Rise of Robots: Technology and the Threat of Mass Unemployment by Martin Ford. Brilliance Corporation, New York, 2015.
Basic Income: A Transformative Policy for India by Sarath Davala, Renana Jhabvala, Soumya K. Mehta and Guy Standing. Bloomsbury Academic, London and Delhi, 2015.
THE Economic Report of the President is an annual document prepared by the White House’s Council of Economic Advisers (CEA) that provides the U.S. Congress with an overview of the nation’s economic progress. Deep inside the pages of this year’s report (released in February) was buried this remarkable nugget: a CEA study estimated that low-paying service jobs (those paying less than $20 an hour) faced an 83% chance of being automated, with those in retail, fast-food and construction particularly susceptible. While total jobs lost to automation are hard to quantify – estimates range from 9% to 50% – it is clear that the elements for a complete transformation of the job market are fully in place.
Martin Ford, a Silicon Valley entrepreneur with over twenty-five years of software design experience, skillfully chronicles this process in Rise of Robots: Technology and the Threat of Mass Unemployment. A simple question lies at the heart of this book: ‘Can accelerating technology disrupt our entire system to the point where a fundamental restructuring may be required if prosperity is to continue?’ (emphasis in original)
Ford’s book is a compact and accessible guide to the future of work. He argues that robots and the ongoing revolution in big data and machine learning will render humans obsolete, irrespective of the colour of one’s collar, level of educational attainment, or functional specialization. He outlines several economic trends suggesting that the American economy is headed in this direction. Productivity gains accrue increasingly to investors and firm owners while wages for the typical worker are stagnant and in some cases, even declining. The share of corporate profits in national income is rising steeply even as labour’s share continues to fall. The term ‘jobless recoveries’ has now entered the lexicon, with both the quality and quantity of job creation declining in the aftermath of the recession, along with falling labour force participation rates and increasing economic inequality. Unemployment continues to be rife among recent graduates, with fully half of all STEM degree holders failing to find jobs in those fields.
Ford asserts that information technology is fundamentally to blame. The acceleration in computing power has allowed companies to become exponentially more productive with disproportionately small teams. In turn, economic crises wreak havoc among middle-skill, middle class jobs leaving only low wage jobs and high-skill professions intact, and weakening consumer demand as a result.
Ford misses a few steps in this analysis. First, if he is right about the power of automation to evaporate jobs – and given his expertise in Silicon Valley, he is likely to be correct about the trend, if not the magnitude – then it is possible that American policymakers may respond to this offshoring of jobs to the ether with protectionist legislation that forces firms to improve hiring practices. Second, there is a glaring lack of sustained discussion regarding the industries that will spring up around producing, maintaining, and disposing the hardware and software components multiplying across the economy. If at least a sizable minority of the low skill jobs displaced by automation can be absorbed by service-adjacent employment, the future of work will look distinctly less dismal. Finally, Ford emphasizes the widening gap between productivity growth and worker’s compensation and suggests that advances in information technology are to blame for wage stagnation. This line of reasoning understates the role of regulatory decisions such as falling overtime protections and an inflexible minimum wage ceiling that have eroded labour standards across the American economy. Despite such minor sins, the first half ably captures how the blistering pace of technological change is in very real ways altering the economy.
It is in the second half, where Ford conjures a dizzying array of real-world examples to make this transformation come alive, that the book begins to falter. Several potentially transformative innovations, from online education to 3D printing to autonomous cars, come with the same caveats to explain their lack of ubiquity: a low return on investment, an inability to scale efficiently, and prohibitive costs. As these qualifications echo across chapters, it is difficult to remain impressed by the tremendous hype surrounding these new technologies.
Towards the end, Ford includes an interesting summary of the challenges facing China and India. He identifies a common predicament of several emerging economies, namely, a marked decline in manufacturing’s share in the national output at a time when there is a dramatic increase in new entrants to the labour force. A more generous reading of this dilemma and even Ford’s characterization of the peculiar set of economic forces powering this change suggest that this is a shared concern for several advanced economies as well, albeit on a lesser scale. His answer is elegant, and as old as the 15th century humanist Thomas More who first suggested it: an unconditional basic income (UBI) paid to all adults irrespective of other income sources. Doubtful of technology’s ability to resist the tenets of Moore’s Law, and frustrated by partisan gridlock, Ford seeks to disrupt the very foundation of the wage-labour relationship.
