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.

Photo: Getty
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Cuts to Short money aren't about balancing the books - they're about killing Labour

The Tories, who were once the One Nation party, seem intent on turning Britain into a One Party Nation.

The history of this country has proved time and time again that we Brits don’t like it when the government gets above itself.  A fundamental sense of fair play – chwarae teg we call it in Wales – is our one national defining personality trait. That’s why we hate an overweening executive, we prefer to cut our politicians down to size and we are fundamentally distrustful of demagogues.  It’s also why we think good government needs proper scrutiny and the Opposition is every bit as important a part of the system as the government.

The sense of fair play is intrinsic to how Labour governments have always approached the Opposition.  When Ted Short was the Labour Leader of the Commons he invented ‘Short money’ in 1974 so as to ensure that the Tory Opposition could do its job of holding the Labour government to account properly.  And when Tony Blair became Prime Minister in 1997, with a massive majority in the Commons, we didn’t slash Short money, we trebled it.  The Tories were on their knees politically and financially, but we believed it was in the national interest for the Opposition to be properly resourced. 

The Tories agreed, of course.  Sir George Young, the then Conservative Shadow Leader of the House told his Labour opposite number, Margaret Becket, that “It cannot be right… for Opposition parties to be under-resourced, particularly when… the government have increased substantially, from taxpayers' money, the resources that they receive for their own special advisers.”  Not surprisingly not a single Tory voted against that increase and by 2010 the Tories had banked £46.2m in Short money.

Now the shoe is on the other foot and they’re in government, though, those very same Tories want to force through a 19 per cent cut to both Short Money and the Electoral Commission Policy Development Grant.  That hypocrisy is flagrant enough, but even more amazingly, they seem determined on cutting support for the Opposition while they continue to hire more and more Tory Special Advisers at an ever greater cost to the taxpayer.

The statistics tell their own story.  The proposed cuts to opposition parties amount to £2.1m.  In 2009, the last full year of the last Labour Government, there were 74 special advisers costing £5.9m. But in December last year the Government admitted they have 95 Tory SpAds on the books, costing £8.4m.  That’s £2.5m more a year.  In other words, the Tories think it’s fair play to push through a 19 per cent cut for the opposition and a 42 per cent increase for themselves.

That’s not all.  Since last year, the number of SpAds in the highest pay grade has jumped by 150 per cent, and in the next highest paygrade it has grown from 15 to 26. The number of SpAds paid above £63,0000 a year in the Prime Minister’s Office has increased by 51 per cent and in the Chancellor’s office by a staggering 277.1 per cent.

The Chancellor bangs on about financial rectitude.  He says were all in it together.  Yet he alone has ten SpAds. One of them, Thea Rogers – best known for giving Osborne his weird haircut – received a whopping 42 per cent payrise.  Just leaving aside the self-evident hypocrisy of Osborne enforcing a pay freeze of one per cent on the public sector whilst awarding his own bag carriers a dramatic hike, bear this in mind.  The Chancellor’s SpAds cost the taxpayer at least £540,499 a year dwarfing the entire Labour Party policy development grant of £333,500.   Jeremy Hunt’s three SpAds cost more than any of the minor parties – the SNP, UKIP, the Lib Dems, the DUP and the SDLP – get off the Electoral Commission.

Why this really gets me angry is that Cameron made such a play when he was in Opposition of cutting the number of SpAds.  He swore blind that no cabinet minister would have more than one.  Yet every Secretary of State has at least two SpAds, several have three and the total is now the highest it has ever been under Labour or the Tories. 

There are lots of Tory MPs who tell me they hate this vindictive and partisan aspect of the Cameron/Osborne government.  They too worry that a nasty authoritarian streak is developing.  You can see it in the systematic attack on Trades Unions, the attempt to curb the power of the Lords, the dramatic increase in unamendable secondary legislation for major legislative change, the gagging law on charities, the attack on the BBC and the attempt to water down Freedom of Information laws.

To add insult to injury, the Government’s latest sneaky manoeuvre is not to publish its proposals on Short Money today, when Parliament is sitting, but tomorrow, when we are in recess; and to allow just three weeks for a fake consultation.

Sadly the Tories, who were once the One Nation party, seem intent on turning Britain into a One Party Nation. My suspicion is that decent, fair-minded people will think this is just not fair play and in the end the Government will be forced to back down.  Democracy is not just about winning elections.  It’s also about holding governments to account.  And the one rule of politics is that what goes around comes around.