However, mismatches between the skills of the current workforce and those required by the new technologies or other substantial frictions to workers changing role could cause the equilibrium unemployment rate to rise alongside any increase in unemployment – particularly if the speed of adoption of new technologies is faster than in the past. That would shift the Phillips Curve up, reducing the disinflationary effects of automation. At present, there is little evidence to go on to judge the likely size and persistence of any increasing in structural unemployment. Monetary policy makers will need to remain alert to this possibility, updating their assessment as the transition occurs. The experience of the 1970s shows that mistakenly ascribing a structural pickup in unemployment to cyclical factors can lead to the wrong macroeconomic policy setting, with long-lasting adverse effects. A more automated world could also affect inflationary pressures through flattening the Phillips curve. The threat of robot substitutes could weaken workers’ bargaining power. And advances in artificial intelligence and similar technologies could increase companies’ ability to learn about their competitors’ marginal costs and leading to greater synchronisation of price changes across companies. Already, there is evidence that online retailers adjust prices more frequently than those on the high street, while being less likely to vary prices by location. 39  Conclusion While the Fourth Industrial Revolution has the potential to transform the economy, the challenges it presents for monetary policy makers are in many ways not new.

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.