Where's the Plan to Confront Technological Change?

09 March 2015

Originally published on ABC's The Drum.

In economic debate, people rarely use the term "Luddite" as a compliment.  If anything the mention of Luddism or neo-Luddism is a kind of economic Godwin's Law, casting the prospect of any kind of reasonable debate out the window.


Today's economists are asking us to embrace technology and prosper from it, despite the challenges to our labour market. So where are the Government's forward-thinking policies, asks Jim Chalmers.

In economic debate, people rarely use the term "Luddite" as a compliment.  If anything the mention of Luddism or neo-Luddism is a kind of economic Godwin's Law, casting the prospect of any kind of reasonable debate out the window.

But in recent months, and now in the wake of the Government's Intergenerational Report released this week, there has been resurgence in the use of the term in the global and domestic press.

But deeper reflection suggests that use of the term in this way does not give full justice to an important discussion of the impact of technology on our future workforce and economy – a discussion largely absent from the IGR.

The original Luddites date to the 1770s, when tech-rebels led by Ned Ludd mounted an attack on emerging technology. In 1779, after a whipping for idleness, he destroyed two weaving frames that he blamed for his unemployment.

Three decades later, 150 armed workers rioted in his name, destroying a textile mill and beginning a spur of similar attacks across England. Over the course of these attacks, seventy Luddites were hanged for their crimes.

While sharing Ludd's concerns about the impact of technology on the workforce, today's economists and commentators are no Luddites. Stiglitz is not when he uses a technical economic model to show that technological innovation can make most people worse off.Kotlikoff and Sachs are not when they find similarly that the long run effect of technological advancement is "no tech-utopia". Frey and Osborne are not when they estimate that 47 percent of all jobs in today's economy are vulnerable to technological displacement over the next two decades.

These prominent economic thinkers are just a subset of the many who are concerned about the effects of technology on employment, pointing to real historical examples of permanent technological displacement.

Stiglitz points to American agriculturalists of the 1920s who were displaced by technology and could not overcome the barriers to labour mobility to take new jobs in the cities. Many of these farmers never recovered. Stiglitz has hypothesised that agricultural innovation may have even helped precipitate the Great Depression

The difference today is that instead of affecting one industry, in one geographical area, technology is displacing jobs from most industries in most areas. Frey and Osborne have even created a cheery little table containing the likelihood of your job being taken by machines, ranging from 99 percent if you are a telemarketer to around 0.3 percent for the lucky recreational therapists.

What's more, globalisation and the rise of the Asian middle class has meant that it's not just the developed economies being threatened, an observation perhaps best illustrated byFoxconn's aspiration to replace their one million Chinese employees with the same number of robots.

But these economists are not really Luddites. None of them are calling on gangs of armed workers to take out the industrial robots that populate our factories, to bring down our computer networks or to liberate us of our smartphones.

In that way, they're not Luddites and they're not denialists either. Instead what they want is for us to confront these technological changes on the horizon, and for governments to develop policies to help minimise any detrimental impacts on our living conditions and to maximise the benefits of change. 

So it was heartening to see a recent Pew research report paint a brighter picture, surveying thousands of experts and concluding technological change can create more opportunities than it destroys but only if we get the education and training settings right to equip people for ‘skills-biased’ work into the future.

That's one of the reasons the Abbott Government's Intergenerational Report has been such a disappointment. The Treasurer’s brief mentions of technology in his 145 page document do not seriously consider the impact of technology on our future economic parameters.

Hockey doesn’t tackle the technological influences on a labour market which Treasury still assumes will return to 5 percent unemployment indefinitely.  He doesn’t frame his labour productivity projections in the context of ever-increasing productivity of capital.  And he doesn’t consider the impacts of technology on inequality and social immobility, and what this means for the kind of society we want to live in.

We need to properly reflect on the type of economy we want to be part of in the future, the role of technological change, and what type of policies we need to enact today to get there.  We need to ensure more people benefit from that change rather than fall victim to it.

That’s why unlike Ludd, today's economists are asking us to embrace technology and prosper from it, rather than destroy it. They are urging us to teach and train our people for a future charactered by robotics, automation, machine learning and artificial intelligence.

If anything, the Luddites have been replaced by another kind of economic vandals: those whose approach would have us ignore these challenges.  Abbott and Hockey fall into this category.  Their IGR was more about today’s politics than the workforce of the future.

This opinion piece was originally published on ABC’s The Drum on 9 March, 2015.