Andrew G Haldane: Labour's share
Speech by Mr Andrew G Haldane, Executive Director and Chief Economist of the Bank of
England, at the Trades Union Congress, London, 12 November 2015.
* * *
The views are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to
thank William Abel, Simon Caunt, Jeremy Franklin, Edward Hall, Philip King, Priya Gupta, Alex Mitchell, Rachana
Shanbhogue, Bradley Speigner and Tom Smith for their help in preparing the text. I would also like to thank
James Bell, Oliver Burrows, Melissa Davey, Gareth Ramsay, Stephen Seawright and Sebastian Walsh for their
comments and contributions.
General Secretary. It is a great privilege for me to be invited to speak to you.
In the early nineteenth century, the unions were struggling to cope with the on-going impact
of the Industrial Revolution on jobs and wages. They came together in the 1860s to present a
united front and face down the threat of legislation to curtail workers' rights. The TUC was
born. The first meeting of Congress, in 1868, debated wage inequalities, workers' hours,
technical education and threats to jobs and workers' rights (London Metropolitan University
(2015)).
Almost 150 years on, Congress today represents more than 5.8 million workers across all
sectors and regions of the UK. The 147th Congress was recently held in Brighton. The topics
it debated may have a familiar ring: wage inequalities, workers' hours, technical education
and threats to jobs and workers' rights. As Mark Twain almost said, labour market history, if
not repeating itself, has certainly rhymed.
This should come as no surprise. As in the mid-19th century, this is a time of huge change in
the jobs market. Rarely a day passes without concerns about job prospects in some of the
UK's most iconic industries, from steel to oil and gas to cars. And rarely a week passes
without evidence of jobs and industries being fundamentally reshaped by globalisation and
technology, be it the digital economy, the sharing economy or even the Second Machine
Age.
There is no shortage of explanations for these searing developments. They are part cyclical,
as the global economy continues to recover from a financial crisis which is likely to be the
most costly since the Great Depression. But these changes are also in part structural given
tectonic shifts in demography, inequality and technology, to name but three.
None of these challenges is of course entirely new either. My own interest in economics was
spawned in the early 1980s by just such a challenge. At that time, more than 3 million people
were unemployed in the UK, or almost 12% of the working population. In Yorkshire, where I
grew up, the unemployment rate peaked at close to 13%, hit by a double whammy of deep
recession and a contraction in steel, textiles and coal-mining.
Unemployment at that stage was not for me a statistic. Nor was it the bloodless theorising I
would go on to study at university. For my family, it was real. For many communities and
regions it was a blight, social every bit as much as economic. Across the country, it
depressed the everyday lives of millions of adults, some of whose sons and daughters I
knew as friends. And it was a blight that affected not one generation, but many.
It was that experience as a teenager that led me to commit to economics, and to public
service, as a way to understand, and perhaps try and correct, that economic and social
blight. And more than thirty years on, those are the same reasons I remain committed to
better understanding, and perhaps hoping to improve a fraction, the functioning of the
economy to this day.
Those wrenching developments in the UK labour market in the early 1980s have been
repeated throughout history, since at least the Industrial Revolution. The cycles and shifts in
jobs and wages, and attempts to moderate them, are as old as civilisation itself. Today's
cycles and shifts in the labour market are, in some respects, an echo of that past.
As in the past, technology is changing the quantum and nature of work, displacing some jobs
while creating others. As I will discuss, through each of the Industrial Revolutions innovation
has disrupted the number and nature of jobs. Often, it has led to a so-called "hollowing out"
of mid-skilled workers and a widening wage gap across the economy.
Yet, in other respects, this time may be different. Technology may be set to change jobs and
wages more fundamentally than in the past. Job displacement and creation may come
thicker and faster than ever previously. "Hollowing out" may become more pervasive. And
gaps between those with and without skills, or with and without jobs, may widen as never
before. Or that, at least, is the picture some have painted.
These issues have fundamental implications for the functioning of industries and economies
and the well-being of families and societies. They also, of course, have fundamental
implications for the TUC and for policymakers like me. So after reviewing labour market
developments, historically and prospectively, I want to conclude with some reflections on
policy, including monetary policy.
Good news, bad news
Let me start with a review of recent developments in the labour market. There is plenty of
good news to report here, with a boom in jobs and, to a lesser extent, wages in the UK.
Yesterday's labour market data confirmed that picture. But there are also strong
crosscurrents at work, often rooted in longer-term structural shifts in the labour market, which offer
a more worrying window on the world of work.
