Creative destruction of jobs

  • Adam Watson Brown profile
    Adam Watson Brown
    2 February 2016 - updated 2 years ago
    Total votes: 1

A central debate behind disruptive innovation and the forces of creative destruction unleashed by new technologies is on employment. What is the impact on jobs? Factory jobs have fallen in Europe over the past 40 years, thanks to offshoring and substitution by capital of labour. The share of wages in the economy has fallen, the so called "Hourglass economy" syndrome. The problem is not just European, as the USA has experienced the same decline. Is this a permanent change or temporary? Opinion is divided. The two sides can be characterised by the optimists – such as Andrew Haldane of the Bank of England – whose recent talk to the UK Trades Union Congress argued that the labour market would compensate for lost jobs with new ones in due course - to pessimists such as Lawrence H. Summers who argue that first world economies are going through secular stagnation, lower productivity and diminished innovation. Futurists and MIT faculty such as Erik Brynjolfsson argue that up to 50% of all jobs won't exist in n years' time. The World Economic Forum is keen to initiate Industry 4.0, a more positive reading of the issue.

Much follows from who is right – and when they are right in electoral terms. If economies don't share the rewards of economic activity, then there will be strong pressure for redistribution as proposed by Thomas Piketty, sceptical that the "caprices of technology" will end in rational or just outcomes. Also notable is a renewed interest in the "basic income" concept, to be guaranteed by the state to all citizens. This has had supporters over the years from economists of both the right and the left. Commentators also mention new concepts such as pre-distribution, replacing redistribution.

How far innovation leads to new jobs will therefore affect much wider issues in society, of which taxation is an obvious one. But what lies beyond?