Edoardo Campanella dispels the myth that new technologies are making low-skilled labour increasingly irrelevant

Edoardo Campanella dispels the myth that new technologies are making low-skilled labour increasingly irrelevant

Before the COVID-19 pandemic, the role of low-skilled labour in the economy was assumed to be in decline. In digitally disrupted labour markets, where fancy STEM (science, technology, engineering, mathematics) professions enjoy pride of place, only highly qualified professionals can thrive. Those whose jobs are threatened by new technologies are condemned to precariousness, redundancy, downward mobility, and declining standards of living.

The pandemic has partly debunked this narrative, by revealing which workers truly are essential. It turns out that there still are no good technological substitutes for the street cleaners, shopkeepers, utility workers, food deliverers, truckers, or bus drivers who have kept the economy running through the darkest days of the crisis. In many cases, these workers perform tasks that require situational adaptability and physical abilities of a kind that cannot easily be coded into software and replicated by a robot.

The fact that these least-skilled workers are resilient to new technologies should not come as a surprise. Previous industrial revolutions followed a similar pattern. At a minimum, human workers are usually still needed to supervise, maintain, or complement the machines. And in many cases, they play a key role in the new disruptive business models of any given era. The challenge has always been to close the gap between the social value these workers create and the wages they receive.

Low-skilled jobs are usually regarded as those that new technologies will co-opt over time. But most of these jobs are themselves by-products of technological progress. Mechanics, electricians, plumbers, and telecommunications installers all owe their occupations to past technological breakthroughs, and it is these workers who now ensure the proper functioning of the world’s machinery, power grids, water systems, and the Internet.

Innovation does not alter the traditional pyramid structure of work, whereby a few highly qualified positions at the top oversee a hierarchy of lower-skilled occupations. Rather, what technology changes is the composition of the pyramid, by continuously replenishing it with new and more sophisticated tasks, while removing the most routine ones through automation. There are still assembly lines today; but a job in a factory that is fully controlled by software and populated by intelligent robots is completely different from a job in a state-of-the-art factory in the 1950s.

Behind their sleek digital facades, most of today’s Big Tech companies rely heavily on low-skilled workers. In 2018, the median salary of an Amazon employee was less than $30,000, reflecting what most of its employees do: manage inventories and fulfill orders in warehouses. The same is true of the electric-vehicle manufacturer Tesla, where the median salary was about $56,000 in 2018: around one-third of its employees work in its assembly plants. And while Facebook’s median salary in 2018 was $228,000, this figure does not account for the tens of thousands of low-wage contract workers that the company relies on for content moderation.

These patterns are especially evident in the gig economy, where software and algorithms provide the platform (a two-sided market) to sell specific services performed by real workers. No matter how sophisticated Uber’s ride-hailing and delivery apps are, the company simply would not exist without its cab drivers and delivery workers.

But all too often, the people working at the end of the platform-economy value chain are treated as second-class labour, not even rising to the level of staff. Unlike the engineers and the programmers designing and updating the apps, they are employed as contractors with scant workplace protection.

Likewise, artificial intelligence, widely seen as the main source of technological unemployment in the future, would not exist without the contributions of millions of digital blue-collar workers – particularly in the developing world – toiling away on the assembly lines of the data economy. Most machine-learning algorithms need to be trained on voluminous data sets that are manually “cleansed” and “tagged” by human annotators who categorise content. For an algorithm to determine that an image of a car is in fact a car, someone generally needs to have tagged the picture accordingly.

Given the realities of the digital economy, there is no excuse for treating low-qualification jobs as synonymous with low-quality jobs. Today’s “low-skilled” workers may not have advanced academic degrees, but many are in fact skilled technicians who have mastered certain knowledge domains and techniques. Acknowledging this will be crucial for re-establishing these workers’ negotiating power and forging a new social contract.

To that end, trade unions have an opportunity to regain influence and push for fairer treatment of the least qualified, including the gig workers who tend to fall off their radar screens. But large corporations (not just in the tech sector) also need to rethink how they assess and reward the contributions of low-skilled workers. It will take pressure from above and below to close the gap (in terms of both salaries and benefits) between those at the top and the bottom of the pyramid.

Finally, governments must do more to support the educational needs of skilled technicians, because even the most basic tasks will evolve over time. Keeping pace with innovation requires continuous upgrading of skills to remain competitive in the labor market. In terms of overall resources, investment in this segment of human capital should be similar to that for skilled professionals, though the two educational paths would of course be structured differently.

Workers with fewer formal qualifications will remain a central and indispensable part of the digital economy. It is political and business decisions – not new technologies – that threaten to push them to the margins.


Edoardo Campanella is a fellow at the Center for the Governance of Change at IE University in Madrid. This content is © Project Syndicate, 2020, and is here with permission.

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33 Comments

Great piece. Countries in the West that have managed to retain hi-value production within their borders have done so by maintaining subsidies for workforce training & development while ensuring high labour mobility.

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Throughout lockdown I have constantly revised my own estimation of 'essential', and this article does a brilliant job of de-polishing the AI/tech turd which has been pushed at us all as 'The Future'.....or often as 'The Only Possible Future'....

It is the only possible future. The machines will only get better, and more work get's automated every year. It affects all levels of work - pieces of medical and legal and accounting work getting automated all the time, not just fruit pickers.

