Easing the Automation Transition: Policymakers, Step Up!

Easing the Automation Transition:
Policymakers, Step Up!

The median Canadian worker has a 45% chance of their job being automated, according to a study conducted by the OECD (Organization for Economic Co-operation and Development). Among the 32 countries studied, Canada had the 10th lowest odds, compared to 39% in New Zealand, 40% in Norway, all the way to 62% in Slovakia. With rising concerns over effects of automation, the current climate of the job market is reminiscent of the automation angst that began as early as the 1950s.

% of jobs at risk of automation, by country
(Skills Panorama)

The issue had been explored for far longer, however, beginning with several classical economic theorists in the early 1800s, who held that, notwithstanding a brief period of adjustment, the introduction of new machines would produce more jobs than would be destroyed. The fears eventually subsided as economic historian Gregory Woirol notes: “Because the general upward trends in investment, production, employment and living standards were supported by evidence that could not be denied, technological change ceased to be seen as a relevant problem.” In America, however, this “general upward trends” was not accomplished as quickly and simply as Woirol would have us believe.

Taking Action: Governance and Company Policies in the 50s

As societies transition towards automation, government intervention needs to be a key piece of the puzzle. The late 1950s witnessed an American society scrambling to keep up with automation, prompting many to criticize the government’s handling of the crisis: Nation Magazine published in November 1958 that, “We are stumbling blindly into the automation era with no concept or plan to reconcile the need of workers for income and the need of business for cost-cutting and worker-displacing innovations.” Despite public opinions, the US government did attempt several reforms.

The Eisenhower Administration aimed, in 1958, to stimulate the economy with a series of actions that included: Quickening the rate of procurement by the Defense Department; stepping up the pace of urban-renewal projects; cutting loose hundreds of millions of dollars for roads and infrastructure, and; the Federal Reserve cut interest rates four times between 1957 to 1958. The Committee for Economic Development even went further and called for a temporary 20% cut in personal income taxes, only President Dwight Eisenhower was reluctant, turning instead to publicly endorse businesses attempting to jumpstart things on their own.

Although there remained unrest among labour unions at the time, many companies in America tried to help their workers. Kodak, for instance, left millions of dollars on the table as they held off the installation of more efficient film emulsion-coating machines. They waited about five years before making the upgrade, which allowed senior workers who would have been forced out, to reach their retirement age. General Motors, on the other hand, enrolled 30,000 employees in training programs, while General Electric’s retraining period guaranteed laid-off workers at least 95% of pay for as many weeks as they had years of service.

Industry 4.0: The Fourth Industrial Revolution

Flash forward sixty years later, and we’ve arrived at what some are calling the “Fourth Industrial Revolution”. As automation continues to stir the job market, workers are in doubt and fear that their jobs will soon be replaced by automated systems. As discussed in previous articles, the benefits of automation, including the number of new jobs and tasks that will be created, far outweigh the number of jobs that could be replaced. However, before anyone can reap the benefits of automation, governments need to assist the transition in every way they can. There have been many speculations about what governments ought to do, including this Business Insider article outlining several key aspects of what the automation transition needs:

  1. Universal basic income – Such as the ones being tested in Canada and Finland

  2. Negative income tax – Will focus on providing the poor with money, instead of asking them to go before a government official and ask for a handout

  3. Government jobs guarantee – To aid in job creation, especially in sectors that are less served by private sectors (e.g. elderly and childcare, health, education, arts)
  4. Broader social safety net – Such as universal healthcare, affordable education, and accessible childcare options
  5. Robot tax – A notion first floated by Bill Gates, this would help distribute power and wealth more evenly among those that run robots, and those that will soon be run by robots

Education is Foremost

While the above reforms focus on direct effects that governments could have on their job markets, a more pressing matter is the importance of education. Governments and companies need to work together to educate youth for the job market of the future, and to expand access to all types of training and retraining for employees. In aiding and empowering workers, broadly shared growth and goals can be more easily achieved. The ability of a country’s education and job training systems (both public and private) to produce the kinds of workers who will thrive in the jobs of the future will be a major deciding factor of success. Instead of feeling doomed by automation and technology, human capital investment must be at the heart of any long-term strategy for producing skills that are complemented, not substituted, by technological change.

A fear of the future can be perfectly normal at any point in a growing society (and yes, societies are always growing and changing), but the direction of said change is very much dictated by the policymakers of the world. While those of us who live and work day-to-day can try to expose ourselves to more skills and relevant education, those at the top need to aid in the process. With the correct amount of help and guidance from governments, institutions, and companies, the benefits of automation will be felt and seen throughout – As productivity and efficiency improve, so too should our standards of living.

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