Tomorrow's 'new collar' jobs will be quite old-fashioned, our response should be too

Artificial Intelligence (AI), inequality and globalisation were central themes of the World Economic Forum in Davos last week. Fearing that AI will destroy jobs, IBM CEO Ginni Rometty called for a future where jobs are not white collar or blue collar, but “new collar”.

While change is coming, these “new collar” will actually be quite old-fashioned. Teachers, nurses and waiters will all still be important as our economy continues to shift towards services.

Regardless of the jobs, technology will also continue to widen inequality if left unchecked. We must learn the lessons of the industrial revolution and see the world’s labour movements return to their roots: sharing the proceeds of progress with all.

Technology destroys low-skilled jobs

Thomas Mortimer once feared that saw mills would “exclude the labour of thousands of the human race”. That was in 1772 as the industrial revolution gained steam.

Historically, technology has replaced low-skilled jobs and complemented high-skilled ones. The invention of tractors replaced workers with pitchforks, but increased the need for engineers.

Trade has had a similar effect. When we cut tariffs on textiles, some factories closed but Australian clothing designers still flourish.

So far this sounds like an excerpt from a Trump rally. But the story doesn’t end there.

Replacing old jobs with new

When one job disappears, a new one is created in its place. During the industrial revolution, farm workers found jobs in factories. Centuries later, they found them in call centres. We call this “structural transformation”, as economies transition from agriculture to manufacturing and then on to services.

The Australian economy is now about 75% services. It isn’t just digging up things (mining: 7%), making things (manufacturing: 6%) or riding on the sheep’s back (agriculture: 2%). It is about doing things for other people.

What this means is these “new collar jobs” might actually be quite old-fashioned. While we will obviously need more programmers, computer scientists and engineers, we will also need plenty of teachers, nurses and policemen.

Services are not easily replaced. As William Baumol pointed out in the 1960s, it still takes just as many people to perform a Beethoven string quartet as it did in the 1800s. It’s easy to automate an espresso, but people still seem to prefer the personal touch. AI will be hard pressed to replace the caring touch of a nurse on a sick patient’s cheek.

Inequality

However, new technologies still pose a problem: inequality. In Australia, the average individual real wage of the richest 10% grew seven times faster than for the poorest 10% in the 20 years from 1988. While technology increases the size of the economic pie, the slices aren’t shared equally.

When someone’s job is automated they could be unemployed for months while they search and retrain. Older workers may never find another job. If they do, they could be competing with a host of people in the same situation. The costs of progress are borne at the bottom of the income ladder, while the proceeds are reaped at the top.

New technology may change this. While nurses and police officers may be safe, artificial intelligence has already made large gains in diagnosing illnesses, writing legal documents and designing machine components.

Doctors, lawyers and engineers are all now at risk.

The response

Regardless of which jobs are affected, we need to make sure the benefits of technology are shared equitably. It won’t happen naturally. The owners of businesses and machines – capital – are in a better bargaining position than ever. Something must be done.

We must learn the lessons of the past. The industrial revolution gave birth to the labour movement, which argued for better working conditions, minimum wages and shorter hours. All of these helped share the proceeds of progress. They also spurred growth.

Around the world modern labour movements have lost their way. While making important gains on social issues, the left in the UK and US has flirted with protectionism and strayed from its core business. That business is ensuring workers share in the proceeds of progress.

We must open our borders and our minds to the great benefits of globalisation and technology. We must also ensure the proceeds are shared.

A start would be a proper tax framework. Forcing tech companies to pay at least a dollar of taxes doesn’t seem like too much. Basing taxes on global profits, prorated by local revenues, could help.

These taxes can then be redistributed. This could be through more retraining support, higher minimum wages or shorter work weeks. John Maynard Keynes predicted that we would be working 15 hours a week by now. A universal basic income is also a possibility, and we should watch Finland’s experiment with interest.

Unions must help. In an age of self-driving cars, bus drivers might make good aged-care workers. This may hurt unions, whose membership is industry-based, but they will need to help ease the transition.

Artificial intelligence and globalisation offer an exciting future, but if we are all to enjoy it we must look to the past.