TECHNOLOGY AT WORK

February 2015
Citi GPS: Global Perspectives & Solutions
57
Technology has two effects on employment
— the destruction effect and the
capitalisation effect
The scope of automation is increasing as
algorithms for big data are able to perform a
much broader scope of non-routine tasks
4. The World of Work in the 21 st
Century
What will the future of employment look like? Most past attempts to predict
this have arguably been unsuccessful. In his famous chapter on machinery,
published in the third edition of The Principles of Political Economy and
Taxation in 1821, David Ricardo argued that the substitution of workers by
machines may “render the population redundant.” 75 In a similar vein, John
Maynard Keynes predicted widespread technological unemployment as a
result of mankind failing to find sufficient new uses for its labour as machines
replace workers in old occupations and industries. 76
The obvious reason why this concern has not materialised is that the replacement
of workers by machines will have effects on all product and factor markets. An
increase in the efficiency of production which reduces the price of one product will in
turn increase real income and thus increase demand for other goods.
In short, technological progress has two competing effects on employment. As it
substitutes for labour, there is a destruction effect, requiring workers to reallocate
their labour, but there is also the capitalisation effect, as the demand for other goods
and services increase, and new occupations and industries are created.
Although the idea of technological unemployment did not materialise during the 20 th
century, there is growing concern that Keynes’ prediction may come true. What will
happen in the 21 st century remains to be seen, but it is clear that the potential scope of
job automation is expanding and will inevitably continue to expand. Meanwhile, the jobs
created by digital technologies have so far largely been confined to skilled workers. In
this section, we highlight these developments and their potential implications.
The Expanding Scope of Automation
Historically, automation has been confined to routine tasks involving explicit rulebased
activities that can easily be specified in computer code. 77 The term
“computer”, for example, initially referred to an occupation stemming from the
invention of calculus in the 18th century. With the advent of the electronic computer,
the routine task of performing mathematical operations was transferred to
machines, displacing human labour in the process. 78
Since then the potential scope of computerisation has increased dramatically, and
will inevitably continue to do so. Algorithms for big data are now rapidly entering
domains reliant upon pattern recognition and can readily substitute for labour in a
wide range of non-routine cognitive tasks. 79 Moreover, intelligent robots with
enhanced senses and dexterity are now able to perform a much broader scope of
non-routine manual tasks.
This is changing the nature of work across occupations, industries and countries.
With the improved sensing available to robots, jobs in transportation and logistics
are now at risk of automation. Take the recent development in autonomous
vehicles, for example, potentially making bus, truck and taxi drivers redundant.
75 Ricardo (1821).
76 Keynes (1930).
77 Autor et al. (2003).
78 Grier (2013).
79 Frey and Osborne (2013).
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