Human Capital and Public Finance Book Report on The Future of Work
Human Capital and Public Finance
Burt Barnow
Book Report
Carl Mackensen
The book I am reviewing is The Future of Work: Robots, AI and Automation, by Darrell M. West, published in 2018. I will go through a summary of each chapter, followed by a critique of the book including questions on the book itself, as well as further questions that can be extrapolated from the book which would have been nice to have answers on. The book is broken down into sections, the first has chapters on robots, AI, and the Internet of things. The second, on Rethinking Work, Lifetime Learning, and a New Social Contract. The final section includes chapters on Is Politics up to the Task, and Economic and Political Reform. This book, overall, explores the impact of emerging technologies on work, education, politics, and public policy. It agues we must rethink work and move towards lifetime learning. It questions whether the US is up to the task of easing this transition. If we cannot meet the coming issues, there could be serious economic and political disruptions.
Section One: Summary
Robots
The argument for replacing labor with technology is an old one. In brief, the following quote sums this up; ‘They’re always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case.”” (Page 3). Also, a computer kiosk doesn’t need to be paid 15 dollars an hour to take orders. Digital tools cut costs, improve productivity, and reduce the reliance on human employees. Tech is replacing both blue and white collar jobs. This is not the first time we have been faced with a ‘megachange’. One hundred years ago we moved from an agrarian to industrial economy. Now we are moving from an industrial to a digital economy. Poor governance is a serious threat to expanding the definition of jobs, revising the social contract, and extending models of lifetime learning. Current political dysfunction, inequality, polarized media coverage, and societal divisions, make it not clear that we can weather the storm of disruptions. We need more effective governance, and its absence could undermine democracy.
Costs of robots have fallen, leading to greater use because they are a substitute to labor, particularly in China and abroad. In the US, the push for a higher minimum wage has exacerbated this. New robots cover working in hazardous areas to dealing with sick chickens to hotel service products to education through virtual telepresence. Used to be that robots did mechanical, repetitive tasks. Today they go further, learning from experiences of other devices. They sense and learn. Do specific tasks and adjust as they perform. Some have a sense of disappointment with the tech advances. Wanted tech to empower people, undermine social hierarchy, and revolutionize daily life. This has not occurred. Some cite rules and regulations as slowing development. Most big problems are beyond tech. Access to healthcare, poverty rates, lack of access to education. Need to address the underlying social and economic problems. Sometimes, tech makes things worse, such as increasing inequality or increasing social and cultural tensions. Further, who is liable for robot actions? What about the gig economy, where workers don’t have benefits?
AI
Some see no threat, others, such as Musk, see large disruption and even threat. AI is spreading into everything. This can improve human productivity. It can change communication and commerce. It can change how people getting information by introducing algorithms to decision making. It is causing change in the workforce and daily life. This piece particularly looks at AI, machine learning, facial recognition, autonomous vehicles, drones, VR, and digital assistants.
AI could transform much. Machines make decisions using certain criteria. They are included in finance, transportation, defense, resource management, and beyond. One example would be stock market trades powered by quantum computers, another smart buildings and energy. Defense data mining is another possibility for unusual or suspect situations. Service delivery would also be a venue, such as tailored medical help in emergencies. Bankruptcy is another, through reading past cases and evolving. China is also investing heavily, particular in face and voice recognition, using massive data for administrative operations, law enforcement, and national security. Every country needs data for AI to work.
Internet of Things
New tech increases efficiency, but business needs people play as consumers. Tech can create jobs and aid society. How innovation affects workers is also important. IOT links a lot of things together through high speed communication and intelligent software. High speed networks, sensors, automated processes are all part of this. Health care, transportation, energy management, and public safety could all be effected. The developed world will be increasingly connected, accelerating tech innovation and its impact on society. Increased convenience will be the name of the game, and it will be disruptive to the social, economic, and political status quo. High speed 5G networks will be instrumental. Small devices will do high level computations. Connected devices will have billions of nodes. High speed internet and instant transactions are already coming to fruition. The huge amount of data generated will be analyzed in real time for better decision making. Suggestions will be more personalized, immersive, and result in enhanced experiences. This can be applied to appliances, home security, energy grids, entertainment. Faster uploads and downloads facilitate digital services. Geography will no longer be a constraint, particularly for underserved rural and urban populations. Cloud storage facilitates this further. Data analytics mines health information for the benefit of the consumer. This is done through deidentifying, cleaning, aggregating, and probing data in large databases. Tech helps increase quality and reduce costs.
