Technological Unemployment

John Maynard Keynes coined the term "Technological Unemployment" back in the 1930s in a letter "Economic Possibilities for our Grandchildren". The term implies the unemployment that is generated because of the replacement of manual labour with technology. When one puts it like this, it sounds like a bad thing. However, this is not the complete picture.

As Matt Ridley points out in his recent book - The Rational Optimist - improvement of technology allows the creation of goods and services at lower costs and lower investment of man-hours. This makes goods cheaper in the economy making more money available for creating demand for completely new goods and services. Labour, which has been freed up by technological innovation can then go about providing these goods and services. Everybody wins and standards of living rise. There is one catch though.

The creation of new goods and services by the same labour force assumes that the individuals of the labour force are capable of acquiring the skills required to provide these new services. This is not an ordinary requirement. Decades earlier, a person could go to school (or join an apprenticeship) to acquire a skill in early years and then reasonably expect to be able to live off that skill for the rest of his life. This is no longer the case today. As Alvin Toffler points out in his seminal work - Future Shock - the pace of technological change in society has increased to the point where it begins to have an impact due to its sheer speed, irrespective of the direction it takes. The future can arrive too quickly for too many people. A skill acquired today can lose its value in well under a decade. Someone who learned to use the internet (even email) in the mid-90s probably had a significant "edge" over his peers. Today, it barely counts as a skill.

While the necessity of continuous skill acquisition and upgradation becomes ever stronger, it simultaneously becomes harder to pick up new skills. Education is vastly more specialised and intricate today and takes longer to acquire (courses in medicine can take almost a decade in some countries). What is required is a radical transformation in the way education and skills are delivered to students. At a more fundamental level, the organisation of knowledge itself has to be transformed in a way as to make it more accessible for non-specialists. The millions of specialised branches have to be re-organised in a manner so that cross-fertilization of ideas across specialisations becomes easier and more effective. On top of this transformation in knowledge representation, the education system has to develop methodologies to teach students to exploit this restructured knowledge-base more effectively.

At a policy level too, Government and policy-makers have to stop fretting about jobs being lost to technology. There also has to be a push to reduce incentives for people to remain stuck in low-productivity jobs - for instance farming in India. Policy-makers are doing a great disservice to the country and to the farmers themselves by directing fiscal spending towards recurring subsidy programmes instead of focusing on alternate skill development within rural communities. The skill-development approach alone can help these people escape permanent poverty while enhancing their productivity and helping the country reap the anticipated "demographic dividend".