However, the upward pressure on the equilibrium interest rate will lessen as the creation effect takes hold. 36 The experience of past episodes suggests that, in the first instance, the returns from the Fourth Industrial Revolution are likely to flow more to the owners of the new capital than to the workers who use it – leading to Engels’ pause in real wages. Owners of capital tend to be wealthier to begin with and evidence suggests that those with higher wealth have a higher propensity to save increases in income (this idea goes back to Kalecki (1954) and Marx before him). Increases in job polarisation and skills premia, which also shift income towards the top of the distribution, are likely to add to this effect. Globally, inequality could also increase as a result of the Fourth Industrial Revolution, which would further lower the equilibrium rate in open economies like the UK and Ireland. 37 Summers (2016) has argued that rising market concentration may also have been an important cause for the fall in the equilibrium interest rate over recent decades. See http://larrysummers.com/2016/03/30/corporate-profits-are-near-record-highs-heres-why-thats-aproblem/. 38 Measured as the proportion of people working part-time would who prefer a full-time job. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  This excess supply of labour available to work on non-automated tasks represents a shift along the Phillips Curve, imparting modest disinflationary pressures. For the UK, each additional percentage point of labour market slack is estimated to reduce annual wage growth by one third of a percentage point.

18 Felten, E W, Raj, M and Seamans, R (2018), ‘A Method to Link Advances in Artificial Intelligence to Occupational Abilities, AEA Papers and Proceedings, Vol. 108, pp. 54-57. 19 Nedelkoska, L and Quintini, G (2018), ‘Automation, skills use and training’, OECD Social, Employment and Migration Working Papers No. 202. Similarly, McKinsey argue that across advanced economies 15% of the workforce in total will need to shift occupational categories because of digitisation, automation, and AI. 20 This process has been well documented for the China Shock in the US (Autor, Dorn and Hanson 2015) and the collapse of local housing markets (Mian and Sufi 2015). 21 If those who understand technology less well are less willing to trust it and work with it, this could further increase its polarising effects. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Speed Could the Fourth Industrial Revolution happen faster? Certainly, the time taken for new technologies to be adopted has shortened dramatically since the dawn of the First Industrial Revolution. The Story Thus Far Current empirical work suggests on balance that, thus far, increased automation has been positive for employment in aggregate even though it has led to substantial compositional changes. Importantly, while technology has reduced middle-skilled employment, its effects on aggregate employment appear to have been more than offset by increased product demand and local demand spillovers. After all, the employment share in the UK is near all-time highs. There are, however, signs that recent technological advances have increased inequality.