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A brief look at the interplay between labour markets and technological change in the UK

Worries that jobs will be lost to automation are not new, but have been heightened since the release of Frey and Osborne’s 2013 study, which warned that nearly half of jobs in the US were at ‘high risk’ of automation. Nearly a decade on, this short briefing note looks at both the current and longer-term picture of the relationship between technology and jobs and pay.

We now know that the period since the Frey & Osborne study has been one of rising rather than falling employment. In the four decades from the 1970s to the 2000s the UK’s working age employment rate tended to peak at around 73 per cent; on the eve of the Covid pandemic it reached 76 per cent. It’s also the case that even some of the jobs considered by Frey & Osborne to be at highest risk of automation, such as car washers and kitchen assistants, have grown fast in this period. Alongside high employment, productivity and real wages have stagnated. On the face of it, this is not a picture which fits well with concerns about the loss of jobs to technology.

But of course – job destruction was only ever half of the story (even if that was the half that the commentary around Frey and Osborne’s paper focused on). Automation doesn’t just destroy jobs, it can also raise demand for other workers, and create the space for entirely new jobs. Consistent with this, we have evidence that exposure to automation has affected the cross-section of employment growth in the UK – both in the last decade but also in the longer-term. This is consistent with what is now a wide body of international evidence pointing to the importance of automation for wage determination. So automation is affecting jobs. But the fact that aggregate employment continues to grow alongside these effects suggests automation’s job-destroying impact continues to be offset by positive indirect effects.

Overall, while we must remain vigilant to the impact of automation, especially since it affects some people and places more than others, the most pressing problems facing the UK economy are not too much automation, but low investment and low productivity growth. We should worry more about these and less about robots taking our jobs.

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