There could be trouble ahead

By R.A. | LONDON

THIS week's print edition features a cover package (leader here, accompanying briefing here) on how automation may affect labour markets over the next few decades. I certainly encourage you to read the pieces, but I will summarise one of the arguments here. The pieces generally accept the contention of scholars like Erik Brynjolfsson and Andrew McAfee, that exponential progress in computing power has reached a critical point, and machine capabilities are suddenly growing very rapidly. That, in turn, is likely to facilitate a wave of disruptive change around rich economies as entrepreneurs develop much more productive ways to do everything from moving goods around cities, to diagnosing and treating common diseases, to educating workers.

We reckon that a decent parallel for this transformation is the experience of industrialisation, which wholly remade the structure of rich economies. Industrialisation led to sweeping changes in labour demand and large sectoral shifts, and it took a very long time for the benefits of industrialisation to begin to accrue to workers in a meaningful way. Real wage growth was imperceptible for the first 60 years of the industrial era, and it was about a century before the big improvements in living standards that we associated with the modern era began to emerge.