In the immediate aftermath of the global financial crisis, there were understandable
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fears that unemployment would rise rapidly. At the start of 2009, the Monetary Policy
Committee (MPC) was forecasting that the UK unemployment rate would rise into
double figures, equivalent to over the 3.4 million people. In the event, the
unemployment rate in the UK peaked at 8.5%, or 2.7 million people.
• Since 2013, the UK unemployment rate has fallen sharply, to a rate of 5.3% or
1.8 million people. This fall in unemployment is considerably faster than the MPC,
and other outside forecasters, had predicted. At the start of 2014, the MPC forecast
that the unemployment rate today would be more than a percentage point higher
than its current rate (Chart 1).
• The main reason for this striking fall in the unemployment rate has been very strong
rates of new job creation. Since 2010, more than 2 million new jobs have been
created in the UK. The lion's share of these new jobs - around two-thirds - have
been full-time positions and in highly-skilled professions (Chart 2). The level of
employment is at a forty-year high.
• This rise in the demand for workers has been met, in part, by increased participation
in the workforce. Participation by women has picked up strongly and is now close to
its all-time highs. So too has participation by those aged over 50, in part taking
advantage of more flexible working practices and removal of the official retirement
age.
• The other end of the age spectrum has also seen improvement. The percentage of
18-24 year olds who are not in employment, education or training - the so-called
"NEETs" - has fallen sharply from close to 17% to below 13%. That is its lowest rate
in a decade (Chart 3).
• These improvements in the labour market have also been reasonably well dispersed
across the UK. Unemployment has fallen in every UK region since 2012, by at least
2 percentage points.
• Last, but by no means least, aggregate pay across the economy has begun to rise.
A year ago, Mark Carney told the TUC that "Britain deserved a pay rise". Today, I
am delighted to say it has had one. Aggregate pay across the whole economy is
growing at around 3% year-on-year, compared to less than 1% a year ago.
• In inflation-adjusted terms, the picture is even more heartening. Real pay is rising at
over 3% year-on-year. A year ago, it was falling by around 0.4% (Chart 4). Real
wages are rising at their highest rate for 8 years and, encouragingly, some of the
fastest rates of real wage growth have been among the lowest paid.
These developments have in large measure been driven by the recovery in the UK economy
over the past few years. But let me now add some cross-currents to this fast-flowing
employment stream. Many of these cross-currents will be familiar to the TUC's membership.
They pose some real challenges, economically and societally.
• Rates of unemployment still remain high among some cohorts and in some regions.
Unemployment rates among those aged 18-24 is still over 13%, 8 percentage
points above the national average. Unemployment rates in some parts of the UK,
such as the North East and Northern Ireland, remain several percentage points
above the national average. And those unemployed for more than one year remain
above their long-term average.
• Even among those with a job, there remains a sizable number who wish to work
longer hours than are currently available to them. Surveys suggest three and a half
million people would like to work for longer, or around 10% of the working population
(Chart 5). On average, they wish to work an extra 11 hours per week. These people
are not unemployed, but they are under-employed.
• Another dimension of under-employment is the extent to which people are using
their skills in the workplace. Under-utilised skills are as much an economic waste as
under-utilised time. At present, there are around 5 million people whose skills are
mismatched, or are over-qualified, for the job they are doing. This number has
increased by two percentage points since the start of the crisis.
• Even for those who have found work, levels of job security appear to be lower than
in the past. Around 6.4% of all employees in the UK are on temporary contracts.
Rates of self-employment have risen from 12% a decade ago to around 15% now.
For some firms and workers, those trends are a welcome sign of job flexibility. But
not for all. Around a third of temporary contract workers would prefer a permanent
contract. Since 2011 the reported incidence of zero-hours contracts has risen
rapidly, from 0.6% to 2.4% of the working population (Chart 6). What may be
welcome flexibility for a company may be unwelcome insecurity for its workforce.
• While participation rates in the UK workforce have increased, in some cases they
remain low by international standards. Female participation in the UK labour market
remains well below our European neighbours, such as Germany, the Netherlands
and Sweden. And compared to these same countries, the fraction of NEETs in the
UK is almost twice as high.
• Finally on wages, real wages have yet to return to their pre-crisis peak. Rather, they
are still 6% below that level. Since the crisis, we have seen one of the largest and
longest squeezes on wages since at least 1850 (Table 1).
• Indeed, since the crisis real wages have fallen faster even than UK productivity,
which itself has been extra-ordinarily weak having flat-lined for the past six years.
