How Covid-19 Is Helping Robots Take Your Job

done by a machine. In a few minutes, I'll be talking about what the future holds with Harvard Economics chair and deep thinker about all things labor related Richard Freeman. Our chief European economist, Jamie Rush is also going to explain why the answer to the biggest question in the global economy right now is three point two trillion dollars. I'll leave you to work out with the questions, but first here's u s A economy reporter Olivia Rockman on the truth about robots and jobs in the year of

COVID nineteen. Adding more robots to factories, retail stores, or mines was historically seen as a job killer by workers and the unions that support them. But this year, automation has allowed sectors of the economy to continue producing with fewer people or without any at all, minimizing the coronavirus risk for workers. Unions have recognized that automation will continue to accelerate to avoid massive outbreaks like the ones seen

in US meatpacking plants earlier this year. But while they're all for protecting workers, their concern is widespread and permanent job loss. In many cases, once a company invests the cash to implement automation, it's unlikely that they'll take their workers back. A highway in Pennsylvania cut five toll worker jobs earlier this year after putting an electronic system into place, and it doesn't plan to bring any of the employees back.

Marcus Casey, an economist at the University of Illinois at Chicago, spoke with me about how eliminating jobs can exacerbate inequality those workers aren't taught new skills. High skill jobs that require creative or human touch, so to speak, will remain um even in cases where pay is not necessarily much higher.

For example, skill workers say professors like myself may see our pay is relatively flat in the future, However, among people who aren't necessarily as skilled, because there will be fewer jobs, you might see pay actually decrease because of increased competition in those sectors. One solution to the inequality problem is increased investment in reskilling, which can help factory workers transition into jobs in healthcare, for example, where automation

is more difficult to implement. That's US President electro Biden's plan ensure that employers give workers impacted by automation advanced notice and put them at the front of the line for new jobs, as well as paid skills training. Currently, though the United States, Chile, and Mexico spend the least among O E c D countries on policies intended to improve job readiness and expand employment. That isn't likely to change quickly because health concerns are coming first, and Casey

says there will be consequences. We already have a long term problem with people who are prime age and not working. Our employment to population ratio has been declining for many decades, and supposed in the future we go from a situation where we have a sixty seven or sixty eight percent employment of population rate to maybe a fifty employment to population rate. Many of those people are young, prime age malls, and our social insurance programs tend to direct money away

from that population. So I'm delighted now to be able to talk to Richard Freeman. Herbert Asherman, share of economics at Harvard, taught me a lot about labor markets quite a long time ago. Richard, thanks for coming on Stephanomics. We're talking this week about the impact that COVID nineteen has had on workers in the US and Europe, and also how fits into the longer term structural changes in the labor market that you've spent a lot of your

life thinking about and studying. And one thing that's come up a lot is the unequal way that this pandemic has hit society's and households, with poorer people much more likely to get sick and more likely to lose their jobs.

But we also know that fiscal stimulus, certainly in the US, actually increased the disposable income of many lower wage Americans in twenty and I think you've also had many parts of the world are kind of out break of social solidarity in many places, and maybe a new appreciation of the value of people in some of these low page jobs that we reminded are so important for keeping the

country going. So when you look back at do you think it's going to mark a break with some of those long term trends for labor or or more an acceleration. My guess is it will more accelerate things because the good outcomes that we had on the particularly through our almost unanimous Cares Act that really provided the people lost their jobs and the low income people are at least you know, financial protection. That was a one time thing. We may next few days plays something else, but that

will also be a short term policy. The longer term thing is that we've created two different kinds of workers, those who work at home using computer technologies and those who work interacting with other humans and dangerous settings. And so I think the real push is going to be to automate more of those jobs and um to do

more work at home phenomenon um. And that's that benefits one group of people, managers, professionals, and that harms another group of people, the people we were told next years ago, not not so long ago, where the we're going to be the heart of the new economy wasn't gonna be, you know, guys working in big factories. It was going to be all the people who interact with other humans. If this COVID is a one off and we don't see another another five six years, you know, maybe we'll

we'll just go back to a more normal phenomenon. But there's a certainly a chunk of thinking in the scientific community that this is just the first pandemic that we're going to say, and they're more coming down the line. We're entering an age of pandemics, that this is not the first one that's gonna jump um, and the climate change is gonna add more to this. So if if this is a turning point, it's going to be a turning point changing work and I think speeding up automation

and creating more problems for the lower skill people. Just to dig into that a bit, because then obviously is quite a lot of debate and pre dates COVID about the impact that the next wave of automation and artificial intelligence could have on on inequality and on and on jobs.

