Rise of the machines to blame for the lacklustre US recovery

Roombas may look cute, but not when they're taking your job.

The Washington Post's Dylan Matthews highlights a new NBER working paper (£) by Duke University’s Nir Jaimovich and the University of British Columbia’s Henry E. Siu which examines why "jobless recoveries" have become the norm in the US after recent recessions. The short version is that it's all about the robots.

The history of the US labour market since the 1980s has been one of "job polarisation", the authors argue:

[E]mployment is becoming increasingly concentrated at the tails of the occupational skill distribution. This hollowing out of the middle has been linked to the disappearance of jobs focused on “routine” tasks – those activities that can be performed by following a well-defined set of procedures. Autor et al. (2003) and the subsequent literature demonstrates that job polarization is due to progress in technologies that substitute for labor in routine tasks.

At one end of the market are non-routine cognitive jobs, "such as physicians, public relations managers, financial analysts, computer programmers, and economists" (and, one would hope, journalists), while at the other end are non-routine manual occupations "including janitors, gardeners, manicurists, bartenders, and home health aides". Polarisation of the labour market comes from technological improvement replacing people in routine jobs, both manual and cognitive – "secretaries, bank tellers, retail salespeople … dressmakers, cement masons, and meat processing workers."

The classic victim of mechanisation is the factory worker, but it actually hits a far more varied cross-section of careers. Think about automated phone trees replacing secretaries, self-checkouts replacing retail workers, or Oyster cards obviating the need for ticket sales on the London Underground. In fact, according to the Council on Foreign Relations' Edward Alden, manufacturing itself has largely reached maximum automation already:

Manufacturing output in the United States is no longer growing as rapidly as it once was (and as you would expect if technology had simply been replacing workers in factories). Real manufacturing output grew just 15 percent in the 2000s, compared with more than 35 percent in each of the 1970s and 1980s and more than 50 percent in the 1990s.

In itself, this technological change is obviously not something to bemoan – it represents society getting more productivity out of fewer people. If we wanted to follow Keynes, we could literally give all of those people replaced by robots permanent paid holidays and the economy would be no worse off. In actual fact, of course, we realise that improvement not as an increase in leisure time, but as an increase in output: the freshly unemployed are sent out to find more employment, and technological growth results.

This would be relatively pain-free if it happened at a slow, background pace, but that's not the case. Instead, "the decline in routine occupations is concentrated in economic downturns":

Following the peak in 1990, per capita employment in these occupations fell 3.5% to the trough of the 1991 recession, and a further 1.8% during the subsequent jobless recovery. After a minor rebound, employment was essentially flat until the 2001 recession. In the two year window around the 2001 trough, this group shed 6.3% of its employment, before levelling off again. Routine employment has plummeted again in the Great Recession – 12.0% in the two year window around the trough – with no subsequent recovery.

The above chart shows routine employment in the US, with recessions overlaid in shaded pink – and the precipitous decline, and lack of recovery is clear to see.

Gradually, the people who did these routine jobs will filter up or down the skills ladder. The lucky, privileged or smart ones will up-skill and end up in non-routine cognitive work, while the rest will fight for the pool of non-routine manual jobs.

Employment will, eventually, rebound from this slump. As growth returns – helped by the new efficiencies of technological change – there will be more jobs at both the top and bottom of the skills ladder. But as technological progress continues, the safe niches of high- and low-skilled jobs may themselves come under attack.

In May, Martha Gill reported that robots are now writing business stories (which is totally fine), and in June, Rafael Behr wrote about the fear in Downing Street prompted by the rise of the robolawyers:

What happens when the same dynamic creeps up the skills ladder? What are the social and political consequences when white-collar, middle class jobs are increasingly outsourced or done by computers? Plenty of professionals who thought they were immune to the labour market pressures exerted by globalisation will suddenly start to feel very insecure. This is a change that could make itself felt easily within a decade.

What's strange about the whole thing is that, viewed from a macroeconomic point of view, this ought to be good news. If ever fewer people can create ever more "stuff" (be that widgets, legal documents, or business reports), then the potential is for everyone to be better off. The sad reality, of course, is that in the UK and US, the attitude is largely a laissez-faire rejection of the state's responsibility to smooth over the turbulence of structural shifts. But as ministers start to see people like them suffering the same changes that their constituents have for three decades now, there is the chance that real change may finally be possible. There have been attempts to tackle what such a change would mean, from nef's call for a 21 hour week, to the Green Party's suggestion of a Citizen's Income. Or maybe its just more, better targeted, and higher quality opportunities for, and support during, retraining which are needed.

Either way, we've got until the next recession to get some plans in order, or we will have to go through the same routine all over again. And when the robojournalists come for me, I want an exit strategy.

Update

A commenter is concerned about the fact that the above chart uses an unfamiliar y-axis.

The graph is presented as the log value of the employment rate for routine industries, defined in the paper as:

“Sales and related occupations”, “office and administrative support occupations”, “production occupations”, “transportation and material moving occupations”, “construction and extraction occupations”, and “installation, maintenance, and repair occupations”.

Employment rate rather than employment level is used so that the effect the authors are discussing is not masked by population increases. I've charted the sum of the routine employment level as well as the sum of the routine employment level divided by the working age population (roughly equivalent to employment rate), which ought to demonstrate why the latter is used.

As for taking the log value, rather than the absolute percentage, we do that because when comparing different percentages, the log rate evens out differences between changes at high percentages and changes at low percentages. The difference between 2% and 1% is one percentage point, and the difference between 20% and 10% is ten percentage points, but the difference between both log(20%) and log(10%), and log(2%) and log(1%), is 0.3.

A wannabe robojournalist. It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until it has filed copy. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.