Automation: a boon or bane for workers?

The economic historian Carl Benedikt Frey is perhaps best known for his estimation back in 2013 that 47% of all jobs in the US were at risk of being substituted by computers. Last year, he followed suit with a book, in which he looks at the history of automation and its social and political consequences, before predicting what it means for the future of work. His “The Technology Trap: Capital, Labour and Power in the Age of Automation” can be read as a call to policymakers to take the losers of automation seriously. If anything, the corona-crisis has made this 2019 publication even more relevant. The lockdowns will likely accelerate automation in the workplace, and in the wake of the resulting economic decline and rising unemployment, questions around jobs and automation will become more politically fraught than they had been up to now.

In his book, Frey takes issue with an economics profession that often relies on an ahistorical and simplistic view of technological progress – namely, that it allows us to do more with less time, and that everyone will be better off. That may be true in the long run, but when Frey looks at the history of industrial revolutions, he notices that new technology can either enhance workers’ skills and make them more productive, or it can outrightly replace them and push them into lower-paid jobs. In the latter case, the so-called ‘friction’ or adjustment costs can easily span multiple generations, leading to economic hardship for workers, and ultimately social and political upheaval. He fears that if left unaddressed, the not-so-short-term losers of automation may end up blocking new technologies and hence undermine long-term prosperity of society as a whole. This, then, is the technology trap.

One might think that it is unlikely that workers would rage against the machine in this day and age. But Frey shows how exceptional today’s pro-automation consensus actually is. For instance, average incomes in Spain hardly increased between the first and eighteenth centuries (!). Such stagnation had of course many reasons, but as Frey makes clear, outright opposition to new technology played an important role. For centuries, powerful guilds opposed innovations that could make their members obsolete. Fearing political upheaval, the ruling class usually sided with labour and banned the application of new technologies in the workplace that risked replacing workers. As late as the start of the 19^th century, the Emperor of Austria, Francis I, blocked the construction of new factories in Vienna, and banned the importation of new technology. He was by no means the only one.

Why then, did the industrial revolution take off in the UK? Frey shows how the rise of a new commercial class made all the difference. As opposed to the landed aristocracy, they had an interest in technological innovation to increase profits, and also possessed the necessary political clout in Parliament to push for it. It also helped that the British were locked in international power struggles and empire building, which convinced other domestic elites that holding back technological innovation would leave the UK more vulnerable and in a worse position to defend its interests abroad. Workers did oppose the introduction of spinning jennies, power looms and other technologies that threatened their livelihoods, as they saw their living standards deteriorate from roughly 1760 to 1840. But they lacked political power and so the riots against the introduction of new machinery were ruthlessly repressed. For instance, as early as 1769, Parliament introduced the death penalty for the destruction of machinery, and Luddites’ were routinely hanged. But, as Frey notes, unlike the Luddites during the Industrial Revolution, today’s workers have the right to vote.

For the immediate future, Frey seems rather gloomy. In his view, the wave of labour-enhancing technologies that paved the way for a large middle class in many western countries over the course of the 20^th century, has come to an end. Since the 1980s, workers’ wages stopped rising in tandem with productivity growth. According to Frey, the main reason is that many inventions of the computer revolution serve to automate exactly those types of routine, mid-skill jobs that were performed by the middle class. In his words, “computer technologies have shrunk the size of the middle class, put downward pressure on unskilled workers’ wages, and reduced labor’s share of income.” And after reviewing technological developments in the field of AI, he expects the trend of labour-replacing technology to continue, perhaps for decades, with unfortunate consequences for low-skilled workers, especially those without a higher education. Although Frey focuses on the US, this phenomenon of labour market polarisation has also been observed for many European countries.

The book offers a rich account of the history of automation, but for a book that looks at the political implications of technology, the treatment of technological innovation itself feels remarkably apolitical. This holds especially for the chapters discussing the industrial revolution and developments since then. For Frey, technology is either labour enhancing or replacing, and the consequences for workers are vastly different. But can we ascribe such labels to technology, outside a given social and economic context? At times, he admits that there are many other factors at play in determining the fortunes of workers, such as education levels and labour market institutions (collective bargaining, minimum wages, etc.). And yet, he considers that the rising incomes for workers in the west in the 20^th century can best be explained by technology itself. Similarly, for Frey, the negative outcomes for workers since the 80s are mainly the result of labour-replacing computer technology, and to some extent globalisation. But what about the deregulatory agendas in many countries, the decline in trade union membership, and the financialisation of the economy?

Moreover, because he treats technological innovation as a given, his policy suggestions come across as unduly narrow. If indeed technology is a deus ex machina, then policy-makers can only try to dampen the resulting inequalities as best they can, with retraining initiatives, relocation vouchers, and income support schemes. But is that really all they can or should do? Early on, Frey quotes the historian Jane Humphries, and notes that during the industrial revolution in the UK, “manufacturers were well aware of the advantages of inventing in ways so ‘as to bypass artisan practices and controls and so sap resistance to change’.” In other words, the nature of innovation was not given, but actively shaped by people who had an interest in hiring children instead of skilled adults. Because children were both cheaper and easier to control. Hence, the nature of ‘technological progress’ is part of a struggle for power. Is it a coincidence, then, that the moment the UK started to restrict child labour from the 1830s onwards, things started to improve for workers?

There are economic historians, such as Carlota Perez, who have underlined the importance of public policy in the shaping of industrial revolutions. The New Deal would be an example of that in the past. Today, the Green Deal looms large. For Frey, such interventions cannot really be considered, because technology is exogenous to his model. But discussing the implications of artificial intelligence for workers, without considering who is shaping the technology – currently less than a dozen global firms –makes for an incomplete picture.