And there is an argument that says, actually, this next wave is going to be kind of different, and that the jobs that we see were being replaced a kind of accountants quite high skilled workers UM that have done well in the previous few decades, the middle middle manager

types potentially UM. And you might argue, I mean, if we don't live permanently in pandemic, you know, those kind of person to person to job jobs, hairdressing, all those things, I mean, they hadn't they didn't go away in the pandemic, and we're all trying to go back to our addresses when we can. So I wonder whether that we're whether you're exaggerating the impact of of COVID and not seeing potentially the other side of this automation, which does seem

to have accelerated. Yeah. I've been sympathetic to the view that the more skilled people would be replaceable by really smart AI UM. But so far the evidence is that that hasn't happened. And all the AI experts told us accounting is gonna just die off, and in fact, the accountants keep increasing, and of course the accountant profession gets

more computerized and people learn more skills. Yeah, it's hard, too hard for me to now see that those are the people who are going to be threatened as opposed to the clerks in the stores. UM. And and if we want to go to a store. I suppose I'd rather see a robot. It's safer for me as a consumer to deal with the robot that can't carry the disease.

There was an old challenge that on the one hand, we've talked a lot about the risk of automation and the likelihood the automation is going to take jobs, at least in the chunk of the workforce, and yet we have this problem, ongoing problem, a very low labor productivity relative to the past. So what's the answer to that, Because on the face of it, it does seem a conundrum that we're that the automation could be destroying jobs but somehow not increasing our productivity the amount that we

can make per person. Yeah. Well than some of that has to do with the sectors. Almost the ast bulk of the first automation things have have been factories, and productivity there has done reasonably well. So it's been in the in the server sectors where it's been slower, and that's where the workforce is shifted. Two. If we begin to see more automation in the service sectors, we will see productivity go up and there will be job problems and the wages would go up in some of these

service sector jobs. The few that are left wages, so at least we will have wage growth if even if we've lost the jobs. No, No, correctly, So I I don't think if if we have a reasonably well organized economy,

that we're going to see mass unemployment. These these things eight million, hundred million jobs disappearing, and depending on which country there or which area of the world they're talking about, I mean that what should happen is the workers will find some other jobs, and those that that will put downward pressure in those labor markets. And so I think the actual our concern should be much more what is automation going to do to the structure of wages? And

that gets back to your earlier thing. Is it gonna harm the wages and the accountants and the managers or is it going to harm the wages of the clerks in the Your restaurant then has no waiters or waitresses, but just buttons. You have been in one in China where you just pushiate buttons. I assume there are a lot, must be more in Japan and Okay, then there's you feel safer, um, you etcetera, and um and it's more

maybe it's more efficient, it's as well. And if that's going to be the way of the world, then where are the people who would have held those jobs going to go? We we just said we have to worry about them. I think, um, I would not. I would not trust natural forces teaching your automation to take care of the poorer and less skilled people. I think that's

something we as societies have to deal with. So at one point you made them over the years, which I think is probably more much more accepted now that when you were first teaching me about it in the the Deities. Is the power of institutional change and the institutions rules, social morays, and how they have affected what happens to workers in the labor market, what happens to wages. You know that it's not just these aren't unstoppable forces that we can do nothing to control. We have a new

administration in the US. Given what you know, you know, what could the Biden administration do to improve the outcomes for labor in the next few years. I'll take three things are one, Biden is incredibly committed to trade union reforms, So he is I've never seen a president speaks so strongly, and sometimes it seems like a voice from the past. Sometimes a voice from the past. He was around in the past too, We know that. So so he said g F. D. R said that Americans encourage unions, and

that's what I'm gonna do, um and UM. And so he has a there is a pretty wealth set out plan. I don't know if they can get it through the Congress that would indeed strengthen that, but they're certainly gonna try. The second area that I think they will move is in the occupational health and safety area, the ocean, which should have stepped forward in the pandemic as a major

force making sure workers are protected. In the US current debate or is where the Republicans want to give employers who bring workers back to unsafe workplaces UM protection against legal suits for you brought me back to an unsafe workplace and that that's that that's insane, it's some level UM and it will just cause more to disaster for everybody. And so I think there'll be a big push on the ocean. And we should be doing obviously more R

and D and how can we protect workers in workplaces? UM, that would be a more natural thing to do the third area that that that they that they will push something with training people for the new technologies. And so there's a there's a big move inside the parts of the U. S. Government that they need really major uh changes in training. Um. I think the administration will will love this when it when they see what it's being planned. So so they'll they'll be those those uh, those friends.

But there have to be major tax changes as well. Um. And how the Biden administration will will be able to reduce the tax cut given to the billionaires and their friends and do something more for ordinary citizens. We'll see. Richard Freeman, thank you very much. Okay, thank you. Now, what value would you put on the ability to lead a normal life? While you might say it's priceless, but

Bloomberg economists say it's three trillion dollars. That's the net benefit to the global economy of countries with vaccination programs for COVID nineteen being able to get back to normal in That analysis was carried out by Chief of Mere economist Jamie rush Our, Chief Asia economists Chang Shu, and senior global economist Beyond Van Roy and Jamie rush Is with me. Now. Jamie briefly how did you come up with this number just over three trillion dollars. So we

thought of it as a bounding exercise. We asked ourselves, and what's the best that it be possible for these economies of everything just happens to go just right. And so the way we approached it is we divided the world into three groups of countries. We thought that there are some that have got a chance perhaps of achieving herd immunity, some that would only be able to vaccinate the vulnerable populations, and some who probably even struggle to