Put differently, labour's share of the national income pie has fallen since 2009, from
around 58% to 53% (Chart 7).
That squeeze on real wages has been even more acute for some. Declines in
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median real wages among the young have been roughly twice as large as among
the old. And workers in sectors such as construction, health and social work have
seen far-larger declines in their take-home pay (Chart 8). In short, many workers in
the UK have not in fact had that pay rise.
Partly in consequence, the number of people earning less than the living wage is
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currently estimated to be around 5.8 million. That is 700,000 people more than in
2013. That fraction ought to shrink in future, once the statutory National Living Wage
is introduced. The Bank itself is already a London Living Wage employer.
• The New Economics Foundation has recently constructed a summary measure of
the number of secure jobs which allow for a reasonable standard of living (NEF
(2015)). From 2011 to 2014, despite the number of people in employment rising
sharply, the proportion in secure and well-paid jobs declined by around
2 percentage points. It currently stands at a remarkable 19.2 million people.
So how do we make sense of these rather disparate patterns? By looking through a historical
lens, I want to try to provide some perspective on these current trends and, more
speculatively, their implications for future jobs and wages.
The "lump of labour" fallacy
Over the longer run, technology may be the single most important force shaping the fortunes
of jobs and wages. That has meant, through the ages, the relationship between technology
and jobs has been a recurring, and sometimes contentious, one. Debates on the potentially
negative impact of technology on jobs - so-called technological unemployment - go back at
least to the invention of the wheel (Woirol (1996)).
Certainly, the Ancient Civilisations of Greece and Rome wrestled with the problem of how to
deal with the consequences of workers displaced by technological advance. The responses
then included large-scale public work programmes and income support policies for the
needy. Indeed, they have an eerie echo in many of today's public policy debates.
The debate about technological unemployment really picked up pace in the 19th century,
with the blossoming of the Industrial Revolution in Britain. Then, it spilt over into the streets
with worker protests and machine-breaking, most notably by the Luddite movement. These
fears about technological displacement gathered intellectual support from no less a figure
than the classical economist, David Ricardo (Ricardo (1821)).
Yet the intellectual tide was by no means in one direction. It was accepted that technological
advance could damage some workers in the short run. But its benefits to most workers in the
longer-run were felt likely to dominate. In the middle of the 19th century, that view came to
prominence through such figures as John Stuart Mill (Mill (1848)) and Karl Marx (Marx
(1867)), two unlikely intellectual bedfellows.
The technology debate was re-stirred in the 1930s, at the time of mass unemployment during
the Great Depression. In his essay, "Economic Possibilities for our Grandchildren", Keynes
predicted on-going technological advance and workers being replaced by machines (Keynes
(1930)). Yet far from being a threat, Keynes viewed this as a huge opportunity. He predicted
that, by 2030, the average working week would have shrunk to 15 hours. Technology would
give birth to a new "leisure class".
Debates on the relationship between jobs and technology stirred again during the 1960s in
the US, during the 1970s in advanced economies, and again in the 1980s and 1990s in the
UK and parts of Europe. In each case, the prompt was rising rates of unemployment. And in
each case, this debate subsided as unemployment rates fell.
Moving into the 21st century, this debate has once again been re-kindled. The prompt this
time has not so much been rising rates of unemployment. Rather it is been the rapid
emergence of smart machines, jet-propelled by modern computing. These machines are
different. Unlike in the past, they have the potential to substitute for human brains as well as
hands (Autor et al (2003), Manyika et al (2013)).
In Race Against the Machine and The Second Machine Age, Eric Brynjolfsson and Andrew
McAfee paint a persuasive picture of robot-fuelled growth in productivity and an
accompanying reshaping of the role and nature of work (Brynjolfsson and McAfee (2011,
2014)). Whether this vision is utopian or dystopian, it poses a fundamental challenge to the
relationship between jobs and technology, to which I will return.
The economics of these debates, which I hope is not too bloodless, is relatively
straightforward. There are two opposing effects at work. The first is the substitution or
displacement effect. Labour-saving technologies displace workers, almost by definition.
Capital substitutes for labour, machine for man. If there is a "lump of labour" to be allocated
across a fixed pool of jobs, technology will raise unemployment, other things equal.
This being the real world, other things are of course never equal. As cheaper capital
displaces labour, goods and services become cheaper, raising real incomes across the
economy. That boosts the demand for new goods and services and new industries to supply
them. To complete the loop, displaced labour then switches to meet this new demand,
lowering unemployment. These are the income or compensation effects of technological
progress. They are what make the "lump of labour" a fallacy.
