E&OE TRANSCRIPT
PODCAST INTERVIEW
THE CONSTANT INVESTOR
WEDNESDAY, 27 SEPTEMBER 2017
SUBJECT/S: New book Changing Jobs: The Fair Go in the New Machine Age
ALAN KOHLER: Welcome to The Constant Investor's Spotlight interview with Alan Kohler and today I'm talking with Jim Chalmers, who has just written a book with Mike Quigley called Changng Jobs: The Fair Go in the New Machine Age. Now if you see this book in the book shop you'll see my name on the cover because they asked me to do a cover note on the book which I was very pleased to do, because I read it, I liked it, I thought it was great!
My comment on the cover is, “The first book I’ve read that brings what’s happening around the world to Australia. Great analysis of a genuine but under-discussed issue.” I think it is under-discussed and I think it’s a really important issue for investors as I'm sure you would realise given all the stuff we've been doing lately on technology and artificial intelligence.
Jim and Mike have looked at the social consequences of that, the political consequences as well; a look back at history, the Industrial Revolution, Agricultural Revolution before that. And so I thought it would be a good idea to catch up with Jim at least to learn a bit more about the book and what's going on as a taste of what he and Mike had found and it might just encourage you to go buy.
So here is Jim Chalmers, who is a Labor MP and Shadow Minister for Finance. Mike Quigley of course used to be the CEO of Australia's NBN company before being replaced by Bill Morrow. But anyway, here's Jim Chalmers.
Jim, it feels a bit like the book's fairly pessimistic. Are you a pessimist?
JIM CHALMERS, SHADOW MINISTER FOR FINANCE: Not at all, Alan. I think there's a tremendous upside to technological change. I think it has the capacity to address, if not overcome, a whole range of obstacles to a good life in a thriving society. But a lot of people have got some genuine anxieties about where they fit in workplaces in particular which are dominated by machines. And so what we've tried to do here, Mike Quigley and I in this new book, is we've tried to say, well "how do we address some of the things that people are worried about without denying ourselves some of the broader aggregate benefits of technological change?".
KOHLER: It does seem to me that in some ways the central point of your book is the sentence that "there is no such thing as technological trickledown". That is a slightly pessimistic thing to say. I mean, a lot of technologists think that the whole thing is you just have the technology and then everyone will benefit. You seem to be saying that's not the case.
CHALMERS: No, what I'm saying and what Mike is saying is that we need to care about how opportunity is distributed in the new machine age. We think that there are broadly three ways to deal with it. Three paths that policy makers can go down. The first is that technological trickledown that you just referred to and I think is the sort of Malcolm Turnbull approach to "these are exciting times" and we just let it rip and the cards can fall where they may and we'll see how we go. We think that's not the right way to go. At the other extreme, we've got that sort of One Nation end of things, which pretends that we can hold back some of these changes, which is also unrealistic and ultimately undesirable. So what we say in the book is that we can make some meaningful interventions when it comes to our schools and skills, when it comes to our social security system, industrial relations, and even in the way that we live our lives so that we can make some of this technological change work for us and not against us.
KOHLER: Well in that answer, you introduced politics into it and you don't do that in the book. The book is fairly apolitical if I can put it that way. Why would you say it's political?
CHALMERS: I don't think it is a political book. I think your assessment of it is pretty well right, Alan.
KOHLER: No, I'm saying it's not a political book. You just introduced politics.
CHALMERS: I just think that there are three schools of thought and people can make their own assessment, but I think one is the sort of populist protectionist end which says that we can prevent some of these changes happening. The other end is the kind of let-it-rip crowd. All I'm saying is that ours is sort of the third approach, which says that we can make some intelligent decisions now which properly distribute opportunity in the new machine age and give people a chance to succeed. It is not a partisan book, you're quite right, but I think there are those three schools of thought and ours are the third one.
KOHLER: You've done a fair bit of work on the lessons of the Industrial Revolution. In fact, all technological revolutions including agriculture. Explain to us what you found.
CHALMERS: Yeah, I think this is really the seventh big revolution in our workplaces and in our society. You had the Agricultural Revolution the first time round, then the Scientific, then the British Agricultural, then the Industrial Revolution, which everybody knows a lot about. Then you had electrification and then you had the Digital Revolution, or the Computer Revolution, which started around the middle of last century with the advent of transistors and then the world wide web and all of that sort of thing. But I think this revolution is a bit different, because those first six big changes did a lot to replace and replicate human effort where as this one - the machine age - this revolution that we are confronting now does more to replace human traits. Things like decision-making and problem solving and learning and observation and all of those sorts of things that make us human. That's what makes this revolution something different entirely from the six that went before it.
KOHLER: Do you mean that the first six were about helping humans do things and this one's about replacing them?
