July 23, 2018

Will robots take your job? Between the glib, ‘it’ll all be fine’ headlines and the stark ‘end of work’ predictions, it’s anyone’s guess – which should be obvious given the technological unknowns. But what we can do is look back at the last time we faced the huge upheaval of an industrial revolution, and new research suggests the impact was rather less positive than is often thought.

It is true that the British Industrial Revolution, which spanned much of the 18th and early 19th centuries, led to more jobs, better jobs, and ultimately the huge increases in wealth and comfort that frame modern life. “Prior to 1750, per capita incomes in the world doubled every 6,000 years; thereafter, it has taken some 50 years.”1

But researchers have been looking in more detail at the costs involved in this huge jump in prosperity, at what effect the new machines had on the working population. They have unearthed disturbing facts that we need to remember as we face fresh changes ahead.

Between 1700 and 1850 the proportion of unskilled workers in the British labour force actually doubled, from 20% to 40%
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We tend to think of automation as using machines to do routine work. But at the core of the Industrial Revolution was the opposite. The heart of Britain’s hugely successful textile industry was the “domestic system” – skilled craftsmen working their looms at home. The new machines took this work into factories, and made it simpler. So unskilled operators could now provide most of the labour.

One effect of this was a big increase in child labour; the machines were designed so they could be operated by children, and they made up around half the factory hands. Having lost their skilled work, the craftsmen now faced fresh competition for the new, lower-paid, machine-based jobs.

This led to the most startling effect of all: an astonishing increase in the number of unskilled labourers. As pointed out in a recent speech to the Trades Union Congress by Andy Haldane, chief economist of the Bank of England, between 1700 and 1850 the proportion of unskilled workers in the British labour force actually doubled, from 20% to 40%. Of course, many of these workers did have skills, but they were skills no longer in demand in the economy. To find work they had to compete with farm labourers and others for unskilled jobs. It was, literally, generations before the situation turned around.

Oxford economist Carl Benedikt Frey sums up the research:

“Technological progress has created prosperity for mankind at large, yet it has always created winners and losers in the labour market. During the days of the British Industrial Revolution a sizeable share of the workforce was left worse off by almost any measure as it lost its jobs to technology.”

“During the first six decades of the Industrial Revolution, ordinary Englishmen did not see any of the benefits of mechanization: as output expanded, real wages stagnated, leading to a sharp decline in the share of national income accruing to labour.”2

To be more specific, the academics found that, according to best estimates, while output per worker increased by 46%, real wages rose by just 14%. But as working hours also increased by 20%, hourly wages actually declined in real terms.

Further reading
The full effects of automation will be way more disruptive than globalisation

By Peter Franklin

No wonder the Luddites resisted the new technology – weaving machinery introduced in the textile industry – which threatened their livelihoods. There had been machine-breaking before, and petitions, and demonstrations. But the Luddites took protest to a new level. Their efforts were short-lived. The government in London sent the army north in 1813 to quell the revolt, and soon after, 24 ring-leaders were swinging from public gallows and dozens more transported to Australia.3

David Ricardo, the nation’s most famous economist after Adam Smith, is credited with developing the theory of comparative advantage which is the basis of globalisation. Ricardo lived through the Industrial Revolution, could see what was going to happen and agreed in principle with the Luddites: “I am convinced, that the substitution of machinery for human labour, is often very injurious to the interests of the class of labourers”, though he considered it pointless for the government to oppose new technology, since “it will be done abroad” anyway.

Introducing the technology was therefore the lesser of two evils: “By investing part of a capital in improved machinery,” he wrote, “there will be a diminution in the progressive demand for labour; by exporting it to another country, the demand will be wholly annihilated.”

One big difference between then and now is that in the days of the Luddites, the workers did not have the vote
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As we look ahead in the 21st century, economists have labeled the coming changes, powered by AI and robotics, as the “Second Machine Age” (two MIT economists) or the “Fourth Industrial Revolution” (World Economic Forum). If we are on the cusp of a “revolution” that parallels the original Industrial Revolution in impact and scope, its implications for labour markets could indeed be catastrophic.

Automation then becomes a major political challenge. Because one big difference between then and now is that in the days of the Luddites, the workers did not have the vote. Economic deprivation is a potent driver of the rise of populism in contemporary politics, especially in the United States, as my UnHerd colleague Henry Olsen has been explaining. Most of those who have lost out blame bad trade deals, off-shoring, and the immigration of cheap labour. If their resentments begin to focus on technology, a fresh Luddism would be a potent force.

We should heed these sobering words from Frey: “Although the Industrial Revolution began with the arrival of the factory, it ended not just with the construction of the railroads but also the publication of the Communist Manifesto.”

Further reading
Why aren't we more worried about the new slave economy?

By Nigel Cameron

FOOTNOTES
  1. Carl Benedikt Frey et al., in Oxford Review of Economic Policy, 2 July 2018
  2. Oxford Review of Economic Policy
  3. It was rough justice. Here is an affecting account of the hanging of 14 of them, based on local newspaper reports. The men sang a hymn as they walked to the scaffold. Between them, they left 57 fatherless children.