Which of these two effects - displacement or compensation - wins out? Ultimately, this is an
empirical question and we have several hundreds of years of empirical evidence as a
testbed. Perhaps unusually, these historical data tell a remarkably consistent story.
• Since 1750, there has been a steady and continuous stream of labour-saving
technologies which have boosted economy-wide productivity, as measured by
output per unit of labour inputs (Chart 9). On average since 1750, growth in UK
labour productivity has been around 1.1% per year. That means the productivity of
our economies has improved by around a third each generation, a massive leap
forward.
• This improvement in labour productivity has not, over the medium term, caused any
reduction in employment. In the UK, the employment rate today as a proportion of
the total population is around 50%, very similar to levels in the early 19th century
(Chart 10). Over time, the employment share has fluctuated around a stationary
average. The same is true in other countries.
• The effects of technology have been felt, at least to some degree, in hours worked,
as Keynes predicted back in the 1930s. In the UK, the average working week has
fallen from 50 hours a century ago to around 30 hours today (Chart 11).
Nonetheless, this fall-off has fallen well short of Keynes' prediction of a 15-hour
week. The "leisure classes" are no more numerous today than a century ago.
• Shifts in population - through changes in birth/death rates or through immigration -
have also had no obvious impact on employment. The relationship between
population growth and the employment share is, if anything, positive (Chart 12).
This, too, is evidence of the compensation effects of population growth - higher
output and demand - outweighing any displacement effects in the jobs market.
• As technology has boosted productivity and incomes, its fruits have been harvested
by workers, typically in the form of higher wages. Since 1750, the upwards march of
productivity has largely been matched by the upwards march of real wages (Chart
13). Since the Industrial Revolution, the former has risen on average by 1.1% per
year, the latter by 0.9% per year.
• The same pattern was evident prior to the Industrial Revolution. Then, the absence
of technological progress led to productivity flat-lining. The real incomes of workers
similarly flat-lined (Chart 13). Over the course of the past millennium, perhaps
longer, technological progress has held the key to rising worker wages.
• Acting in parallel to this secular rise in labour incomes has been a secular rise in
workers' skills. Levels of educational attainment have risen dramatically since the
middle of the 19th century (Chart 14). As machines displaced man in conducting
manual tasks, man has kept one-step-ahead of the machine by continuously
skillingup to meet the new demands of new industries for new products.
With rates of employment steady, and with real wages rising in line with productivity,
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labour's share of the national income pie is little different today than in the 18th
century (Chart 15). In other words, the suppliers of both labour and capital have
shared, in roughly fixed proportions, in the fruits of higher incomes.
• Moreover, workers with different skills have benefitted broadly equally from these
gains. The distribution of wages is little different today than at the dawn of the
Industrial Revolution (Chart 16). In other words, technological progress has not
obviously widened income inequalities.
Viewed over the sweep of history, then, there is essentially no evidence to suggest
technology has damaged jobs and plenty to suggest it has boosted wages. Technology has
enriched labour, not immiserated it. Mill was right; Ricardo was wrong. Labour is not dead
wood to be carved up between tasks. It is a tree whose trunk and branches have lengthened
and thickened with time. The "lump of labour" fallacy is just that.
Industrial revolution and "hollowing-out"
Or is it? Looking more closely at past phases of rapid technological change paints a more
nuanced picture. Each phase has eventually resulted in a growing tree of rising skills, wages
and productivity. But they have also been associated with a "hollowing out" of this tree.
Indeed, this hollowing-out has widened and deepened with each new technological wave.
Economic historians tend to partition the growth timeline into three distinct phases: the first
Industrial Revolution, the era of steam engines and spinning jennies, commencing in the
middle of the 18th century; the second, the era of mass industrialisation, commencing in the
second half of the 19th century; and the third, the era of information technology, commencing
in the second half of the 20th century (Haldane (2014)).
These industrial revolutions each brought about a remarkable re-shaping of the jobs
landscape (Chart 17). The employment share of agriculture and other primary activities has
fallen from around 50% in 1700 to around 1% today. Secondary activities, notably
manufacturing, rose to 45% of employment at the end of the 19th century, before falling to
around 10% today. Meanwhile, the employment share of services has roughly doubled each
century since 1700, to reach around 80% today.