CHALMERS: Some people would put it that way. I'd prefer to think of it that the first six replaced human effort, this one has the capacity to replace elements of what makes us human - those decision-making aspects. And what's really happened here is because computer power has gone through the roof and because algorithms are becoming more and more sophisticated, it means that machines can learn from big sets of data. And so they can continually improve with things like speech recognition or image recognition. Even things like medical diagnoses, the sorts of things that we used to consider to be inherently human in the new machine age can be performed by artificial intelligence and robots.
KOHLER: You say that the Industrial Revolution didn't result in increased unemployment, but it did result in a lot of dislocation and probably arguably led to Marxism, didn't it?
CHALMERS: A hell of a lot of dislocation. And we tell the story in the book of the experience of one particular young woman, what her life was like in the Industrial Revolution; the very poor working conditions, for example.
KOHLER: Tell us that story. I think that's quite interesting.
CHALMERS: There was a parliamentary inquiry and as part of the parliamentary inquiry in the UK, this young woman talked about what her day was like, showing up very early, leaving very late, having very little in the way of breaks.
KOHLER: You forgot the main point Jim, which was that she was six years old!
CHALMERS: And a lot of child labour of course, yes. All of these things. And until the Government really caught up with the appropriate regulations and the appropriate public policy responses, that dislocation really did a lot of harm to people. And that's one of the lessons that we're picking up here, to say that even though this revolution is different, even though the machine age is different to the changes we've seen before, we still need to have some anticipation and collaboration and foresight and planning to make sure that humans do have a place in these changes, that their lives aren't ruined by these changes and that they can take advantage of those big upsides to technological change.
KOHLER: One of the things that I've been on about is the way that technological change this time around is coming on the back of the impact on globalisation, and you don't go into that in too much detail but you do kind of hint at it. There's a table on page 41 of data from Michael Coelli and Jeff Borland looking at the decline in middle-pay occupations of 19 per cent between 1966 and 2011, while at the same time, highest-paid occupations rose 17 per cent. That presumably, that period from 1966 to 2011 was primarily about globalisation. Is that right?
CHALMERS: We talk a bit about globalisation in the book. It is an important factor. We see it through the prism of what's called labour linking, which is the idea that as technology improves, it doesn't really matter where the task is performed, so you get a lot of jobs being performed elsewhere and countries have to choose what part of these big global value chains they want to occupy. That comes down to things like technology and skills and infrastructure and also things like wages, as you know. The story that table that you refer to on page 41 tells is really about the hollowing out of middle-income jobs, which is another new phenomenon. A lot of your listeners - a lot of people that I run into in my electorate and beyond - are very familiar with the story about robots and automation replacing low-skilled jobs in factories, process workers, that sort of thing. But what we need to become used to and what we need to address is that technology has the capacity to hollow out the middle-income jobs - jobs like translation, for example, is one that we spend a lot of time talking about in the book. And what that means is that a lot of people who would be otherwise occupying those middle-income jobs are pushed down to compete in some of the lower income areas and that has implications for wages and inequality and unemployment and all of that.
KOHLER: So to what extent do you think the dislocation may be caused by this double whammy of globalisation followed by technology means that Trumpism, if I could put it more broadly than Donald Trump himself, is more a longer time problem or issue than an aberration?
CHALMERS: I think that's exactly right, Alan. That's one of my real fears, that along with the anxieties about where people fit in workplaces dominated by machines, that encourages people to consider the sort of fringe elements in their politics. It makes them look for political alternatives - not just Trump, as you mentioned, but right around the world there is that prospect. And what the story is there is that a lot of people feel, with some justification, that the rules of the economy are written to benefit somebody else and so they want to re-write the rules. And I would like to re-write the rules too, but along the lines of a country where we've got inclusive economic growth, where people are being rewarded for effort, where we've got a decent social safety net. And part of all three of those objectives is how do we teach and train our people to succeed? How do we get social security right? How do we get industrial relations right? And how do we change our approach to technology so that we can access the benefits of technological change? Mike and I say in the book that we think that we think that technological change in the workplace is arguably the defining anxiety of our time. There are a lot of other things that people are worried about - climate change, terrorism, a lot of things that they have reason to be worried about - but I think this is really the main game and the in time I'd like to spend in the federal parliament, I think this is the main issue that we'll need to confront.
KOHLER: In the chapter entitled "What Governments Could Do" you say "let's begin with what not to do - a universal basic income paid to everyone". So why not?
CHALMERS: A lot of high profile people have pitched that up as an idea and I don't lightly dismiss that idea necessarily, but we spent a long time thinking about it. We've spent probably more than a year thinking about it, Mike Quigley and I. When you really look at it, what a universal basic income does is it has the capacity to make society less equal. What you want with social security, is you want it targeted to the people who need it most. But what a universal basic income would do would be to give everybody the same amount of money. That would be very expensive as well. Even if we gave everybody $10,000 for example, that would cost more than twice the current social security budget and that has implications for things like tax and all the rest of it. So we're not big fans of the universal basic income. We think there are other paths you should go down. But it's a pretty radical idea and think that's a really good example of the fact that this is troubling people so much that they are prepared to discuss and deliberate on changes as substantial as that.
