Technologies are reshaping economic activity, as they always have done. Stephen Boyd offers five approaches the Scottish Government should take towards technological change.

There is nothing new about job-destroying technological change: from the seed drill and threshing machine to the silicon chip, innovations have allowed machines to undertake with requisite quality and speed tasks that hitherto could only have been performed by humans.

The consequences for the individuals, families, communities and regions directly affected have been severe, often brutal. Yet, overall, the economies of the 19th and 20th centuries managed to create new jobs at as least as fast a rate as old jobs disappeared. The higher productivity unleashed by new technologies freed up resources for investment elsewhere. The benefits were widely – if very unevenly – shared and living standards generally improved.

There are compelling reasons to believe that the current wave of technological change may be different. A decade ago, in their influential book The Second Machine Age, MIT’s McAfee and Brynjolfsson argued that the ‘exponential, digital and combinatorial’ technological progress of the 21st century will prove ‘profoundly beneficial’ but bring ‘some thorny challenges… stemming from the fact that as computers get more powerful, companies have less need for some kinds of employment’. They provided numerous examples of technologies that are redefining – or will redefine – the type of human capabilities machines can replicate.

Almost simultaneously, a widely cited study (Frey and Osborne 2013) estimated that 47% of current US jobs were vulnerable to new technologies within the next 10 to 20 years. These ostensibly mo- mentous findings inevitably provoked a flood of popular journalism painting dystopian visions of a workless future.

Increasingly, the conventional wisdom states that, not only will jobs be lost, but those who manage to retain employment are likely to see new technologies radically transform the way the workplace is experienced. This debate is most prominent around the ‘gig’ economy: the rising prevalence of insecure temporary or freelance work facilitated by digital intermediaries with business models predicated on the arbitraging of labour standards.

But the extent to which technology will destroy jobs in the 21st century is actually highly contested. The OECD debunked Frey and Osborne noting that technology will also create jobs and that tech- nological feasibility is not synonymous with economic viability. The labour market ‘has become less, not more, dynamic’. Sectoral reallocation of labour in the UK was significantly more rapid in the 1980s (as manufacturing declined precipitously under Thatcher and services boomed) than in the 2020s. It isn’t true that more people are working two jobs. Length of job tenure has not fallen.

And if capital is substituting for labour at the rate assumed in much popular writing, shouldn’t productivity growth be exploding? It isn’t. Productivity growth has been weak across developed nations since before the financial crisis, especially so in the UK. We need to try to move beyond the hype. Yes, technology will continue to reshape many economic activities. It was ever thus. Many tasks and occupations will undoubtedly decline and some will disappear. Even those who are sceptical about the extent to which technology will destroy jobs accept that technological change is likely to have profound distributional consequences.

So, how should the Scottish Government approach technological change?

1. Dispense with Technological Determinism

First, it should dispense with the technological determinism (technology x can perform task y therefore technology x will inevitably perform y) that infects so much policy debate. We have agency. It is entirely feasible – indeed necessary – to establish boundaries. Technologies that can provide the full range of caring services are not yet on the horizon (many including myself doubt that such technologies will ever exist – indeed, when human empathy is or at least should be a core element of a service, the idea seems ludicrous). But, to avoid endless speculation about people’s jobs, the Scottish Government could commit to the human component of vital services by, for instance, making clear that it can envisage no plausible scenario whereby machines become the carers of our children, sick, disabled and elderly.

In a recent report, IPPR argued persuasively that there should be ‘ringfenced tasks for human involvement’. For instance, there could be a requirement that ‘medical diagnoses are overseen and delivered to patients by humans or that much early years education retains the human touch’. This could be achieved by ‘a combination of bottom-up classification of tasks and government policy incentives. It would require significant levels of cooperation across busi- nesses, unions and government’.

2. Base Policy on Evidence, not Hype

Second, policy must be developed in response to real challenges and on the basis of credible evidence, not hype. It would be perverse to devote resources to planning for a speculative workless fu- ture when the employment rate is high and labour shortages persist across a range of sectors.

MIT’s David Autor, probably the world’s preeminent labour economist, explains why the fear of an AI jobs apocalypse is misplaced:

The industrialized world is awash in jobs, and it’s going to stay that way. Four years after the Covid pandemic’s onset, the U.S. unemployment rate has fallen back to its pre-Covid nadir while total employment has risen to nearly three million above its pre-Covid peak. Due to plummeting birth rates and a cratering labour force, a comparable labour shortage is unfolding across the industrialized world (including in China).

