The authors make the case for a deliberate effort to steer technological advances in a direction that enhances the role of human workers.
By Anton Korinek and Joseph E Stiglitz
The covid-19 pandemic has necessitated interventions that reduce physical contact among people, with dire effects on our economy. By some estimates, a quarter of all jobs in the economy require physical interaction and are thus directly affected by the pandemic. This is highly visible in the medical sector, where workers and patients often come into close contact with each other and risk transmitting disease. In several countries medical workers have experienced some of the highest incidences of covid-19. Moreover, as patients were advised to postpone non-essential visits and procedures, medical providers in many countries have also experienced tremendous income losses.1
In economic language, covid-19 has added a “shadow cost” on labour that requires proximity. This shadow cost reflects the dollar equivalent of all the costs associated with the increased risk of disease transmission, including the costs of the adaptations required for covid-19. It consists of losses of both quality adjusted life days from increased morbidity and quality adjusted life years from increased mortality, as well as the cost of measures to reduce these risks, such as extra protective equipment and distancing measures for workers. Some sectors will incur increased costs from changing the physical arrangements in which production and other interactions occur so that there can be social distancing. It is, of course, understandable that we take these measures to reduce the spread of the disease: by some estimates, the social cost of one additional case of covid-19 over the course of the pandemic is US$56 000 to US$111 000.2
This shadow cost on labour is also accelerating the development and adoption of new technologies to automate human work. One example is the increasing use of telemedicine. Telemedicine is currently provided in a way that changes the format of delivery of care but leaves the role of doctors largely unchanged. However, it reduces the need for workers who provide ancillary services and who typically have lower wages than doctors—for example, front office or cleaning staff—thus increasing inequality. Moreover, going forward, it may also make it possible to provide medical services from other countries, which has hitherto been difficult, and hence reduce demand for doctors in high income countries.3
Complementary investments, for example internet connected devices such as thermometers, fingertip pulse oximeters, blood pressure cuffs, digital stethoscopes, and electrocardiography devices could further revolutionise the delivery of medical care and may also reduce demand for nurses.4 Such technologies have already made it possible to establish “virtual wards” for patients with covid-19.5 But even once covid-19 is controlled, medical providers will take into account the risk of future pandemics when choosing which technologies to invest in.
Looking further ahead, technologies powered by artificial intelligence (AI), such as Babylon Health’s chatbot, foreshadow a possible future in which medical functions traditionally done by doctors may also be automated. This would reduce labour demand and generate a whole new set of potential problems.6
In the past, cybersecurity risks such as computer viruses have held back automation, especially in the medical sector, in which privacy and security are of particular concern. It is ironic that a human virus is now levelling the playing field and forcing automation because it has lessened the appetite for employing humans.
These developments have the potential to reduce labour demand and wages across the economy, including in healthcare. However, making labour redundant is not inevitable. Technological progress in AI and related fields can be steered so that the benefits of advances in technology are widely shared.
AI, Automation, And Labour Demand
The fear of job losses has accompanied technological progress since the Industrial Revolution.7 The history of progress has been one of relentless churning in the labour market, whereby progress made old jobs redundant and created new ones. This churning has always been painful for displaced workers, but economists used to believe that the new jobs created by progress would be pay better than the ones that became redundant so that progress would make workers better off on balance, once they had gone through the adjustment.8
The most useful way to analyse the effects of a new technology on labour markets is not to look at whether it destroys jobs in the short term—many technologies have done so, even though they turned out to be beneficial for workers in the long run. Instead, it is most useful to categorise the effects of technological progress according to whether they are labour using or labour saving—that is, whether they increase or decrease overall demand for labour at given wages and prices. For example, automating many of the processes involved in medical consultations, as in the example of telemedicine, is likely to be labour saving, whereas new medical treatments to improve patients’ health are likely to be labour using if they are performed by humans.9 In the long run, as markets adjust, changes in labour demand are mainly reflected in wages not in the number of jobs created or lost.
Overall, technological progress since the Industrial Revolution has been labour using—it increased labour demand by leaps and bounds, leading to a massive increase in average wages and material wealth in advanced countries. The reason was that innovation has increased the productivity of workers—making them able to produce more per hour—rather than replacing labour with robots.
However, more recently, the economic picture has been less benign: a substantial proportion of workers in the US—for example, production and non-supervisory workers—earn lower wages now (when adjusted for inflation) than in the 1970s.10 Moreover, although it is not clear whether this finding holds in the rest of the world, the share of economic output in the US going to workers rather than the owners of capital has declined from 65% to less than 60% over the past half century.11
Lower skilled workers have been the most affected. Many recent automation technologies have displaced human workers from their jobs in a way that reduced overall demand for human labour.12
Excerpted from ‘Covid-19 driven advances in automation and artificial intelligence risk exacerbating economic inequality‘ by Anton Korinek and Joseph E Stiglitz.
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