JOHN TÖNS JP. Is the trend towards Artificial Intelligence a threat to Employment?

Jun 17, 2019

If today’s (12/06/19) National Press Club address by Chris Richardson is to be believed then the trend towards artificial intelligence presents no threat to employment. The analysis presented, however, reminded this listener to Mark Twain’s comment ‘that there are lies damned lies and statistics.’

On the face of it, it would seem that there is little to fear from the growing use of robotics or artificial intelligence. Employment data from OECD countries shows that all countries experience the highest rates of employment in history. Surely if AI is a threat to full employment it would have been shown up by now?

However, we can delve even deeper. Richardson reminded us of the shrill voices of alarm that were raised in the 1970ties. Then the threat to employment was from the influx of married women. Equal opportunity meant that the work force had effectively doubled in size, yet all these doomsayers were proved wrong – unemployment did not grow exponentially; the economy had little difficulty in finding work for all.

But perhaps there is a different lesson to be learnt from history. If we plot wage growth from 1900 to the present and likewise corporate profit growth over the same period, we notice something interesting. Up to about 1970 the two grow at roughly the same rate. However, from the early 1970ties, wages begin to flat line as corporate growth continues unabated.

This is a puzzling trend. Wages growth fuels consumption so how did the corporations continue to grow their profits? As households became dual income households part of what would have been a wage increase was used to pay the women but that alone is not enough. Corporations used their profits to enable the banks to introduce something that was unknown: the credit card. This in turn has meant that in most OECD countries the majority of households are living on the edge. The debt to income ratio for Australians is 189%. Australians need a mere adverse economic zephyr to default on their debt.

Chris Richardson is right that the influx of women into the workforce did not create unemployment but what it did seem to do is to reduce incomes forcing households to rely on cheap credit to fund their lifestyles. We can also note that during the last 50 years there has also been a significant growth in the precariat – they are not included in unemployment statistics but often have incomes below the poverty line, and as they do not have permanent employment are shut out of the housing market.

Little wonder that there is a lively debate in the literature about the idea of taxing robots. No doubt Chris would concur with the view ‘that the Fourth Industrial Revolution is no different from earlier waves of automatization, hence AI will largely complement, rather than substitute, human labor, rendering “robot taxes” in addition to conventional capital gains taxes not only unnecessary, but harmful.’ (Arndts, J. and K. Kappner (2019). “Taxing Artificial Intelligences.” IREF WORKING PAPER NO. 201902.)

It is a matter of no small concern that politicians continue to listen to economists like Chris Richardson.

John Töns JP was a teacher, curriculum writer and researcher for SA Department of Education

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