The term ‘technological unemployment’ has long been on the horizon. As early as 1930, John Maynard Keynes described this phenomenon as “our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.” Advancements in the fields of artificial intelligence and automation have revived the prospect of technologically driven unemployment and inevitably raise new questions on the distribution of income between labour and capital.
Clearly there is a lot to gain from innovation and technological progress, specifically in the form of increased productivity and competitiveness, as well as the safety and well-being of workers. According to Harvey, “the advance of micro-electronic technology gives firms the possibility to manufacture a more diverse rate of products and also to increase the quality of those products offered.”
However, technological change also fundamentally transforms the way a firm manages its industrial relations, i.e., the relationship between employers, workers, and labour unions, as jobs shift towards more complex, non-routine tasks and firms aim to make use of newly acquired technologies.
According to Harvey, in the face of technological change, “firms are required to reciprocate and accept the union more as a partner than an adversary.” The idea is that when corporate management implements change in cooperation with unions, workers are encouraged to share intimate knowledge on the production process that can likely spur further innovation and growth. When, on the other hand, job, security is jeopardised and management does not make any attempt to reconcile its worker relations, labour may try to thwart automation, and information privy to the worker is lost. Harvey concludes that “the firms with more cooperative industrial relations were on average the ones that are performing best in the marketplace.”
In support of this view, a 2022 paper published in the British Journal of Industrial Relations explores the relationship between so-called ‘cooperative institutions’ and robotization in a number of OECD countries. The author, Toon Van Overbeke, links higher rates of robotization to greater cooperation: a surprising trend considering the competing interests of capital and labour that are intrinsically present. Moreover, is the positive relationship a result of a genuine alignment of interests or an attempt to undermine labour? Belloc et al. posit that stronger unions and employee representation put an upward pressure on wages and may incentivise the firm to employ more automation in the production process to disorganise labour and circumvent costly input factors. Van Overbeke disputes this argument, claiming that wage coordination and bargaining exhibit negative effects on robotization. Instead, in the presence of institutions, employers focus on long-term strategies that ensure equitable outcomes.
So, at what point do we see the positive effects of cooperative institutions on robotization? In his paper, Van Overbeke reveals that there are functional differences between institutions that have varying implications for the utilisation of automation in the production process. I asked Van Overbeke to elaborate on what exactly is causing these disaggregated effects. In his response, he outlined the central issue that these institutions aim to resolve is lowering transaction costs and facilitating coordination between capital and labour. While wage bargaining can underpin this task, individually, it does not contribute to higher rates of robotization. Works councils, tripartite bargaining, and sectoral institutions, on the other hand, do resolve this issue. “By providing long-term venues for bargaining, they allow capital and labour to coordinate their interests and land on a long-term cooperative equilibrium on crucial issues such as skills, contracts and investment.”
Still, the manufacturing sector does not represent the entire labour market, and soon robots may not serve as an appropriate proxy for automation. It thus remains difficult to say how cooperation will behave across other sectors of the economy and how workers will square against less tangible forms of automation, specifically, artificial intelligence.
Finally, the evolution of automation does not only elicit an assessment of capital-labour conflicts, but also highlights intricate within-labour distribution effects. Naturally, labour-saving innovation will displace some low-skilled workers in favour of high-skill professions that require extensive education. Ultimately this can lead to the so-called “hollowing out” of the middle of the job and wage distribution. As Martin Ford notes in his book ‘Rise of the Robots: Technology and the Threat of a Jobless Future’, “as top managers increasingly employ data-driven decision making powered by automated tools, there will be an ever-shrinking need for an extensive human analytic and management infrastructure.” In other words, not only will low-skilled workers come under pressure, but “layers of middle management will evaporate,” adding to job market polarisation.
Although his paper explicitly targets capital-labour conflicts, I was curious to see what role cooperative bargaining practices can play in mitigating labour market inequality in light of technological change. Having visited a few factories, Van Overbeke assured me that “cooperative bargaining practices also provide good outcomes for low-skilled workers.” As an example, one factory reallocated its workers to other low-skilled jobs as they automated, avoiding lay-offs altogether. Fundamentally, we are also seeing a reversal in what we value in terms of the method of production for certain goods. In a world where consumers are exposed to mass-produced products everywhere, traditional, and non-mechanical methods of production are making a comeback. In other words, “technology does not just take away certain tasks, but dynamically readjusts what we value.”
We still have a way to go before automation dominates the workforce, but the perils of labour-saving innovation certainly call for collective measures that give workers a voice in technological changes in their firm. In the race between man and machine, cooperation seems to be the best option.