Rethinking Work
There is the possibility of a new human era. We need to rethink work, and what counts as work. We need to provide benefits for those whose work doesn’t provide them, and broaden work to include volunteering, parenting, mentoring, and expand leisure time activities.
Machines will displace workers. Between tech and outsourcing, there just isn’t as mch need for as many full time workers. Large firms with small US based full time workers will define the 21st century economy. It will be characterized by a small workforce, external supply chain, and reliance on independent contractors or outsourcing. New jobs today are in online ventures. The number of jobs lost in some sectors exceeds those being created. The most falloff is among the high school educated and Black men. Increased tech and trade are responsible for reduced demand for young and middle aged male employees. Worker prosperity is also a concern. Worker incomes have suffered over the past several decades due to tech, and also decreased union bargaining power. In some fields, tech is substituted for labor. Tech destroys jobs and creates new and better ones, but a smaller number of them.
“Researchers predict AI will outperform writing high-school essays (by 2026), driving a truck (by 2027), working in retail (by 2031), writing a bestselling book (by 2049), and working as a surgeon (by 2053). These experts believe there is a 50% chance of AI outperforming humans in all tasks in 45 years and of automating all human jobs in 120 years.” (page 68)
Tech is changing operations, not just the number of jobs. It is hard to predict the impact due to its early stage. “47 percent of US workers have a high probability of seeing their jobs automated over the next 20 years” (page 70). Most likely to be automated are “physical activities in highly structured and predictable environments…which make up 51 percent of activities in the economy and account for almost $2.7 trillion in wages” (Page 71).
Others dispute this, saying new jobs will be created. Gains and losses will even out. Work will be transformed, but humans will still be needed. High and low ends of work may be favored, while the middle may be hollowed out. Some see the need for robots as population grows and ages to maintain the standard of living. Some still argue that completely new jobs will be developed, as has happened previously.
This brings us to new models and the sharing economy; business models are changing. The ‘fissured workplace’ where business leaders have devolved authority to a broad network of outside companies, distant suppliers, and remote managers” (page 79) will be the name of the game. The sharing economy, “the peer-to-peer-based activity of obtaining, giving, or sharing access to goods and services, coordinated through community-based online services.” (Page 80) will also develop. Development of the gig economy will also take place. Sharing will continue to grow, such as ride sharing, bike sharing, Airbnb, eBay, craigslist, second hand goods amazon, and renting goods. This is gGood for flexibility and part time work. But there are no benefits for the workers. Volunteering and Parenting can be seen as work; work also includes part time, volunteering, mentoring, and parenting. Millennials have different approaches to work and leisure, and want to help their communities. With less work and more leisure, we should think about making volunteer work eligible for social benefits.
There could be more leisure time. If workers are not needed, we can construct meaning outside of work. Even if we work, we may have more leisure. The time for nonwork activities such as art, culture, music, sports, and theater will grow. We will move from consumption to creativity. There will also be more time for family and friends, as well as hobbies.
A New Social Contract
The new economy doesn’t guarantee income, health care, or retirement benefits. Employers are moving to temporary staff. The lack of benefits could lead to societal discontent. “Employment is becoming less routine, less steady, and generally less well remunerated. Social policy will therefore have to cover the needs of not just those outside the labor market, but even many inside it.” (Page 89). The lack of full time jobs would exacerbate socioeconomic divisions by weakening the distribution of benefits. New models are needed. Some possibilities include establishing citizen accounts with portable benefits provided by the government, paid family and parental leave, revamping the earned income tax credit to help the working poor, expanding trade adjustment assistance for technology disruptions, providing a UBI, and deregulation of licensing requirements so that it is easier to pursue part time positions.
Who should pay? Bill Gates proposed a ‘robot tax.’ Some say the problem isn’t automation, but the inequality caused by it. We may end up with inequality, social conflict, political unrest, and a repressive government. How do we retrain workers, and who pays transition costs? We could raise the income tax for high earners in top 1%. However, the amount needed would probably be more. We could do a progressive tax on high consumption goods. A solidarity tax, taxing net property, stock, pension and financial assets owned by high net worth people, is also a possibility that is done in some countries. It has been proven that trickle down won’t work, in which benefits go to the top 1%.
