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26 January 2017

How the government’s industrial strategy could steal your job

The industrial strategy aims to boost productivity and spread growth. But this is not the same as a well-paid job.  

By Julia Rampen

Not long ago, a musician friend of mine told me about a lucrative gig. Instrumentalists were being paid to come to a recording studio, and simply play every note of a scale. The pay was good. There was only one thing that made my friend uneasy – once the project was done, the man behind it would have a recording of every orchestral instrument playing every note. And thanks to the wonders of digital technology, he’d never need to hire a live musician again. 

The government’s industrial strategy is one of the great hopes of Brexit. Pumping money into infrastructure, research, and business support has stoked dreams of reindustrialisation. The Labour donor and industrialist John Mills, who has long investigated the decline in British manufacturing, is calling for further action. He believes a further devaluation in the pound, to around $1.05, could tip the balance in favour of the home grown makers. 

Meanwhile, the Prime Minister has made it clear that the government will prioritise controls over immigration in the Brexit negotiations. Those who believe that unskilled immigrants have pushed down wages (the evidence is mixed) can expect any new jobs created to go to British workers.

But here is the question that still needs answered. What is the definition of industrial strategy success?

According to the government’s green paper, it is launching the strategy in order to enable “stronger productivity and more balanced growth”. These are laudable aims. Put simply, productivity is the ratio of what you get out compared to what you put in, and Britain isn’t good at it. But I am yet to come across an example of a struggling, northern, small-town Labour voter who said they voted Leave because of “the value added per employee”. The Brexit post-mortem has revealed deep fears about employment security, the quality of jobs and the way culture and industry overlap. Productivity is not the same thing. 

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Britain’s manufacturing heritage is told through faded photos of workers on assembly lines, or operating basic tools. But that was the 1970s, and in the 21st century, a factory has a lot more robots. Using robots raises productivity by 0.37 per cent, according to a recent LSE/Uppsala study, and we are still in the early stages of development. Surely any 21st century, productive, British entrepreneur worth his or her salt would embrace automation?

Whether or not robots and other automated processes steal jobs is up for debate – just as immigration is. The Bank of England’s chief economist believes robots will replace nearly half of all British workers in the next two decades. (Mills, for his part, argues that robots can never replace humans in certain sectors, like caring). What we do know, is that Foxconn, which makes Apple and Samsung components in China, replaced 60,000 factory workers with robots in 2016.

Conversely, one of the explanations for Britain’s “productivity puzzle” is that since the recession, firms have tried to avoid making good employees redundant. In other words, they have chosen humans over machines. “Firms have had incentives to substitute cheaper workers for more expensive machinery and buildings,” is how the Royal Economic Society put it in 2014. Silicon Roundabout’s “disrupters” may wince at such disregard for progress. But since unemployment leads to the erosion of skills, reliance on public services and the disintegration of the community, it’s worth putting productivity in context. 

The industrial strategy may well stimulate local economies, inspire entrepreneurs in forgotten small towns and provide some backbone in the uncertain Brexit negotiations ahead. But it will not be a return to the past. And with freedom of movement scrapped, if the workers of post-industrial Britain find they are still lacking quality manufacturing jobs, they won’t have immigrants to blame.