OPINION: Technological disruption unlikely to trigger labour doomsday (Business in Vancouver, Prince George Citizen)

July 18, 2019
Jock Finlayson

Today, economists and policy analysts interested in the future of work are confronted with a mix of conflicting evidence and forecasts.

On the one hand are projections pointing to large-scale occupational obsolescence as artificial intelligence, machine learning, robotics, the internet-of-things, and big data all continue to advance and reshape production processes and the nature of work, in one sector after another. According to the McKinsey Global Institute and the Organization for Economic Cooperation and Development (OECD), as these technologies become more pervasive many current job types will disappear and the way work is performed will change fundamentally. Some prognosticators go further, conjuring a dystopian future in which an ever-diminishing fraction of the working-age population is able to sustain gainful employment. This latter view is sparking interest in the idea of some kind of “guaranteed annual income.”

Yet a review of recent labour market indicators provides little support for those who spy a massive hemorrhaging of jobs driven by technology. In Canada, job growth has been impressive for several years, with the unemployment rate dropping almost to record lows. The same story holds for the United States.

Closer to home, last month employment in B.C. was 4.4 per cent higher than a year earlier, and the unemployment rate was 4.5 per cent (the lowest in the country, and almost an all-time low for the province). Perhaps most telling is that the share of B.C.’s population that’s employed sits near a record high, at 63 per cent. This statistic is hardly consistent with the wholesale displacement of workers via new technologies. And plenty of B.C. employers remain hungry for warm bodies: the province’s job vacancy rate is 4.4 per cent, the highest in Canada.

Two industries thought to be especially vulnerable to technology-enabled job destruction are retail trade and transportation. Yet in many North American cities, there is no shortage of retail outlets, restaurants and hotels looking for staff. And while the era of driverless vehicles may indeed beckon, in the here and now trucking companies in the U.S. and Canada are scrambling to fill more than 50,000 vacancies. The job vacancy rate in B.C.’s trucking industry is now in the double-digits. Some taxi companies and public transit providers are also in hiring mode.

So rather than a surplus of labour linked to the deployment of innovative technologies, today’s economic environment is characterized by labour scarcity (at least at prevailing wage rates). Certainly the federal government sees things this way: Mr. Trudeau and his ministers justify their plan to ramp up immigration targets by citing skill and broader labour shortages which, the government insists, exist across swathes of the Canadian economy.

Even though the labour market looks drum tight, might we nonetheless be on the cusp of an unprecedented upsurge in occupational obsolescence, as digital technologies spread rapidly throughout the economy? To be sure, such a scenario cannot be ruled out.

Last year, our colleague David Williams examined the “automation potential” of the B.C. labour market, drawing on the methodologies used in previous U.S. academic studies. Based on the composition of employment and the international literature on the prospects for automation by job type, he found that 42 per cent of B.C. jobs have high potential for automation from a “technical capabilities perspective” in the coming 10-20 years.

Throughout history, technologies have been developed to economize on the use of labor and improve production processes. Whether the technology is equipment used in construction, manufacturing assembly lines, or computers, the goal is to substitute machine-consistency for error-prone human handiwork. Evidence from the past confirms that technological innovation makes some occupations obsolete and restructures many others, but that it also fuels the emergence and growth of new occupations and leads to different roles for labour in the economy. And, as David’s report makes clear, non-technical factors will influence the pace and extent of automation. These include changes in labour supply/demand; the relative prices/costs of labour, capital and technology; the evolving regulatory environment; how quickly smaller firms make use of new technologies; and the impact of societal values and norms.

Add it all up, and we are hard-pressed to see digital and other technologies causing a big decline in overall employment levels in Canada in the near- to medium-term, although they will certainly lead to some labour market dislocation and gradual shifts in the composition of employment. After all, even as new technologies are adopted, population aging will be putting downward pressure on labour force participation, at a time when many employers will be looking to replace the swelling ranks of retiring baby-boomers. Looking ahead, we worry more about skill and labour supply constraints facing B.C. employers than the risk of technology-induced mass unemployment.

Jock Finlayson is executive vice president and chief policy officer, and Ken Peacock is the chief economist of the Business Council of British Columbia.

As published in Business in Vancouver and Prince George Citizen.

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