Lifetime Learning
With rapid technological, organizational, and economic transition, it is vital that people engage in lifelong learning. We can expect to switch jobs, see whole sectors disrupted, and need to develop additional skills due to economic shifts. There are different possibilities for life time learning. Community colleges, private businesses, distance learning for vocational training that is inexpensive and accessible to adults are all options. However, these skills need to be those needed for the long term. Young people need the most relevant training. We need some way for people to pay for new skills acquisition. Disruption will be the hallmark of the future workforce. This is due to the rise of digital tech.
Is Politics Up to the Task?
A major challenge currently is how to generate a social consensus around needed workforce and policy changes. Changes could threaten income provision, health benefits, and retirement support. Developed countries could have underemployment or unemployment, which could lead to risks to civil peace and prosperity. Things are currently very polarized. It is hard to get people to think about digital disruption and the future of work.
There have been large disruptions in the past. Changing from agrarian to industrial was devastating for workers. Real wages fell 10 percent between 1770 and 1810, and didn’t rise until 60 to 70 years later (page128). Change brought severe transition costs. Mass production and factories caused the need to retrain workers, address food safety, enact child labor laws, reduce economic concentration, and manage mass migration. Leaders devised new policies and built new business models. Economic and political reforms helped adaptation of these problems. Primary elections, direct election of senators, and state initiatives gave people a voice. Social security and unemployment were started. Women were given the vote and income tax was started. Following WWII, there was similar turmoil. The World Bank and IMF were started. The Marshall Plan was introduced.
Political and business leaders have difficulty coming up with realistic ideas that Congress will agree on. Tech can undermine truth and trust. Public discontent is signaled by politics. Inequality makes it impossible to finance what is needed. This is tied to emerging technologies. It is not just a financial issue, but affects politics and basic governance. The rich are much more involved in politics and hold views different to those of the public, being far more conservative on issues related to social opportunity, education, and health care. They do not support a major role for the public sector. There is a strong link between ‘affluence and influence.’ All of this makes everyday people cynical.
‘Flexicurity’ is the separate provision of benefits from jobs. We could also change the number of hours worked. Government will lose tax dollars with autonomous vehicles and other progress. The challenge is to bring the benefits of digital revolution to a wider range of people. Many don’t have digital access, including 20 % in America and half around the world.
There are risks to inaction. Worsening inequality and social upheaval are some possibilities. Growth alone doesn’t help inequality. Trump saw manufacturing and trade as bad for workers, but in reality, it’s spread far beyond that. There is a mismatch between economic output and political representation. 15% of counties in America generated 64% of GDP, on the coasts and voted for Hillary. The 85% of other counties that voted for Trump generated 36% of GDP. These areas felt neglected. US geographical economic inequality is growing. There is a push against globalization, free trade, immigration, and open economies. There is also a decline in trust in journalism coupled with a rise in disinformation campaigns.
Economic and Political Reform
Politicians could take short term measures for security that are actually detrimental in the long run. There are some short run answers. Developing a new concept of work including parenting, mentoring, and volunteering, enacting paid family and medical leave, expanding the earned income tax credit, and improving health, education, and well-being.
To address economic dislocations, enacting universal voting to reduce political polarization, reducing geography-based inequities, improving legislative representation, abolishing the electoral college, enacting campaign finance reform, and adopting a solidarity tax to finance needed social programs would all make change.
In the past, jobs weren’t the only means of having meaning in life. It used to be linked to your family, ethnic group, religion, neighborhood, or tribe. We could return to this, and have a job be only part of what we do. We need to be able to earn income and social benefits outside of a job. Some possible means include privately operated citizen accounts, worker-controlled benefits, or government-run benefit exchanges. Workers should control their benefits, and they should be portable across employment and geography. The demise of the American Dream and the social mobility associated has impacted the working and middle classes negatively. We need to help the health and education of those negatively impacted by tech innovation and economic disruption, including improving pre-school and worker training.
We also need a new kind of politics. We are highly polarized around role of government. Conservatives want less, and liberals believe public sector has important tasks to stabilize, deal with imperfect markets, and help people adjust.
Section Two: Critique
In this section I detail some of the questions I found after completing reading this work. Some are on the basic foundations of the text, others are questions that I would have liked to have seen answered, but weren’t.
