Work, income, technology and all that

A few weeks ago, commenting on one of my posts on New Zealand’s relative economic underperformance, a reader (a former Treasury economist) encouraged me to read  Jobs, Robots & Us, a book published earlier this year by Bridget Williams Books and written by Kinley Salmon, an economist and consultant (formerly of  The Economist and McKinsey) raised in New Zealand but now resident in the United States.   My reader suggested that he thought “the politics will not appeal” but that there were useful insights in the book.  So I bought and read it.

It is a funny mix of a book. It is written in an enviably accessible style and has positive blurbs from an impressive range of fairly prominent  and well-regarded economists (David Autor, Lant Pritchett, Diane Coyle, Dani Rodrik, and Ricardo Hausmann).   He covers a lot of material (50 pages of endnotes/references –  including, I noticed, one to a post from this blog).  There was the odd, really interesting, fact I didn’t know.  For example, that the first solar panel was created in 1883 and that what is essentially today’s approach to solar panels was developed in 1954, or that self-driving cars managing 90 kms per hour were a thing as long ago as 1987.    And there was a lot I was nodding along to or putting ticks in the margin beside.  There is little sign that “robots are coming to take our jobs” in any very rapid or disruptive sense, and in support of that argument he uses lines I’ve used here before: labour force participation is high (thought not, contra Salmon, record highs), unemployment rates are modest, and recorded productivity growth (especially in frontier countries) isn’t exactly dazzling.

Last week I wrote, quite critically, about the Productivity Commission’s latest draft report, suggesting that it was pursuing personal political preferences of staff/commissioners around a bigger welfare state (especially for the unemployed) under the guise of (often not very persuasive) economic analysis.  In many ways, Salmon’s book is much the same sort of piece, except that –  not being a public servant –  there isn’t a problem with him championing his social democratic vision of the world (or, rather, New Zealand –  if I didn’t mention it earlier, the book is deliberately very New Zealand focused).  In fact, it is a useful contribution to the debate around such issues, helping to frame some of the issues.   It isn’t explicitly partisan and I’m pretty sure no New Zealand politician or political figure even gets a mention (unless one wants to include Adrian Orr under that heading) but his sympathies are pretty clear.  Indeed, reading the book I was left wondering if it was intended, at least in part, as a marketing exercise for a spot on Labour’s list some time down the track, if the author ever comes back to New Zealand

In fact, Salmon links to an interesting short paper he wrote for Labour a few years ago, on the Danish flexicurity system that he –  and the Productivity Commission – champion.

Advocates of flexicurity claims that the social compact that gives rise to such provisions makes for more flexible labour markets –  people will more readily move to where the new and better opportunities are.  In this chart, the higher the number the more restrictive the law.


In his Labour Party note, Salmon also notes that 25-35 per cent of the Danish labour force change jobs each year.  In the New Zealand LEED data about 15 per cent of workers change jobs each quarter (you can’t simply multiply those numbers by four to get an annual rate, because some people will do several jobs in the course of the year).   Either way, of course that rate of turnover is (much) faster than the underlying technologies are changing.   And advocates of flexicurity –  protecting people involuntarily displaced –  often seem to overlook pointing out that most job changes, including those associated with technological change, occur voluntarily (were it otherwise there would be no new-tech firms/jobs in France, given their scores for employment protection legislation.)  Large scale multi-year unemployment problems are much more often the consequence of recessions – or, more rarely, major structural policy changes –  than of technological change.  And, of course, the ability to handle recessions –  and associated unemployment –  is much more constrained in a country like Denmark, which has a fixed exchange rate and thus no ability to use discretionary monetary policy.

But back to the book.  Here, his bottom line message seems to be that we (New Zealand) can, to a considerable extent, make our own future, and can make collective choices about how as a society we respond to new technologies.    He devotes two chapters to alternative visions, each built –  in easy to relate terms –  around individual families 30 years hence.     One, to be honest, looks a lot like now (only richer) –  but might have been just slightly more persuasive if the family concerned wasn’t generating its main income from an industry (film) that exists here now only because of heavy taxpayer subsidies.  The other was one in which most people choose not to work, but live comfortably on some mix of a UBI and a state allocation of equity shares to all when they turn 18.

