Technology has the power to transform – but it won’t render jobs obsolete

Ian Stewart
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FEARS that technology would destroy jobs and create mass unemployment have recurred with each wave of innovation since the Industrial Revolution. I was reminded of this when reading a book by the prominent trade union leader Clive Jenkins, from the late 1970s. The Collapse of Work did not beat around the bush. To Jenkins, technology would lead to mass unemployment and an abundance of leisure.

Technological change has indeed been transformational. But even the bleakest forecasters have been proved wrong. UK unemployment rates today are lower – and labour participation rates higher – than in the pre-mobile, pre-PC world of the early 1980s. Employment is at record levels.

The idea that technology permanently reduces employment is based partly on the fallacy that the human appetite is unchanging and finite. The reality, as every student of economics soon learns, is that human desires are limitless.

Innovation enables goods and services to be produced at lower cost, often with less labour. The result is that – as with clothes, digital media, air travel or communications in the last 30 years – we consume more. Innovation is giving us more for less, providing us with the means to spend on a host of goods and services which were once the preserve of the few – everything from second homes, to long haul holidays, to healthcare for the kids.

All this extra demand provides jobs. So while innovation destroys, it also creates. The internal combustion engine destroyed a centuries-old industry built around the horse, but it created a new one around the re-fuelling and maintenance of cars.

Where the sceptics were right is that the benefits of new technologies are not evenly spread. Often the people who lose jobs as a result of innovation are not the ones who get the new ones. Skills, education, experience and attitude count.

It is hard to disentangle the effects, but technology, combined with globalisation and rising levels of immigration, has had significant effects on the distribution of income. Lower-skilled workers have lost out to those with higher levels of skills and education.

Across advanced economies, the number of jobs requiring mid-range skills has been squeezed and growth has been concentrated in high – and low – paid employment. In the US, median male earnings have not risen since 1975. Technology and globalisation have contributed to rising income inequality across many industrialised countries in the last 30 years.

Fears about the effects of technology persist. Yet the direst predictions of the pessimists have so far been incorrect. Technology has not created mass unemployment, nor reduced the overall number of jobs.

Insatiable human demand, and the creative opportunities of the destruction wrought by innovation, means that work has not died. The challenge posed by technology is political and social – to ensure that its benefits are widely spread.

Ian Stewart is chief economist at Deloitte.