Martin Ford has seen the future, and it doesn’t work. To be more precise, it generates wealth while obliterating demand for work. “Go West, young man”, was the career advice of the 19th century. Today’s equivalent is “get an engineering degree”. Alas, the latter is not as rewarding as the former.
A third of Americans who graduated in STEM subjects (science, technology, engineering and maths) are in jobs that do not require any such degree. Up and down the US there are programmers working as fast-food servers. In the age of artificial intelligence, they will only drift further into obsolescence, says Ford.
Though Ford is a software entrepreneur, it is easy to dismiss his prognosis as the rantings of a latter-day Luddite. That is how many responded to his last book The Lights in the Tunnel (2009), which warned of a future in which even highly skilled occupations were vulnerable.
Rise of the Robots is Ford’s answer to those critics. Unlike his first book, which was based on a thought experiment about tomorrow’s world, this one is grounded in today’s economy. It is well researched and disturbingly persuasive.
Ford’s contention is that our current technological revolution is different from earlier ones. Most economists would disagree. Their view is that today’s displacement is similar to the shift from agriculture to industry. Roughly half of Americans were employed on farms in 1900. Today they account for just 2 per cent of the workforce. Just as ex-farm labourers found work in the factories, so laid-off manufacturing workers were re-employed in the service industries. The IT revolution will be no different, economists say. It is all part of the natural cycle of creative destruction.
Ford finds two big holes in this Panglossian outlook. In contrast to earlier disruptions, which affected particular sectors of the economy, the effects of today’s revolution are “general-purpose”. From janitors to surgeons, virtually no jobs will be immune. Whether you are training to be an airline pilot, a retail assistant, a lawyer or a financial trader, labour-saving technology is whittling your numbers — in some cases drastically so. In 2000, financial services employed 150,000 people in New York. By 2013 that had dropped to 100,000. Over the same time, Wall Street’s profits have soared. Up to 70 per cent of all equity trades are now executed by algorithms.
Or take social media. In 2006, Google bought YouTube for $1.65bn. It had 65 employees. The price amounted to $25m per employee. In 2012, Facebook bought Instagram, which had 13 employees, for $1bn. That came to $77m per employee. In 2014, it bought WhatsApp, with 55 employees, for $19bn, at a staggering $345m per employee.
Such riches are little comfort to the thousands of engineers who cannot find work. Facebook’s data servers are now managed by Cyborg, a software programme. It requires one human technician for every 20,000 computers. Almost any job that involves sitting in front of a screen and manipulating information is either disappearing, or will do soon. Offshore workers in India are just as vulnerable as their counterparts in the west. China is the fastest- growing market for robots. No human can compete with the relentlessly falling costs of automation. Software can now drive cars and mark student essays.
But it is Ford’s second point that is the clincher. By skewing the gains of the new economy to a few, robots weaken the chief engine of growth — middle-class demand. As labour becomes uneconomic relative to machines, purchasing power diminishes. The US economy produces more than a third more today than it did in 1998 with the same-sized labour force and a significantly larger population. It still makes sense for people to obtain degrees. Graduates earn more than those who have completed only high school. But their returns are falling. The median pay for US entry-level graduates has fallen from $52,000 in 2000 to $46,000 today. It has stagnated for postgraduates. Education is by no means a catch-all solution, says Ford. Not everyone can get a PhD. Assuming that highly skilled jobs can take up the slack is “analogous to believing that, in the wake of the mechanisation of agriculture, the majority of displaced farm workers would be able to find jobs driving tractors,” he says.
What, then, is to be done? Peter Thiel, co-founder of PayPal, said: “We were promised flying cars, and instead what we got was 140 characters.” He was right of course; Twitter is not comparable to the invention of printing. Yet in another sense, he was wrong. We live in a world where everyone with a grievance wields more power in the palm of their hands than the computers that sent Apollo 14 into orbit. Ours is a super-democratic age. Ford does not believe technological progress can be stopped, nor that it would it be desirable to try. Yet the robot economy is inexorably squeezing our rewards in the jobs market. Ford’s answer is to pay every adult a minimum basic income — or a “citizen’s dividend”. There is logic to his remedy but not much realism. My forecast is that cars will fly before that happens.