How to invest as machines come for our jobs

Machines are taking over

When he wasn’t explaining mass unemployment, negotiating the Treaty of Versailles, making a fortune trading stocks from his bed or inventing modern probability theory, John Maynard Keynes had a few ideas about the future of work.

Writing in the 1930s, Keynes predicted that automation and rising productivity would lead to a world of ease and plenty. In the future, people would work for 15 hours per week, he said, which would give us more than enough income to satisfy our needs.

This idea was still in vogue when I was being taught economics in the 1970s. The early spread of computers and increasing automation made Keynes’ dream seem achievable in our lifetimes.

But today, it’s clear that Keynes got it wrong. Instead, we live in a time where junior investment bankers are keen to do basic repetitive tasks for 90 hours per week. And where the government allows you to opt out of the EU working time directive, if 48 hours a week just isn’t enough to satisfy you.

Despite our eagerness to toil all the hours God sends, the share of national income taken by labour has been falling in recent years. Average wages are stagnating. They used to grow a little faster than inflation. Now they are lagging.

So the big political issue at the moment isn’t unemployment, which most economists (wrongly) expected to be a lot higher after the crash in 2008. The big issue is this squeeze on real wages (that is, wages adjusted for inflation).

Are we stuck with low wages?

I would normally blame the economic cycle for this. And if the economic cycle is to blame, the problem will resolve itself as the economy improves and the labour market strengthens.

Our labour market is a lot more flexible than it used to be, back when the unions ruled. So workers might well be pricing themselves into jobs by not demanding inflation-busting pay rises. It’s reasonable to expect their bargaining power will improve as unemployment falls.

But something tells me that this might not happen. In fact, there are a couple of reasons that I suspect this squeeze could be permanent.


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First, there is globalisation. At first, the West lost basic manufacturing jobs as millions of workers in emerging markets entered the global workforce. Then we saw white collar jobs in call-centres, and basic legal, financial and IT tasks being ‘offshored’.

Cheap communications and IT meant that previously ‘safe’ service sector jobs could be carried out almost anywhere.

The latest big trend which is hurting workers is automation. Voice recognition technology means that you no longer have to choose between Mumbai and Middlesbrough for your call-centre. Instead, you can locate it in the cloud, and let the computers do the work.

Computers are getting smarter

Computers are getting a lot better at reading text, too. They can use smart algorithms and huge processing power to ‘understand’ human language. So rather than put-upon junior lawyers or bankers ploughing through legal texts and contracts, the machines will be able to take over.

I wrote recently about Aim new-issue Arria NLG, which makes software which is able to write technical reports in everyday language. Once the machine has been taught the industry specifics, it can generate useful reports far quicker than a technically qualified human could.

Machines are getting better at ‘working with’ humans. Another example is Google’s driverless cars. They’ve already clocked up half a million accident-free miles in the US.

Driving in normal traffic was something that most of us would have thought needed a human. But the end of the taxi driver could be closer than we thought. There’s already a trial planned for Milton Keynes next year.

How to invest in this trend

So, what ‘safe’ jobs should I try to direct my children into? It’s not at all obvious what jobs will be unaffected by the relentless progress of machines. A lot of the growth stocks I look at for Red Hot Penny Shares employ very few people relative to their market value.

A few well-paid technicians develop valuable services and software, while the support tasks are either outsourced or just don’t exist anymore.

This seems to tie in with the view that the labour market is splitting in two – that a small number will enjoy great success by working with computers, but most will struggle.

Workers and parents might find this future unsettling. But as investors, we can choose to be on the right side of this trend. That means looking out for companies that are exploiting growth in computer power.

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  • Texas Pete

    I don’t doubt for a minute that when my 6 year old twin sons come of age that many of the jobs available now will be performed by machines. I’m already teaching them how to build basic circuits and plan to get them a Raspberry Pi to teach them how to program, build computer controlled devices, etc, so they have the skills they need (or can develop these) – they will need to be creators, innovators in order to make their way. We have to adapt to the world that it coming. Whether I like all the changes or not is irrelevant – every era has its Luddites but this has never and won’t stop technological progress.

    I also think it will only be a few years before an increasing number of what are currently relatively well paid jobs are automated. I had a message today about planned tube strikes. Why TFL are paying £50k+ salaries to tube drivers when the automated Docklands Light Railway has been running for at least 20 years is beyond me. I would also have thought that a powerful computer algorithm could plan flight plans as effectively, if not more so than an air traffic controller. On the subject of aeroplanes, autopilot is hardly new technology either. Dare I mention Dr Google…?

  • robin

    I’m so pleased you have written this article. THIS is the question of our age!

    What happens when technology has put us all out of work? When we stop earning, we will stop buying things and the very fabric of our free market system will sputter and seize.

    We have survived globalisation by running up massive consumer debts that have kept consumers in the market so that the engine of our economy can keep going. Those debts will be defaulted on; either directly or via inflation.

    Going back to the market cycle, when the business owners have laid off all their workers, they will remain viable only so long as they are selling things to other employees that still have work. The system has within it, the seeds of its own destruction. Paradoxically the quest for profit will reduce the size of the market, cutting into profits.

    ok, I think I’ve repeated that point enough. But I would like to add; things need to change, but we don’t want to discard the free market entirely. That way went the soviets. We need competition, in fact that is the point; we need more competition, more activity, more people making buying choices so that the ‘invisible hand’ can choose what is efficient and desirable and what is not.

    We need in short; a political class with the balls to stand up to industry and redress the balance between the rich and poor. For this to happen, the poor need to stop being distracted by smoke-and-mirror issues such as immigration and taxing-the-rich and rather look at tax-havens and international corporations.

    The system won’t come to a sudden standstill in some kind of apocalypse. Rather, if we don’t do something, the corporations will, by taking all the money out of the system, slow things down to a deathly crawl. Just look at Japan; That is where we are headed.

    The system itself needs an equal distribution of money across the various players. The idea that people should only get money as long as they contribute meaningfully is false. They contribute by deciding what they want not by working.

  • Engineer

    Automated driving may well be one of the early casualties of AI. The number of people employed in this area is such that mass unemployment will happen. We need to be aware of the social consequences that are inevitable. Many of those employed in this area will be too old to retrain.

  • BillMac

    This is a subject that really needs to get into mainstream politics. We have a choice (the Keynes forecast) of everyone working fifteen hours a week or (the one we seem to have taken by default) that work is reserved for an elite and the rest can rot on benefits.

  • joe sod

    Paradoxically alot of menial jobs can’t be replaced by machine, jobs like farming, construction, nursing. Jobs where you are dealing with mud, blood etc. Jobs that are not clearly defined cannot be automated.


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