Does the author provide adequate evidence for conclusions and recommendations?
The author provides virtually no evidence for his conclusions and recommendations. He cites a few quotes from famous thinkers here and there, and has this work sprinkled with references to the past, but there is no true evidence or quantitative analysis anywhere in this work. This is a core weakness for the piece, as it makes all of its arguments seemingly off the cuff arm chair philosophizing by someone who I suppose may be qualified to do so, but without having any true substance to the arguments.
Did the author use appropriate qualitative and quantitative methods?
What methods there were, were almost entirely qualitative. This is not to say that qualitative methods are bad ones, I certainly believe that a well articulated case study can teach much, but this is not the form that the qualitative analysis takes. As I say above, it is more in the way of anecdotes that the author introduces these methods, then in any substantive or defensible way.
Did the author ignore relevant literature?
There was virtually no reference to other texts in this piece. Instead, the author relied on a few quotes and public opinion surveys. For someone who wants to completely reshape the nature of work, you would think that a deep dive into relevant literature would form a back bone for his arguments. This was not the case.
What further research and recommendations are called for?
In his final chapter, the author details Economic and Political Reform that he would like to see take place as a result of his analysis. This is all fine and good, and much of it makes sense if you accept his initial premises, but without a substantive analytical framework, there is little in the way of supportive evidence in place to have us accept his recommendations.
The following questions are ones that were generated by me in response to reading this piece.
What is the role of government?
The author argues for a lot of change. This is fine, but he doesn’t get to the core issue in his prescriptions; namely, what the role of government is. For his assertions to be true, and his recommendations take effect, we need a clearly argued and reasonable defense for why government should take up these tasks, as opposed to the private sector, or individual citizens. Personally, while I favor market mechanisms in terms of policy prescriptions, I also am a ?New Deal Democrat, and believe in big and bold government programs. I believe the government should spearhead much of the development that the author argues for.
Who should pay the costs?
This is slightly gone into, by virtue of discussing different taxes, particularly solidarity tax and wealth tax, but the author admits that his analysis is insufficient. In order to actually implement most of these changes, we will need a radical rethinking of what taxes are taken from whom, and how they are redistributed throughout society. Personally, I believe that a consumption tax would go a far way towards funding the author’s recommendations, combined with other taxes.
How should that payment take place?
Again, wealth and solidarity taxes are argued for, but this is a weak argument. Something like a consumption based tax would make a lot more sense, or perhaps private industry paying directly into funds that allow for the movement of benefits for workers from one place to another.
Do we need radical change, or incremental?
This is not addressed at all. The author cites some projections of how much of the economy will be driven by tech in the future, but then there is no prescription as to whether his proposed changes should take place immediately overnight, or gradually with time. Personally, after reading this piece, I do actually agree that change has to take place, and fast, but to do so immediately would ostracize many in society. Realistically a phased in approach makes a lot more sense.
Given the speed of tech change and inequality, will developing countries be left in the dust, or leap frog?
This is not addressed whatsoever in this text. The core focus is on the US, and perhaps other developed countries. The author does cite that inequality will worsen both nationally for the US, and internationally for all people, but there is no talk of how to ameliorate this. I believe the developing world holds a unique opportunity for leap frogging old technology and moving right into the new, as Africa has seen solar and wind developments for energy without needing a classical grid. This would go a long way towards bridging the gap between the developed and developing.
Should growth be the focus of macroeconomic policy, or a new, circular economy?
This is not alluded to whatsoever in this piece, aside from the seemingly implicit bias that growth is always a good thing. I do not believe that growth needs to be the focus of all economic policy. We can have an economy of maintaining the status quo while our population grows, but also focus on a circular, recycling economy in which value is added at every transaction, even ones where traditionally there would be waste.
What would you want work to look like for your children and grand children?
Future is in the title of the book, so the author does write with future generations in mind, but he never makes it personal enough to really pack a rhetorical punch. Personally, for my future and my children’s future, I would like to see an economy that operates at the height of technological development, but also one where everyone has a fair chance at working towards what is rightfully theirs. I also see a world where divisions that currently plague us have been passed by, and where everyone on Earth has the same basic starting conditions. I realize this is likely impossible, but I can still be motivated to get us as close to that world as possible.