do that. So it's that first group of countries that has the best chance of getting back to normal. There'll still be cases in those countries, but widespread transmissions pretty unlikely. That means very low fatalities, very low personal and societal risks. So it's these countries which have a good chance of

getting back to normal um. So what we did to work out of your countries in this group is we just compare the number of those is that are on order with the size of the population um and we found that about sixteen major economies are able to do that, and they're accounting for about half of world GDP and a third of the population, so thinking that what's the best that's possible for them, or maybe they can get

back to their pre crisis trend, just maybe. So we estimate that in four Q and taking into account the impact of fresh lockdowns that the last the last three months of this, that's right, yep, the last few months. We were looking at those and we think that on average those sixteen economies are about six percent below their

pre crisis trend level of output. So if you're able to vaccinate a very substantial portion of the population in those countries, then maybe if everything goes right, you could get back to that trend level. So six pc increase in GDP, which is about three point two percent of world GDP. In that second group with countries but just

able to vaccinate the vulnerable populations. We think there are about eleven major economies and these are mostly emerging market economies and they don't make up a huge amount of

world GDP. But we think that vaccinations in the vulnerable could have a very big impact on the economy because if you think of it, it will very significantly reduced fatalities, so intensive care beds won't be overburdened the risk of death most people will be very low, and so you should still see a very meaningful boost in g d P. But because these economies that are in this group a bit smaller, you only add an extra half percent to world GDP. And and so it's those two groups that

account for the three trillion dollar boost. I mean, I understand these are just kind of broad magnitudes. We're not we're not saying that these exact numbers. But is there are you making an allowance here for the impact on of of lockdowns? I mean, is the assumption that you're saying that there will be no further lockdowns whereas there might have been lockdown what's the what's the assumption there?

As the base case we've we've just assumed that the lockdowns are in place now, stay in place until until the spring um and then the vaccine gradually allows these

to unwind. But it means that the countries that will get the biggest boost in the vaccine will obviously be the ones that have got the tightest lockdown condition or the lowest levels of g d P, So like the UK calls into that category, Spain as well, where there's really a lot of scope for improvement if they can they can they can move past the crisis phase of the pandemic and what you say the UK, of course

this is to throw something else in the mix. But of course the UK in those three months is also going to be going through the sort of the final stage of Brexit, is actually not going out of the sort of transition period of Brexit where we were still following all the European rules. You spend you spent quite a lot of time thinking about what's going to happen

to the UK next year. Do you think we're going to be able to see the effect of Brexit in the numbers or is it just going to be crowded out by this big boost from vaccinations and the bounce back of the economy generally as you come out of the pandemic. Well, I think if there is an impact from Brexit, it's likely to happen just before there's a boost from the pandemic, So you probably would see in the numbers because it would happen in the first quarter

of this year. Um. And it's I don't think it's that likely that that would be a huge proportion of

the population vaccinated by the end of them. Um. I mean I guess that the interesting thing about Brexit is that some of the policies that are in place to deal with COVID are also going to work pretty well for the Brexit shock, because both COVID and Brexit disruption would be a pretty similar, uh supply side disruption to the economy, something that's hopefully temporary that would eventually go away, and so it calls for the same sort of policy settings.

So in the UK we have a large furlough scheme to protect workers protect jobs that would work if there's disruption for Brexit or if there's continued disruption for COVID. So in some ways it's it's helpful those those policies already in place. Um, when you think about what your sort of base cases for next year, how much is how much does the pace of vaccination affect where the global economy ends up at the end of next year

relative to where it might have been. No, I think I think the realistic base cases that a portion of the population is vaccinated in advanced economies, and because it starts with the vulnerable groups, that that reduces fatalities quite substantially and allows people to go start living their lives a bit more normally. I mean, the big unknown is how the people that aren't in the vulnerable groups will

behave once the vulnerable people are vaccinated. That's the that could be like the huge upside surprise to activity next year, where it could just be a massive dempscaph and everyone just stays and stikes are still scared. It's perfectly possibly it goes either way. So I think that it's it's um it's not a question even it's not a question of the medicine. It's not even a question of kind of the standard economics. It's a a what are people's

behavior response going to be to this? And to be honest, we just don't know. I have to say anecdotally, my sense is that people are dying to go on lots of holidays to extend that they can and go and restaurants and other things. Now, how long that will last? I think, isn't it? Because if you think back, if you think back to the summer, I mean, people were clamoring to get out and go to restaurants, fly, go home.

And it's one of the reasons why the economy picked up so fast over that period is that people were willing to do things even though that risk still existed, so I'm fairly optimistic that's something something will be a fairly major boost as vaccines wrong. Now, Jamie Rush, thank you very much, thanks for listening to Stephonomics. We'll be

back next week with more on all things economic. Remember you can always find us on the Bloomberg Terminal, website, app or wherever you get your podcasts, and you can get a lot of news and analysis from Bloomberg Economics during the week by following at Economics on Twitter. This episode was produced by Magnus Henrison, with special thanks to Olivia Rockman, Richard Freeman, Chang Shue, Beyond, Van Roy, and Jamie Rush. Lucy Meekin is the executive producer of Stephonomics.

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