The second book under review focuses exclusively on this policy idea. The idea of the UBI has enjoyed something of a renaissance in recent years, with experiments underway in Finland, Netherlands, Canada and Kenya. It enjoys popular support across both the left and the right in the United States (it helps that past proponents have included Martin Luther King Jr. and Friedrich Hayek), and more recently, has found resonance in the op-ed pages of Indian business dailies. Against this backdrop, Sarath Davala, Renana Jhabvala, Soumya Kapoor Mehta and Guy Standing’s Basic Income: A Transformative Policy for India provides an excellent overview of the real-world challenges of implementing a basic income scheme and its potential as a tool of poverty reduction.
The authors argue convincingly that India’s welfare regime continues to suffer from poor implementation, clientelism and inefficient targeting. In particular, the authors single out the Public Distribution System and the Mahatma Gandhi National Rural Employment Guarantee Scheme as emblematic of the issues plaguing India’s welfare and social policies. Using empirical evidence collected by past studies, the authors show that staple foods promised by the former fail to reach the poor and often suffer from shortages, while the latter creates poor quality assets and disincentivizes the training of unskilled labour. The authors contend that a universal and equal sum paid to individuals can improve both social equity and administrative efficiency.
In the chapters that follow, the authors present the results of two modified randomized control trials (RCTs) conducted in Madhya Pradesh, funded by the United Nations Children’s Fund (UNICEF) and overseen by the Self-Employed Women’s Association (SEWA). Even with small grants, amounting to 30% of monthly expenditure for families living at the poverty line, the authors are able to ascertain four clearly positive effects.
First, they find the basic income had positive welfare effects. Among villagers residing in the basic income villages, the consumption of nutritious foods like pulses, fresh vegetables and meat shot up by 1000%, 888% and 600% respectively. Compared to the control villages, nearly twice as many households that did not previously possess latrines had one at the end of the evaluation period. There was reduced incidence of illness as preventive actions like regular food intake and medication became normalized across villages. There was a strong positive impact on school enrolment and attendance, especially among female students, with suggestive evidence for improvement in school performance.
Second, the basic income resulted in more equitable development. With individualized payments, welfare for marginalized groups improved significantly as they began to exercise agency within their households and the community. Third, it spurred economic activity. Villagers worked harder than before, with the number of adults engaged in two economic activities (own-account farming with small business on the side) in basic income villages being significantly higher compared to control villages. Both wheat production as well as investment in storage facilities increased as villagers sought to provide food security to the community. Fourth, it reduced indebtedness. The propensity to save increased in basic income villages over the pilot period, and in several cases villagers were able to escape from bonded labour and reduce dependence on moneylenders for funds. Cash, quite literally, became cheaper.
Taken together, these results powerfully demonstrate the benefits of unconditional transfers and emphasize the ‘transformative’ potential of this unorthodox welfare policy. The authors make an effort to anticipate and disarm several conventional critiques of a universal basic income – that if given a chance, people will spend the extra cash on alcohol or drugs, that they will lose all incentive to work, and so on.
The authors do not, however, manage to convincingly vanquish the ‘external validity’ bogey that has long loomed over RCTs. In brief, this critique argues that policymakers must account for factors like political systems and public institutions that may influence the success or failure of interventions. Given India’s vast economic and geographic disparities, these results should be treated with extreme caution – if anything, the successful examples from this book should inspire more such field experiments across the country.
Further, it is doubtful that shifting the burden of funding and implementing such a scheme from external actors like UNICEF and SEWA would be as smooth as the authors make it out to be. The book provides several object lessons in the difficulty of carrying out field surveys in India, and is a testament to the authors’ and enumerators’ commitment to ensuring that the pilot schemes were implemented according to the original research design. Though innumerable challenges exist in the implementation of the simplest government schemes, yet the authors afford little space to discuss the feasibility of retooling the state or district level bureaucracies to deliver cash. The authors wisely advise against dismantling current delivery mechanisms before instituting a UBI and suggest that there be a brief overlap to enable the transition. But where will the additional state capacity to manage unconditional cash transfers in addition to Byzantine welfare schemes, even if temporarily, come from?
Finally, the book does not provide details regarding the cost of implementing a monthly cash transfer. For this policy to be considered a valuable and feasible alternative to current methods of welfare provision, a clear cost-benefit analysis needs to be conducted to examine the cost of providing cash compared to PDS or other mechanisms.
All told, both Martin Ford, and Jhabvala et al. have presented nuanced yet powerful arguments for reconsidering income redistribution in an age of capital-biased technological change. For readers interested in the forces reshaping the fabric of modern society and the arsenal of policy responses at our disposal, both texts will serve as an excellent resource.