Technology and the future of the labour market

This seminar will explore how technology is affecting the labour market. Recently there has been a renewed interest in this question. Advances in technology have been great. Over the last 150 years, for instance, computational power has increased between 1.7 and 76 trillion-fold. And in the past 15 years a ‘task-based’ literature has emerged to explore the consequences of these changes. This literature relies on a particular understanding of the capabilities of machines — known as the ‘ALM hypothesis’. However, this hypothesis has often led the literature to underestimate these capabilities. Tasks that were believed to be out of reach of automation can now be automated. This seminar will explore the consequences of this. First, it will describe two distinct explanations for why these capabilities were underestimated — one that is explored in the recent literature and maintains the ALM hypothesis, and a new explanation that challenges it. Secondly, it will set out a new task-based model based on new reasoning about how machines operate. This leads to a pessimistic account of the prospects for labour. In a static model, increasingly capable machines drive down relative wages and the labour share of income and force labour to specialise in a shrinking set of tasks. In a dynamic version of the model, labour is driven out the economy at an endogenously determined rate, forced to specialise in a shrinking set of types of tasks, and wages steadily decline to zero. In the limit, labour is fully immiserated and `technological unemployment’ follows. The seminar will close with a discussion of the broader political and social implications of these changes.