‘Where are the robots?’ The real impact of new tech on Aussie workers

Unpacking who stands to lose out from the IT revolution and where we’ve gotten it wrong.

Splitting fact from fiction when it comes to the IT revolution is a difficult challenge. It’s no different when considering the impact it might have on the labour market. While some fear “the end of work” through automation, others claim that human inputs are irreplaceable.

At any rate, research shows that these projections have largely proven false.

In some cases, the IT revolution has proven an easy scapegoat for other trends, while in others, the true effects have defied predictions.

It was this question that led Michael Coelli, associate professor of economics at the University of Melbourne, and colleague Jeff Borland to ask: “Where are the robots?”

Polarisation

The conversation around technological change has tended to centre on the threats posed to lower-skilled jobs.

According to Michael Coelli, associate professor of economics at the University of Melbourne, the facts haven’t borne this out.

“There’s pretty strong evidence that what’s happened in the last 30–40 years, the biggest losses in jobs have been in what we might call middle-tier or middle-skilled jobs,” Mr Coelli said.

“The biggest declines have been in manufacturing-style jobs and fabrication, but also clerical jobs.”

This is referred to as the “job polarisation hypothesis”.

“The hypothesis is that the losses are at the middle of the [skills] distribution. Big gains at the top, and gains in employment at the bottom. Maybe not wages, but employment,” Mr Coelli said.

When predicting job losses to automation, it can be more helpful to consider the degree of routine involved in the work.

Those middle-skilled jobs that have seen the greatest level of displacement were “the ones where there were a lot of routine tasks”, Mr Coelli said.

“Computers are good at doing these routine tasks. Large-scale work can be harder to automate, and it can be hard to get a computer or even a robot to dig a ditch. It’s even harder to get the robot to help an old lady go to the toilet,” he said.

Skills shortage

A lot has been made of the recent skills shortage in Australia. Among the most frequently named culprits behind the trend are automation and technological development.

In reality, however, Mr Coelli thinks this is a short-term phenomenon, one quite apart from technological advancement.

“This really isn’t a story about technological change. It’s a longer-term thing,” he said.

The shortages have more to do with demographic changes, COVID-19 government spending, and migration, claimed Mr Coelli.

“There was a demand that built up during the pandemic. All this money was being given out by the government. People saved it, but once things opened up, they started spending it.”

“The other thing is we had closed border. The flow of permanent migrants, backpackers and students was cut off,” Mr Coelli explained.

“We still had the ageing workforce, and the growth in need to look after them, but we didn’t have that flow of workers coming in to fill the jobs.”

According to Mr Coellie, the recent easing of the shortage was not the result of deep technological change.

“Vacancies have started to fall as the migrants are coming back. I think there will be loss of this worry about shortages,” he said.

Worker bargaining power

In sectors where automation will play a bigger role, larger firms who choose to capitalise on the productivity gains will likely increase their market share. Consequently, employees will have fewer options when looking for work.

“If outside opportunities are declining because work is being concentrated amongst fewer employers, then the bargaining power of those employees is going to be reduced,” Mr Coellie said.

“Employers have bargaining power. It’s not this wonderful, ideal free market that economists might talk about. Labour markets don’t tend to be particularly free.”

That said, according to a recent Treasury working paper, labour market concentration appears to have remained relatively stable over time.

That same paper, in accounting for lower wage growth, however, points to a potential increase in the impact, rather than prevalence, of labour concentration.

It’s not that labour is getting more concentrated; it’s that the effects are more pronounced.

The paper concluded that the cause of the greater impact of existing concentration is likely a decrease in “firm entry and dynamism”. In other words, new, smaller organisations are doing less to pull workers away from their jobs at bigger companies – meaning the push and pull of market demand is not hiking up wages.

While many have pointed to labour’s declining share of gross domestic product (GDP) as evidence of an already weakened bargaining power among workers, others believe that things are turning around.

Some data suggests that Australian workers are relatively confident in job security and their ability to negotiate for better terms or find work elsewhere. However, there are signs that the pandemic peak has passed.

Over COVID-19, “workers have got this brief period of time with the borders closed where they’ve got more bargaining power”, said Sally McManus, secretary of the Australian Council of Trade Unions.

“They are choosing to leave jobs, especially if they are not secure, and are looking for ones that are,” said Ms McManus.

Though the IT revolution will change the way we work, Associate Professor Coelli’s research insists against overstating the impacts.

“There’s lots of stories about all these jobs that are going to be lost to technology, but we’ve still got tonnes of work. It seemed the fear is outweighing the reality,” he said.