Perhaps it is a useful expositional device, but I’m a bit more sceptical about quite how much choice individual societies collectively really have.  After all, technologies today are hugely different (and more advanced) than they were 100 years ago and yet –  despite reasonably significant differences in the size of government –  in important respects most advanced countries really do look pretty similar (eg no society has chosen to settle for 1950 living standards and taken the improved possibilities in dramatically shorter working weeks/lives).  And, despite Salmon’s attempt to be New Zealand specific, it is striking that “Australia” doesn’t appear once in his index (although I do recall one mention) and there is no discussion at all of how potential political choices here might be reflected in, for example, changes in the net flow of New Zealanders to Australia (the much richer exit option for decades now).  In fact, much of his discussion is really quite North Atlantic in focus –  perhaps reflecting Salmon’s own education and employment, and the authors he cites (eg those who blurbed the book) –  and he doesn’t seem to engaged in any depth with the severe limitations New Zealand’s geographic remoteness poses, or the steadily widening gaps between the productivity performance here and that in the leading OECD countries.  I guess one can’t cover everything in a single book.

Perhaps where I would be more critical is that on some issues he doesn’t seem quite sure what line he is taking from chapter to chapter.  Tax is a good example, where at some points he worries about advanced countries being too reliant on taxes on labour, and taxing capital too lightly, making the point that firms will seek to economise on expensive inputs.  But later in the book he is openly talking up the possibilities of higher (labour) income taxes, the use of payroll taxes “consistent with incentivising greater automation”.    He also can’t seem to make up his mind whether low interest rates are dreadful –  encouraging too much use of capital –  or something really positive, from a pro-active set of central banks.  Whichever he wants to plump for, he substantially overstates the importance of central banks (or fiscal policy) in influencing medium-term real economic outcomes.  He cites (approvingly) Adrian Orr urging firms to invest, without showing any sign of having thought hard about (a) why interest rates might need to be so low, or (b) why business investment rates in New Zealand have been so low for decades.    And perhaps there is a similar tension between his enthusiasm for something like flexicurity and the way he (rightly) highlights just how serious the implications for individuals (mental health etc) of prolonged unemployment can be.

Salmon comes down on the side of expecting that decades hence things will look much as they do now, in that most adults will still get up and go to (paid) work. I suspect he is right about that.  But I was somewhat puzzled by his paid-employment focus. He talks about how “it is at work where we most often find ourselves in a state of flow: that feeling of being totally immersed in an activity, energised by it and enjoying the process”.  He goes on to assert that (paid) work is a good thing because someone tells us what to do, and in the process we rise to challenges etc.  We need, on his telling, external mechanisms that force us to commit.     To be honest, it seems like the perspective of someone with a particular set of skills that are very valuable in paid work, without community involvements, and someone without too many ties elsewhere (no kids as far as I can see, his own family thousands of kilometres away).

I take his point about some retirees blobbing in front of the TV and going into decline.  But the energy and engagement and commitment of being a stay-at-home parent –  particular of very young kids –  seems something alien to his world.  And as someone who has got up each week day for almost five years and written something here, not because I have to but because I enjoy doing so, it all seems a little alien to me. Or I look at the energy and activity (often more than a little exhausting) of my (formally retired) in-laws. Perhaps these days plenty of people do need the structure work imposes, and there is certainly an ongoing demand for the services/goods paid employment provides the ability to purchase.   But it didn’t seem quite the open and shut case Salmon makes it out to be.

There is quite a bit more in the book including on climate change and a bit on immigration, where his views seem to be pretty conventionally North Atlantic centre-left (including the failure to recognise the role that rapid population growth –  or lack of it – plays in explaining why, for example, New Zealand’s emissions were rising while those of, say, Denmark and Germany were flat or falling).

It was, as I said, a funny mix of a book.  Perhaps it was really two quite different books.  One was a fairly useful survey of the issues and literature around technological change and the options, possibilities, risks etc.  That book wasn’t really very New Zealand focused at all.  And the second, woven through the first in the book we actually have, was his own policy preferences and political inclinations.   Fair enough. It was his book, But I read books I don’t really expect to agree with to be challenged and extended, to understand where others are coming from, and perhaps even to at times change my mind on some things.  Perhaps I wasn’t the target readership, although the fifty pages of notes/references suggests it wasn’t mainly a mass market publication either.  But I didn’t come away from the book particularly challenged or extended. In a way that’s a shame, because Salmon clearly has thought quite a bit about a number of the issues, and he isn’t just a partisan hack.    Despite the blurbs, perhaps the book would have been better for having taken a bit more time to test the argumentation on the policy side a bit more robustly.  And, of course, any book thinking about the New Zealand economy and its prospects needs to grapple much more seriously with the actual experience of decades of relative decline.