Automation needs to be tackled with the economics of the 19th century

Marx versus the robots.

Since covering the strangely unimaginative way the economics establishment treated the effect of automation on the economy, I've been looking for economists who do seem to get it.

Responding to a piece by Paul Krugman (a back-of-the-envelope demonstration of how neoclassical models could show technological improvements leading to a reduction of the real wage), Fred Moseley, Professor of Economics at Massacheusettes' Mount Holyoke College, gives an overview of the Marxist approach to the problem:

Marx’s theory predicted in the early days of capitalism that technological change would tend to be labor-saving… and this labor-saving technological change would cause increasing unemployment (the “reserve army of the unemployed”) which in turn would put downward pressure on wages and the wage share of income (Capital, Volume 1, Chapter 25). He called this important conclusion “The General Law of Capital Accumulation” (the title of Chapter 25). One does not have to use the very dubious marginal productivity theory to explain these important phenomena. Marx’s theory provides a perfectly adequate explanation without the extremely problematic concepts of marginal products of labor and capital.

Marx is obviously relevant to the end stage, of a world in which automation replaced the bulk of work. That world would struggle to continue to arrange things along a capitalist order, as Noah Smith's contortions demonstrated. Ownership of the means of production — the robots, algorithms, computers and everything else replacing human labour — becomes more and more important the closer to that stage we reach.

Moseley's point is that Marx is probably relevant to the whole thing far earlier. The labour theory of value (Marx's key economic idea, that value — which is distinct from "price" — is determined exclusively by the human labour a good takes to create) has always been a lens through which technological improvement in the means of production leads, eventually, to immiseration of the labourer.

(The flip side of such an argument is that immiseration is offset by the fact that technology also reduces the amount of labour required to live a good life. The balance between those two tendencies is, in essence, the answer to the question of whether or not capitalism is sustainable or not.)

No matter how accurate it may have been in this situation, it will take a long time for most people to begin taking the Marxist economic analysis seriously. (Part of that might be that it's got that frightful déclassé word "Marxist" in it.) But if economics doesn't adopt some of its lessons, it seems doomed to spend the next decade reinventing it from scratch.

A man poses in front of a bronze statue of Karl Marx and Friedrich Engels in Berlin. 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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There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.