Must-read: Duncan Weldon: “Fear of the robots is founded in the messy reality of labour”

Must-Read: Duncan Weldon: Fear of the robots is founded in the messy reality of labour: “Dystopian visions of a future in which machines sweep millions of people out of work…

…are as old as technological change itself. What is missing from today’s debate about the march of the robots is an appreciation of the crucial role of labour bargaining power. When labour bargaining is weak, the Luddite fear of mechanisation is worth taking more seriously…. The best argument for being relaxed about this process is the long sweep of economic history itself…. But looking at the big picture risks missing important details….

To understand how the labour market reacts to labour-saving technology, economists tend to look at two related effects: the displacement effect and the compensation effect. The interaction of these processes determines how long a painful short run will last…. Labour market interactions are rarely the bloodless interplay of supply and demand lines on a graph. They are instead conditioned by the social and political context…. If labour’s bargaining position is weak, as it is currently, then the danger is that the higher productivity from new technologies will not sufficiently be captured in swift wage growth. Instead, it could flow to the owners of the technology…. Avoiding that unhappy outcome means recognising now that wage growth plays a crucial role in helping an economy through technological transitions and that labour bargaining power is a big part of it…