This is not a prediction, it’s a demographic fact. All the people who will turn 30 in the year 2053 have already been born and we cannot make more of them. Barring a massive change in immigration policy, the U.S. and other rich countries will run out of workers before we run out of jobs.

Of course, AI hype serves employer interests. Workers conditioned to believe that their jobs are always at risk of replacement by emerging technologies are likely to be more compliant that those who are aware that their labour is in fact being sold into a tightening market.

3. Use AI to Empower Workers

Third, we need to identify and prioritise ways in which AI and other technologies can complement and enhance the skills – and rewards – of workers, especially those who have seen their bargaining power diminish in recent decades. Autor again:

The unique opportunity that AI offers humanity is to push back against the process started by computerization — to extend the relevance, reach and value of human expertise to a larger set of workers. Because artificial intelligence can weave information and rules with acquired experience to support decision-mak- ing, it can enable a larger set of workers equipped with nec- essary foundational training to perform higher-stakes deci- sion-making tasks currently arrogated to elite experts, such as doctors, lawyers, software engineers and college professors. In essence, AI — used well — can assist with restoring the mid- dle-skill, middle-class heart of the U.S. labour market that has been hollowed out by automation and globalization.

The debate in Scotland has hardly begun to contemplate let alone act on such possibilities.

4. Build Institutions for the Tech Transition

Fourth, the Scottish Government should establish a new institutional infrastructure fit to respond to the technological as well as the environmental, demographic and distributional transitions of the 21st century. This will require statutory, independent and sufficiently resourced bodies to oversee industrial (including innovation) and labour market policies. Trade unions must be properly represented and employer interests have to extend beyond narrow lobbying bodies with little general or sectoral expertise.

Scotland will also have to invest much more heavily in workplace learning and a range of measures to assist the unemployed into work: training and retraining, support and rehabilitation and job-search. As things stand, Scotland as part of the UK invests significantly less in these measures than comparable European nations. Structures for collective bargaining should be established in industries such as social care and hospitality and these should have a locus to consider and plan for technological change.

5. Create an Industrial Strategy for Long-Term Transformation

Finally, the time is ripe for a revisiting of core Scottish Government economic strategy. The current National Strategy for Economic Transformation is focused on minor or irrelevant issues (the rate of business formation really isn’t a problem – we need better, larger firms not more small, underperforming enterprises) and is in totality very far from transformative in any meaningful sense.

Ultimately what has to be confronted arethe implications of an economy increasingly bifurcated between high productivity firms with concentrated ownership and personal services with intrinsically slower productivity growth assuming an ever-higher share of the labour force. Many of these services – health, education, care – are delivered largely by the public sector. Their inexorably rising relative costs will have to be borne by the taxpayer. Overall tax revenues will need to rise, and everyone will have to contribute more.

Government at all levels has to get serious about ownership and governance. The high capital intensity and concentrated ownership structures of digital/technology firms will tend to exacerbate inequalities of income and wealth. Higher prevalence of cooperative and, where appropriate, public ownership should be a key policy goal.

Concerns over the activities of some high-tech sectors (e.g. defence) should not blind us to the fact that nurturing sectors with potential for relatively fast productivity growth is desirable. A higher average rate of national productivity growth opens up policy choices that will not be available under stagnant or low growth.

This is one of the reasons why we should be concerned about the failure to develop large scale manufacturing related to Scotland’s renewable energy sectors. Over the long-term, productivity growth is significantly higher in manufacturing than in (most) services as human labour is automated.

Another recent IPPR report found that rebuilding manufacturing strengths can help build a more dynamic and competitive economy, reduce regional inequalities and reduce exposure to trade shocks. The report also provides a strategic framework to help identify areas for investment based on the size of the opportunity, existing industrial capabilities and strategic supply chain considerations.

The bottom line is that we need a higher-quality, more evidence-driven national debate about technological change. There is a flat-out contradiction in warning of an AI-induced jobs apocalypse while at the same time bemoaning (the consensus position) the UK and Scottish economy’s catastrophically weak investment performance. By what process will machines replace humans if it isn’t by firms investing in those expensive, clever machines? The problem is surely not too many robots but too few.

Stephen Boyd is Director of IPPR Scotland and previously worked for the Scottish Government. Between 2002 and 2017 he was STUC Assistant Secretary with responsibility for Economic and Industrial Policy.