and it matters for living standards. It is the key determinant of wages and living standards.
“Now the only option to grow and increase productivity is to invest more, to do more with less.”
In the Liverpool speech he brought it up again. He said
“Why, then, doesn’t it feel like the good old days?
“Because anxiety about the future has increased, because productivity hasn’t recovered, and, as a consequence of the latter, because real wages are below where they were a decade ago – something that no-one alive today has experienced before.
“The underlying reasons for the 16% shortfall of the UK’s productive capacity, relative to trend, are poorly understood.”
It’s one or the other
So we’re being told:
- Automation is so good that it threatens to make lots of workers redundant.
- Workers are much less productive than they should be, relative to the long term trend.
The problem is that both of those things can’t simultaneously be true.
You can’t have a situation where:
Technology is progressing so fast that 15m workers are no longer needed, replaced by “better tools”…
And productivity, which measures output per hour worked, is stagnant.
Either the tools are getting much better and they can replace 15m workers, or the tools aren’t getting better and we’re stuck in a productivity rut. It’s one or the other.
The “not enough robots” crisis
Job-stealing robots is a fun story, but it just doesn’t fit the data. Who knows what’s going to happen in the future with machine learning and robe-doctors and such. But it’s just not happening yet.
The productivity crisis is real. You can see it right there in the data. Here’s what it looks like on a chart going back to 1975:
Click image to enlarge
Click image to enlarge
We need more automation and better tools to raise our productivity and living standards. Fretting over the rise of the robots badly misses the point.
Risk and Reward
P.S. I’m reminded of an old piece I wrote for MoneyWeek years ago. [The case for replacing central bankers with robots.]