Technology is not here to take our jobs

Historical precedents point to technological disruption creating more jobs than it destroys


Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

Jack Ma knows a thing or two about technological innovation and disruption. The founder and executive chairman of Alibaba Group has built it into the world’s fifth-largest Internet company by revenue. In a letter to shareholders earlier this month, he had this to say: “Throughout history, technological disruptions have followed similar trajectories: 20 years of technological disruption followed by 30 years of further rapid change as new technologies are applied throughout society. The Internet revolution is a historical inflection point, much like when electricity was introduced, and it may have an even greater impact.”

This is in keeping with the commentary in recent years on the rapidly evolving technological—and consequently, economic—landscape. Later in the letter, however, he displays an optimism that runs counter to much of the analysis of the potential impact of those changes: “In 20 years, we hope to…empower 10 million profitable businesses and create 100 million jobs.”

It’s a bold vision. Cloud computing, Big Data—the “twin pillars” on which his business is built—and the technology-enabled globalization of supply chains they enable have been portrayed as the horsemen of the fourth industrial revolution. Many economists and industry watchers fear that paradigm shift will result in automation displacing employment on a scale hitherto unseen.

MIT Sloan School of Management’s Erik Brynjolfsson and his co-author Andrew McAfee have a name for this process—the great decoupling. They note the fact that historically, productivity and total employment have tended to track each other. But the two lines started diverging in around 2000, with productivity rising even as employment stagnated. Since 2011, the gap has widened.

And if secular stagnation is indeed creeping up on developed economies as many fear, technological disruption has also been blamed here. On the one hand, the argument goes, it has enabled the globalization with its lopsided outcomes that is partly responsible for a trend of increased savings. On the other, the fear of technological obsolescence has made investing riskier, while new economy companies like Amazon have squeezed out conventional rivals, with the net effect being a reduction in capital investment. This imbalance between savings and investment has played a role in the ongoing stagnation—which in turn will have a knock-on effect on employment.

Yet, history is on the futurist Ma’s side. This is not the first time the Cassandras have made their dire prophecies, from the Luddites to John Maynard Keynes with his “technological unemployment”. They were all proved wrong. Historically, technological advance has invariably created more jobs than it has destroyed. The fear that this time the rate of advance is so great that job destruction will outstrip job creation entirely has surfaced every time there has been a leap forward. As in those instances, Brynjolfsson and McAfee’s great uncoupling may point to a lag, but there is little evidence to show that this is anything but an initial period of adjustment for markets, industries and society.

On the other hand, economists Ian Hathaway and Enrico Moretti have both found that every new high-tech professional indirectly creates four-five jobs in ancillary areas. And that’s the formal jobs. There is a sort of Malthusianism-in-reverse tinge to the fear that technological advance will outstrip the creative capabilities of human endeavour. The burgeoning gig economy, commodifying time and owned assets, is the obvious rebuttal to this. But it goes further than that. How would the gamer whose YouTube channel gets enough views to earn sponsorship and advertising interest be classified in employment statistics? Or the Instagram model who becomes popular enough to attract similar interest?

These are, perhaps, as difficult to envision today as the wholesale employment shift from agriculture to industry would have been at the turn of the 18th century. But the economic logic of increased industry efficiency freeing up labour to put their time to productive use has been proved correct time and again.

This is not to dismiss all concerns about automation. Economist Branko Milanović has written eloquently of the dangers of the new breed of gig economy jobs to quality of life, and the potential therein for a kind of tech-enabled serfdom. This ties into larger worries about inequality and job polarization—people at the top of the socio-economic and educational ladders reaping the full benefits of technological innovation while those at the bottom are compelled to commercialize their lives, as Milanović puts it. As we have written in these pages, government has a large role to play in mediating these processes and investing in human capital to ensure that the gains are more equitable.

The Panic of 1873 was the first global economic upheaval brought about by technological advance. The Industrial Revolution had replaced mercantile capitalism with industrial capitalism, but economic systems hadn’t matured well enough to keep pace. The following decades, however, saw an explosion of economic creativity. Patent filings surged; the light bulb, telephone and electrical grid were invented and created immeasurable economic gains. It is an episode worth keeping in mind when considering Ma’s vision.

Will technological innovation create more jobs than it destroys? Tell us at views@livemint.com

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