On May 21, 2019, Christopher A. Pissarides, Regius Professor of Economics at the London School of Economics and 2010 Nobel Laureate in Economic Sciences, payed his very first visit to IESR.
One of the major highlights of Professor Pissarides’ visit was his public lecture “Work in the Age of Robots and Artificial Intelligence” that attracted hundreds of people to the Grand Hall of Jinan University.
This topic, according to Pissarides, has been of close interest to him for many years now, even decades. His work has been concerned about the impact technology has on labor markets, and particularly about the implications for workers, change of jobs, etc.
Christopher A. Pissarides
Before elaborating on the growing impact of robots and artificial intelligence (AI) on labor markets, Christopher Pissarides firstly provided some of the background of industrial penetration by AI in the world. As data shows, a tremendous growth in AI started in 21st century, especially since 2008, with the highest growth seen in the region of Australasia. As of 2016 data, there were around 1.8 million robots in the world with most of them in Australasia (1 million, mainly in China), the U.S. (500,000) and Europe (300,000). The difference between countries is significant – for example, as compared to South Korea which has 70 robots per 10,000 employees (Japan and Germany are one of the leaders), China has only 1 robot per the same number of employees (to catch up with the world’s leaders in AI, China has officially launched Made in China 2025 initiative in 2015). Professor also notes, one of the greatest challenges is that technology is not discovered and implemented uniformly across the economy and therefore can benefit only certain sections of the economy. As data shows, 99% of robots employed in the world are in the manufacturing industry but this industry employs only minority of labor force.
This, according to Pissarides, gives rise to the structural transformation of the economy, i.e. shifting from the old means of production to the new ones, thus having a major impact on labor markets by “disrupting” it in a sense that new technology penetrates into various industries and alters traditional working methods. To explain AI role in this latest structural transformation, professor first sheds light on structural transformations of the economic development throughout the history by distinguishing three main stages – agricultural, industrial and service production. After shifting from agriculture to industrial production in the 20th century, industrial employment has started to decline in advanced countries in 1970s/80s due to the rapid growth of new technology, which was replaced by the service employment that now accounts for around 80–85% of the whole employment shares in developed countries (whereas in China it is still less than 50%).
With digital revolution, current technologies are based on computers, the internet and AI, therefore structural transformation in the digital revolution is different from earlier technological breakthroughs. Nonetheless, it is still disrupting the operation of labor markets because, having the ability to process enormous amounts of data, computers destroy jobs done by skilled people. This structural transformation involves both job destruction and job creation, so the major challenge is the transition to new jobs of the displaced labor. With regards to job destruction, professor explains, this process is ongoing due to the extensive computerization across various sectors. Based on the replacement of tasks by computers in the labor market, there are general estimates that up to half of tasks are at risk over the next 20 years, which translates to around 10–20% of jobs. Jobs that are at the highest risk of destruction, says Pissarides, is telemarketer (99%), loan officer (98%), cashier (97%), legal assistant (94%), taxi driver (89%), and etc., whereas least affected are mental health social workers (0.30%), occupational therapists (0.35%), dietician nutritionists (0.42%), and others.
Audience at the JNU Grand Hall
Despite these estimates, professor acknowledges, we still know very little about the automation in the 21st century – either how to research it in economic theory or how to estimate its impact. Besides, each new innovation puts at risk different kinds of jobs, so it is impossible for either companies or workers to plan on how to avoid the risk of job loss. One thing that we do know is that computers and AI is replacing jobs that have predictable environments (AI cannot be programmed to respond to such unpredictable environments that involves contact between one human being to another), therefore the least affected jobs are those that require people skills.
Christopher Pissarides also observes an interesting fact that in countries with higher productivity workers on average work shorter hours, yet overall employment in more productive countries is as high as that in countries with lower productivity (or even more), which implies that some of the gains from new technology are taken as increased leisure time. Given this fact, reducing hours of work is one way of keeping employment high in the time of job destruction due to AI. Although, there will still be new job creation, notes Pissarides. He distinguishes three types of new job creation: 1) new tasks invented by companies as some get automated (e.g. “relationship banking” instead of bank cahiers), therefore, the increases in product variety will lead to employment growth; 2) jobs created in the new tech sectors that would focus on complementary tasks to the new technology (e.g. app development, robot repairing); 3) jobs in other sectors of the economy. However, professor believes, these most likely won’t be enough to employ all of those who would lose their jobs.
According to Christopher Pissarides, most new jobs will be created in service sectors where there is non-mechanized human service. Moreover, new jobs will be also widely created in sectors where production gets marketized as societies become wealthier. For example, professor says, it is very likely that more and more people would choose to go to a restaurant instead of cooking at home, or hire a cleaner instead of cleaning the house. Finally, new jobs will be created in sectors whose products are luxuries, i.e. things on which people spend more in proportion to the rise in their income, such as designer clothes or luxury travel instead of choosing cheaper alternatives. Taking all of this into consideration, professor thinks, such sectors as health and care, education, hospitality/leisure, real estate management, household services, personal services, etc. will highly likely to create jobs in the future.
Christopher Pissarides believes that the role of government and business is crucial in responding to the labor market challenges that emerge due to the growth of AI. First of all, professor suggests, research, production and maintenance are very technical jobs and thus universities need to expand to cover those needs. Also, preparation has to start from schools by focusing more on STEM subjects (Science, Technology, Engineering and Mathematics). At this point, professor notes, collaboration between companies and universities or government is essential to get the best results. What is more, Pissarides suggests, big companies have to do their own training to adapt their workers to the company’s needs. And last but not least, the area that require serious attention and training is social skills which, at the moment, is still highly lacking.
Professor concluded his lecture by predicting that automation of industry in the future will lead to the increase in productivity, make society wealthier and bring about a change in the structure of jobs. Also, he added, the working week will be cut (people will take more leisure), but there will also be new job creation, especially in industries that involve human contact. Finally, professor highlighted the importance of new education and skills in taking the most advantage of these new technologies.
Christopher A. Pissarides and JNU President Xianzhong Song
After the lecture, Christopher Pissarides had an opportunity to have a talk with our Dean Professor Shuaizhang Feng and get to know our faculty a little bit more by spending the rest of the afternoon here at IESR.
Our scholars together with professor Pissarides have dived into the discussion on a wide variety of topics, including AI impact on gender equality and industrial policy in China. They also furthered the discussion on how the study of such regionally specific phenomenon as hukou can contribute to the universal field of research, or what could be the impact of changes in the world trade on developing countries.
Christopher A. Pissarides and IESR Dean Shuaizhang Feng
Christopher A. Pissarides and IESR faculty
About Christopher A. Pissarides
