Disruptive Technology – more jobs or less?

Disrupted Employment: Will technology destroy jobs?

A start-up business with a product called Lunecase is planning to bring intelligence to an iPhone case.   The idea is for the product to use electromagnetic energy generated by the phone to notify the user of new text messages or missed calls, without the need to switch from stand-by mode.  In this way, it is possible to check your phone for updates without eating into its battery. It an example of product aimed a niche market and illustrates an important point, technology can create jobs, as well as destroy them.

In 2014, the UK saw more start-ups being formed than ever before, the signs are that 2015 will see even more. There is a good reason. New technology has created countless new opportunities to develop products aimed at a specific niche.  So, we have seen the rise of the entrepreneur, small businesses operating in a host of niche markets, from Fintech to nanotechnology, each looking to fulfil a need that, not so long ago, no one knew needed filling. 

And that, your honour, ladies and gentleman of the jury, in a nutshell, is the case for the argument that technology will create more jobs than it destroys. The case against will be made in a moment.

The case for technology supporting jobs

Ever since the time of the Luddites, the view that technology is a force for job destruction has permeated economics, media reports, and even conversations down the pub. The story of the industrial revolutions of the 18th, 19th and early 20th centuries was that technology had a much more subtle effect than that. Sure, in the short-term it did often destroy jobs, in the long run, it created more than it destroyed.  By creating efficiencies in the production process, new technology also led to higher wages, creating demand across the economy, fuelling economic growth Disruptive technology and jobsand more job creation.

You only need to ask an IT worker whether computers have created jobs.  Think how computers and word processing software has done away with the need for typing pools and virtually eliminated the profession once called ‘short-hand-typists’.  These were jobs typically carried out by female members of the work-force, yet since that time female employment has increased, wages for women have risen. Okay, technology does not provide the only explanation, but it does provide a partial reason, besides there is a wider point. The argument that technology can create more jobs that it destroys is supported by the tale of how employment and wages increased, even as more people did their own typing.

This time, though, technology is creating a new type of opportunity. It party lies with what Chris Anderson calls the ‘long tail’. The internet has made it easier to sell products to a worldwide audience. As a result, it is now more practical to generate a profit from making and selling a product, even if it only appeals to a tiny niche. For example, a product that only appeals to 1 per cent of 1 per cent of the population may have world-wide demand of around half a million people. Before the internet, it may have been impossible to market such a product. Technology has also lowered barriers to entry. Consider, for example, the market for apps. It is now possible for two or three people working from a spare bedroom, or one of the many co-working spaces that have grown in recent years, to develop an app that proves to be a worldwide hit. The low barriers to entry that technology provides, and the opportunity to sell to aspects of a ‘long-tail’, have combined to create opportunities for entrepreneurs. Furthermore, these opportunities may have been considered too niche, or too much of a distraction for larger companies to consider. Or if these larger companies do consider these opportunities, then they do as so at arms-length, via investment into start-ups perhaps via accelerator funds.

According to a report from Deloitte, over the last 140 years evidence suggests that technology has been a job creating machine. It cites the rise in hairdressers as an example of how rising living standards have transformed sectors. The report states that “The dominant trend is of contracting employment in agriculture and manufacturing being more than offset by rapid growth in the caring, creative, technology and business services sectors.” It says: “Machines will take on more repetitive and laborious tasks, but seem no closer to eliminating the need for human labour than at any time in the last 150 years.”

Another example of digital technology and entrepreneurism lies with the so called sharing economy. According to Department of Transport statistics, since Uber moved into London the UK’s capital has seen the number of cab drivers grow by 26 per cent.   Uber may be disrupting the taxi company business, but employment for taxi drivers is growing. Likewise, Airbnb is creating opportunities for individuals to generate an income from their home, but the net effect is likely to be a rise in the number of people paying to stay away from home.

The case against technology, why it may destroy more jobs than it creates

There are problems with many of the above arguments. Sure digital technology is fuelling the rise of the entrepreneur, but we can’t all start and run a business.

The sharing economy may be leading to an increase in the number of taxi drivers in the short and even medium term, but self-driving cars may change this. Technology can create and then destroy.

The sharing economy may create greater efficiencies, and enable us to make more efficient use of our existing assets, but if you extrapolate this out across the economy as a whole, the end results may be less demand. Take the car industry. How will it cope if more of us start sharing lifts, or indeed if we share self-driving cars? The car industry is set to go through major upheavals. It’s only hope is that the rise of India and then Africa will create demand for cars, which will cancel out the effect of the developed world needing fewer cars to meet our needs. Only this hope stands between the industry’s collapse. Even then any respite will be temporary.

What is clear, is that technology is doing more and more of the jobs that were once considered to be impossible to be automated. It has been estimated that within a few years, 80 per cent of what doctors currently do will be carried out by technology.

The view that technology created new types of jobs, such as IT, does smack of old thinking. In an age of robotics and artificial intelligence getting steadily more sophisticated, the list of jobs that can never be automated is reducing in size. Accountants and actuarial work may be on the road to extinction.

Carl Benedikt Frey and Michael Osborne from Oxford University penned a recent paper arguing that the type of job that is most likely to be carried out by machines is telemarketing. Other jobs that sit high in their list of occupations that they identify as likely to be replaced by technology include insurance appraisers, insurance underwriters and tax preparers.

Even entrepreneurs face a threat

Incredibly it has been suggested that computers may even take over from humans in the role of innovation. An article published in New Scientist on 29th August 2015, states that the “eureka moment could be dialled up on demand as leaps of imagination are replaced by steady steps of software. From algorithms that mimic nature’s way of producing the best designs to systems that look for gaps between existing patented technologies that new design may fill, computer assisted invention is here.”

Think of it this way. What is the most innovative force we know of? Answer, evolution. But, evolution does not require imagination for it work, it works by combining randomness with an automated selective mechanism, and a multigenerational approach to change. In the digital world, the innovative process created by evolution can be mirrored, but millions of times faster.

The chance

Frey and Osborne do suggest that some jobs are safe from automation for the foreseeable future. They say that say jobs that involve a high level of social intelligence are less likely to be disrupted. Occupations that are likely to be safer include those which involve developing ideas, originality, negotiation, social perceptiveness, and assisting or caring for others. They cite occupational therapists, mental health counsellors, healthcare social workers and teachers as examples of jobs that seem quite safe from disruption. 

We can’t all cut hair

While the 20th century may have seen the rise of the hairdressing industry, it is both a cliché but true nonetheless to say we can’t all make a living by cutting hair.

It may be true to say, however, that there will be a need for most of us to take on some kind of a caring role. The day computers can take-over from carers is the day humanity loses all purpose. Furthermore, thanks to demographic changes, the populating is aging and the need for care will grow to massive levels.

The last human characteristic to be replaced by AI/robots/computers will be empathy. Jobs that involve empathy, be they caring, nursing, counselling, involving some form of social support, or even using 3D printers to work with customers to design and make bespoke products, may be the jobs that are safest.

The challenge may lie with finding a way to ensure the fruits of technology trickle down such that there is economic demand for the roles that computers cannot fulfil to be funded.  There is one snag, the jobs that computers will find it especially hard to replace, are often poorly paid, or even come under the voluntary sector. This will have to change.

By Michael Baxter, Chief Economist, iDisrupted