KOHLER: It would involve a complete reshaping of the welfare system, wouldn't it?
CHALMERS: Yes, and we've got a really well-targeted social security system. The international institutions have said for some time about Australia, particularly with the efforts that have been put into means testing over the last 10 or 12 years or so that we've got a targeted social security system, which means that we give ourselves every chance of providing support to people who need it most. Whereas going down the path of a UBI would really unwind a lot of that good work and would give money to people who don't need it at all. And so for all of these reasons we don't support it. We don't dismiss it, as I said. But it's not one of our 33 recommendations in this book.
KOHLER: You examine and talk about the "tax the robots" idea that a few people have put forward, including Robert Shiller. What's your view about that?
CHALMERS: Robert Shiller, as you know Alan, is a huge deal in the global economic community and he has pitched up this idea of taxing capital differently, especially taxing robots and then using that money for training. And that's a pretty powerful idea in one sense, and others like Bill Gates have also backed that idea. We're not quite ready to recommend that in the book. We discuss it. We say that there's a lot going on in the international conversation about taxing robots that we should be a part of. But we don't think there's sufficient rigour or detail around that idea yet to pick it up off the shelf and implement it in Australia.
KOHLER: So you're proposing three improvements to Australian social security. Can you just run us through what you're suggesting?
CHALMERS: We think that technology has the capacity to do some real good when it comes to social security and sort of more broadly, social services. We've got all of this data and we want to use the data in the social security system for good, not evil. We want to use it as a way of better targeting and assisting people, not just using it for punitive interventions, that's one thing. Another thing is there is a lot of Australians with a disability who would like to work more but whose disability prevents them from doing so. So there are technological avenues open to them to augment their work and to make that work possible. We also need to think differently about a term you'd be familiar with, which has popped its head up over the years, which is reciprocal obligation. And I think too often that's been narrowed down to a focus on Work For The Dole, but I think we could broaden that out, particularly for older displaced workers in things like mentoring and volunteering. We need to rethink that. But the big thing is because people can anticipate having more and more transitions between jobs - their jobs will turnover more frequently - if you graduate from Year 12 at the moment, you can anticipate having something like 17 different employers in your life, five different careers, an average of just over three years per job and so we need to care about those transitions between work, and that means things like income smoothing, things like wage insurance, other ways that we can smooth people's incomes out to allow for the bumpy incomes they get in a more volatile jobs market.
KOHLER: Now obviously your focus is on social and workplace changes and economic changes, but our audience and The Constant Investor is investors. Have you given much thought to how best investors should approach this?
CHALMERS: I think the best thing for investors and also CEOs and senior managers of businesses around the country is to think about where do we fit in this global economy dominated by machines? Our big chance there really is to get our skills base up to scratch. That means appreciating that we can't just do one bit of training or learning at the end of high school and hope that that sustains us for the next 40 years of one career. The Singaporeans have got a really good initiative called SkillsFuture, which tries to say to business and to investors "let's reward the workers who want to constantly retrain" not as some sort of triage when people lose their job and are temporarily on the scrapheap, but to try and work out how do we make training a constant part of people's work week? How do we make it ongoing and habitual and granular and industry-led? I think that whether you're and investor or an industry leader, we've all got an interest in getting that right. So one of the main focuses of the policy proposals is around how we teach and train people for the future.
KOHLER: And what about artificial intelligence? What do you and Mike think the implications of that are for the corporate world?
CHALMERS: I think the main thing for the corporate world is the way that we can interpret data and recognise patterns, not just in the sort of narrow approach to things like trading, but right across the spectrum. We can identify and understand and analyse big trends in industry that we couldn't necessarily do before because artificial intelligence has the capacity to learn from what's gone before and to learn from new inputs and new data. So it's pretty exciting I think from an investor point of view and from a corporate point of view the sorts of things that are possible which we may not have thought of 10 and 20 and 30 years ago.
KOHLER: Have you come out of this process, writing the book, with some clear ideas about what you want to do with your own money?
CHALMERS: I'm a pretty passive investor, as you'd appreciate, being in the parliament we have a pretty hands-off approach to how our money is managed for obvious reasons. We don't want to get caught up in any kind of conflicts. But I think what it has helped me appreciate really are the big trends coming at us down the pipeline and what they mean for Government policy above all, rather than individual investment strategies. And I've also really appreciated that as people have learned that we're writing this book over the last 12 or 18 months or so, people from all walks of life - investors, financial planners all the way down to schools and teachers and all of that sort of thing - everybody's got an interest, everybody's got a stake in it. I think we've written at a time when people have really turned their mind to it, so that's a good thing.
KOHLER: Great to talk to you, Jim. Thanks.
CHALMERS: Good on you, Alan. Thanks for the opportunity.
ENDS