These dramatic shifts are even more striking at an occupational level. Chart 18 plots
employment in four occupations since 1870: agricultural labourers, telephonists, accountants
and hairdressers (Deloitte (2015a)). The relentless upwards march of the accountant and
hairdresser, at the expense of the downtrodden (but presumably better-coiffed) farmer, is
one of the lesser-known societal power struggles of the post-Industrial Revolution period.
But transition on this scale is not costless, with complex shifts in the pattern of skilled
employment and wages. In its first phase, the Industrial Revolution appears to have led to a
shift towards unskilled employment as "the artisan shop was replaced by the factory and later
by the assembly line" (Acemoglu (2008)). The share of unskilled UK workers doubled
between 1700 and 1850, from around 20% to 40% (Chart 19). The same was true,
somewhat later, in the US (Katz and Margo (2013)).
Later in the 19th and into the 20th centuries, the demand for high-skilled workers also began
to rise. Rising incomes created a demand for new goods and new, more complex and
technical, ways of producing them. That increased the demand for operatives, engineers,
mechanics and managers, in addition to hairdressers and accountants.
Between 1850 and 1910, the share of skilled workers in US manufacturing rose from 3% to
around 12% (Katz and Margo (2013). The share of low-skilled jobs also increased, from
around 58% to 65%. Over the same period, the share of mid-skilled workers shrank from
40% to 23% (Chart 20). In other words, there was a "hollowing out", or U-shape, in the
pattern of employment - the hollowing-out, in effect, of the artisan.
By the middle of the 19th century, aggregate real wages were rising in the US and UK. Yet
despite increased demand for their services, unskilled workers do not seem to have shared
in this pay rise. Higher demand for their services was more than matched by increased
supply, both from child labour and from displaced artisans as they moved down the skill
spectrum (Clark (2010)). As a result, their pay appears to have flat-lined.
At the high-skill end, the supply of workers was also increasing as some workers skilled-up
(Clark (2010), Wallis (2014)). Despite that, there is evidence the skill premium for clerks and
other professionals rose through the 19th century. The net effect of these complex shifts was
thus to widen the distribution of wages between skilled and unskilled workers (Katz and
Margo (2013)). Income inequality rose.
The pattern of labour's share of the national income is also interesting. This appears to have
fallen in the first part of the 19th century (Allen (2009)), as Chart 21 illustrates. Workers do
not appear to have enjoyed the early fruits of the Industrial Revolution. That perhaps explains
why David Ricardo entered the fray at this time.
In the event, these concerns proved ephemeral. With a lag, the rising tide of productivity and
incomes lifted all boats, whatever their level of skill. Inequalities in wages started shrinking
and labour's share of income began to rise, returning to their levels at the end of the 18th
century. If the first part of the 19th century had seen substitution effects dominate, the latter
half saw compensation effects in the ascendancy.
Moving into the 20th century, and the third industrial revolution, these emerging patterns in
jobs and wages have become clearer. Technology appears to be resulting in faster, wider
and deeper degrees of hollowing-out than in the past. Why? Because 20th century machines
have substituted not just for manual human tasks, but cognitive ones too. The set of human
skills machines could reproduce, at lower cost, has both widened and deepened.
Chart 22 shows the employment pattern in the UK over recent years, ranking professions'
skills by their average pay, while Chart 23 shows the picture for a set of countries over a
similar period. They tell a striking and consistent story of mid-skill jobs being lost,
counterbalanced by employment gains at the high-skill and, to lesser extent, low-skill segments of
the workforce. The U-shape, or "hollowing out", has deepened and widened.
What has happened to these displaced mid-skill workers? Some appear to have "skilled-up",
typically through higher or further education. In the UK, total numbers in higher education
have increased from around 130,000 in 1970 to over 2 million today. In the US, total
numbers in higher education have increased from 2.4 million just after the Second World
War, to over 20 million today. As in the late 19th century, this skilling-up has enabled workers
to keep one-step-ahead of the machine.
But some displaced workers have not been on the up-escalator. They appear instead to have
"skilled-down", typically by taking a job for which they are over-qualified. They have become
not unemployed but "under-employed". Rates of under-employment have risen and are at
significant levels (Table 2). Across the EU, rates of under-employment average around 15%.
As in the early 19th century, by adding to the unskilled pool of labour, this will have
dampened unskilled wage growth.
