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.

Getty
Show Hide image

Former Irish premier John Bruton on Brexit: "Britain should pay for our border checks"

The former Taoiseach says Brexit has been interpreted as "a profoundly unfriendly act"

At Kapıkule, on the Turkish border with Bulgaria, the queue of lorries awaiting clearance to enter European Union territory can extend as long as 17km. Despite Turkey’s customs union for goods with the bloc, hauliers can spend up to 30 hours clearing a series of demanding administrative hoops. This is the nightmare keeping former Irish premier John Bruton up at night. Only this time, it's the post-Brexit border between Northern Ireland and the Republic, and it's much, much worse.   

Bruton (pictured below), Taoiseach between 1994 and 1997, is an ardent pro-European and was historically so sympathetic to Britain that, while in office, he was pilloried as "John Unionist" by his rivals. But he believes, should she continue her push for a hard Brexit, that Theresa May's promise for a “seamless, frictionless border” is unattainable. 

"A good example of the sort of thing that might arise is what’s happening on the Turkish-Bulgarian border," the former leader of Ireland's centre-right Fine Gael party told me. “The situation would be more severe in Ireland, because the UK proposes to leave the customs union as well."

The outlook for Ireland looks grim – and a world away from the dynamism of the Celtic Tiger days Bruton’s coalition government helped usher in. “There will be all sorts of problems," he said. "Separate permits for truck drivers operating across two jurisdictions, people having to pay for the right to use foreign roads, and a whole range of other issues.” 

Last week, an anti-Brexit protest on the border in Killeen, County Louth, saw mock customs checks bring traffic to a near standstill. But, so far, the discussion around what the future looks like for the 260 border crossings has focused predominantly on its potential effects on Ulster’s fragile peace. Last week Bruton’s successor as Taoiseach, Bertie Ahern, warned “any sort of physical border” would be “bad for the peace process”. 

Bruton does not disagree, and is concerned by what the UK’s withdrawal from the European Convention on Human Rights might mean for the Good Friday Agreement. But he believes the preoccupation with the legacy of violence has distracted British policymakers from the potentially devastating economic impact of Brexit. “I don’t believe that any serious thought was given to the wider impact on the economy of the two islands as a whole," he said. 

The collapse in the pound has already hit Irish exporters, for whom British sales are worth £15bn. Businesses that work across the border could yet face the crippling expense of duplicating their operations after the UK leaves the customs union and single market. This, he says, will “radically disturb” Ireland’s agriculture and food-processing industries – 55 per cent of whose products are sold to the UK. A transitional deal will "anaesthetise" people to the real impact, he says, but when it comes, it will be a more seismic change than many in London are expecting. He even believes it would be “logical” for the UK to cover the Irish government’s costs as it builds new infrastructure and employs new customs officials to deal with the new reality.

Despite his past support for Britain, the government's push for a hard Brexit has clearly tested Bruton's patience. “We’re attempting to unravel more than 40 years of joint work, joint rule-making, to create the largest multinational market in the world," he said. It is not just Bruton who is frustrated. The British decision to "tear that up", he said, "is regarded, particularly by people in Ireland, as a profoundly unfriendly act towards neighbours".

Nor does he think Leave campaigners, among them the former Northern Ireland secretary Theresa Villiers, gave due attention to the issue during the campaign. “The assurances that were given were of the nature of: ‘Well, it’ll be alright on the night!’," he said. "As if the Brexit advocates were in a position to give any assurances on that point.” 

Indeed, some of the more blimpish elements of the British right believe Ireland, wedded to its low corporate tax rates and east-west trade, would sooner follow its neighbour out of the EU than endure the disruption. Recent polling shows they are likely mistaken: some 80 per cent of Irish voters say they would vote to remain in an EU referendum.

Irexit remains a fringe cause and Bruton believes, post-Brexit, Dublin will have no choice but to align itself more closely with the EU27. “The UK is walking away,” he said. “This shift has been imposed upon us by our neighbour. Ireland will have to do the best it can: any EU without Britain is a more difficult EU for Ireland.” 

May, he says, has exacerbated those difficulties. Her appointment of her ally James Brokenshire as secretary of state for Northern Ireland was interpreted as a sign she understood the role’s strategic importance. But Bruton doubts Ireland has figured much in her biggest decisions on Brexit: “I don’t think serious thought was given to this before her conference speech, which insisted on immigration controls and on no jurisdiction for the European Court of Justice. Those two decisions essentially removed the possibility for Ireland and Britain to work together as part of the EEA or customs union – and were not even necessitated by the referendum decision.”

There are several avenues for Britain if it wants to avert the “voluntary injury” it looks set to inflict to Ireland’s economy and its own. One, which Bruton concedes is unlikely, is staying in the single market. He dismisses as “fanciful” the suggestions that Northern Ireland alone could negotiate European Economic Area membership, while a poll on Irish reunification is "only marginally" more likely. 

The other is a variation on the Remoaners’ favourite - a second referendum should Britain look set to crash out on World Trade Organisation terms without a satisfactory deal. “I don’t think a second referendum is going to be accepted by anybody at this stage. It is going to take a number of years,” he said. “I would like to see the negotiation proceed and for the European Union to keep the option of UK membership on 2015 terms on the table. It would be the best available alternative to an agreed outcome.” 

As things stand, however, Bruton is unambiguous. Brexit means the Northern Irish border will change for the worse. “That’s just inherent in the decision the UK electorate was invited to take, and took – or rather, the UK government took in interpreting the referendum.”