These switching patterns of employment demand and supply would be expected to show up
in wages. UK evidence shows no clear pattern (Salvatori (2015)). But US evidence is more
conclusive. It suggests that wages at the top end of the skill spectrum have risen, in some
cases significantly. But there is little evidence of that having happened at the lower-skill end
(Autor (2015)). In other words, only the higher-skilled appear to have gained in both
employment and wage terms.
A rising skill premium is consistent with the well-documented widening gap between the top
1% and 0.1% of income earners and the rest over recent years (Piketty (2014), Atkinson
(2015)) (Chart 16). In the words of Tyler Cowen Average is Over, with a widening bifurcation
between a high-skilled elite and everyone else (Cowen (2013)).
By itself, a widening distribution of incomes need not imply any change in labour's share of
national income: in the past, technology's impact on the labour share appears to have been
broadly neutral. But this time could be different. There is evidence, across a number of
countries, of the labour share having fallen over recent decades (Chart 24). Even in the UK,
the labour share has glided south, if more slowly than elsewhere, over recent years.
The relationship between productivity and real wages tells a similar story. Across a number
of countries, there is recent evidence of real wages falling short of productivity (IMF (2015)).
In the US, this has been evident since at least 1970, with average real wages rising
0.6 percentage points per year more slowly than productivity (Chart 25). In the UK, that gap
has averaged 0.3 percentage points per year since 1990. For median wages, these gaps are
larger still (Chart 26).
Over time, these gaps can accumulate into big income differences. Had US real wages
tracked productivity since 1970, the median worker today would be 40% better off. Had UK
wages tracked productivity since 1990, the median worker today would be 20% better off.
Unlike earlier phases of rapid technological change, labour has not shared equally in the
fruits of recent great leaps forward - or at least not yet.
A number of explanations have been put forward for these falling labour shares, including the
falling relative cost of capital goods and globalisation (OECD (2012)). A third explanation,
related to the first two, is technological change. As machine has substituted for man across a
greater number of tasks, and as hollowing-out has intensified, the balance of bargaining
power has swung against labour. That would tend to show itself as labour securing a smaller
slice of the income pie, as we have seen.
In sum, the third industrial evolution appears to have resulted in an intensification of trends
already fledgling in the first two: a hollowing-out of employment, a widening distribution of
wages and a fall in labour's income share. The key question is what happens next? A re-run
of the 19th century, with productivity gains eventually boosting wages and the labour share?
Or, different than in the past, a permanent re-shaping of the labour landscape?
Race against the machine
A number of authors have recently argued, persuasively, that it is the latter. Based on past
patterns, it is argued that information technology may be poised for exponential growth, as its
full fruits are harvested. Indeed, we may be on the cusp of a fourth Industrial Revolution or
Second Machine Age (Brynjolfsson and McAfee (2014), Ford (2015)).
Its defining feature would be that new-age machines will be thinking as well as doing,
sensing as well as sifting, adapting as well as enacting. They will thus span a much wider
part of the skill distribution than ever previously. As robots extend their skill-reach,
"hollowing-out" may thus be set to become ever-faster, ever-wider and ever-deeper. Or that,
at least, is the picture some have painted painted.
How much wider and deeper? Research by Carl Benedikt Frey and Michael Osborne has
tried to quantify this hollowing-out, by assigning probabilities to certain classes of job being
automated over the course of the next few decades. Their work was initially done for the US,
but has recently been extended to the UK (Frey and Osbourne (2013), Deloitte (2015b)).
Using this methodology, the Bank has recently done its own exercise for the UK. Table 3
classifies jobs three ways in the US and UK - high (greater than 66%), medium (33-66%)
and low (less than 33%) probability of automation. It also shows the fraction of employment
these jobs represent. Chart 27 provides a more granular breakdown of these jobs.
For the UK, roughly a third of jobs by employment fall into each category, with those
occupations most at risk including administrative, clerical and production tasks. Taking the
probabilities of automation, and multiplying them by the numbers employed, gives a broad
brush estimate of the number of jobs potentially automatable. For the UK, that would suggest
up to 15 million jobs could be at risk of automation. In the US, the corresponding figure would
be 80 million jobs.
The BBC website contains a handy algorithm for calculating the probability of your job being
robotised. For an accountant, the probability of vocational extinction is a whopping 95%. For
a hairdresser, it is 33%. On these numbers, the accountant's sun has truly set, but the
relentless upwards ascent of the hairdresser is set to continue. For economists, like me, the
magic number is 15%. At first I found that number disconcertingly high. But in fact it puts me
in the lower third of "prone" professions.
Another perspective on hollowing-out comes from looking at how automation might affect the
distributio