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"Globalism has meant that we're competing with the richest people in the world for our houses and the poorest people in the world for our wages." I hadn't realised that we were literally shipping the poorest people in the world here to undermine our labour market until this pandemic laid it bare.

The reason why small towns have been dying out for years is because technology has massively reduced labour requirements for farm productivity. Pushing down wages. Now we find out, that the little labour still required gets shipped in from foreign countries. No wonder wages aren't increasing with inflation.

Ironically, our leaders promising to end poverty and wealth inequality are also some of the loudest supporters of globalism.

Paying Kiwi’s a higher wage to attract more staff wasn’t a viable option either, said a Waikato strawberry farmer. I don’t think that works. You’re getting the same people, the same productivity, but you’re paying more for them. We show Kiwis the opportunities are there to make good money, but they’re still not engaging... they just don’t want to get into the labour. If my staff can prove their productivity, then I’ll pay them more.

I am surprised asking Kiwis to work on Islanders' wage rates this season while promising growth and more money somewhere in the future hasn't attracted more locals.

Incredible: "You’re getting the same people, the same productivity, but you’re paying more for them." Yes, exactly, this is what happens when a resource is scarce (in this case, labour). You have to pay more for it. Everyone who wants a house has to pay more for the same house than someone else paid a year ago, even though the house is no better. If we can let houses increase by 20% a year and do nothing about it, then why can't we also let labour costs increase by 20% a year.

Having done it before, picking strawberries is the 21st century version of picking cotton. Wealth inequality will be fixed with globalism - in the sense we'll all be poorer for it bar the top 1%

Any migrant workers must, by law, be paid at least the NZ minimum wage. Something many people here seem to ignore. Unfortunately many Kiwi's seem to think they're worth more than that. God alone knows why, they are harvesting fruit - hardly a high skilled job. Unemployed Kiwi's need to get off their @rse, put their ego in the back pocket and get their sh*t together.

I've worked plenty of jobs on minimum. And that works out okay when I was still living at home with no dependants. I even managed to have a bit of fun in one but that was working 70 hours week.

You should go compare gdp per person for NZ and some of the island nations where the fruit pickers come from to understand why minimum wage can work for one lot but not the other.

They get around this by paying minimum wage for the work and clawing it back through charging for the temporary accommodation and food. Also, in our labour market I think it's worth somewhere around $30-40/hr. Anything less and you'll be going backwards on the economic treadmill. And sacrificing your body for the privilege. Can I ask why you're not doing it at the same time as volunteering others for those roles?

"Can I ask why you're not doing it at the same time as volunteering others for those roles?" - I have a skilled job. I also owned an orchard so I have experienced the quality of labour supply and I certainly wouldn't pay them $30 - $40 an hour to harvest. There's a reason why tech is moving to displace labour - productivity.

So what you're saying is, that the price for picking fruit isn't high enough to entice you to do that work rather than what you're already doing. Noted. Your contempt for those who've slaved for you is palpable, maybe that's some of the reason why the price for the work is higher than you expect, because the employers are knobs? All these things factor in.

Hurry up and get the tech in place then and stop trying to get wage slaves to pull your fruit for you. Until you reach the market price for your workers, you won't get enough workers. Markets aren't that complicated. Meet the market or pull your fruit yourself.

The attitude you're displaying is why robotic harvesters are being developed now. None of my harvesters were slaves, they were paid promptly (above minimum), provided with free lunches and at the end of the weeks harvesting a BBQ and beers. Yet I still had people sitting under trees smoking weed, sleeping or just plain slacking off. Until you've been on the other side of the equation I'd suggest you know absolutely zip.

Pay peanuts, get monkeys. The price you offer also affects the calibre of worker. It also affects how workers feel about the work they are doing. The market price includes for both quantitative and qualitative outcomes. If you can't afford your workers without shipping in 3rd world wage slaves. You shouldn't be in business.
https://en.wikipedia.org/wiki/Wage_slavery

If you could automate it, you already would have. And cheap wages shouldn't be the thing that stops automation. Get to it. Increased productivity, minimising human exploitation is a good thing. The amount of human labour involved in farming has fallen from about 80% to about 2% in the last couple of centuries. That is economically positive. The trick then becomes ensuring that all humans benefit from the natural resources of the nation. The solution to the failure of the labour market to properly distribute societal productivity is in Henry George's works "Progress and Poverty". https://en.wikipedia.org/wiki/Progress_and_Poverty
And Thomas Paine's "Agrarian Justice"
https://en.wikipedia.org/wiki/Agrarian_Justice

"Pay peanuts, get monkeys. The price you offer also affects the calibre of worker." - the price I pay for labour is dictated by the price I receive for the produce, a simple but important factor that is completely missed by most people here advocating for higher wages. If the produce price doesn't cover costs then the enterprise ceases - pure and simple. You can reference as many theoretical studies as you want but the simple fact remains - no profit - no enterprise - no jobs. BTW, I ripped out the orchard for exactly that reason - returns vs costs meant I personally was working for free, end result - no orchard and no jobs

You're saying the labour market is dictated by the price of fruit. This is where you are confused.

You have no divine right to the labour of others. You have to pay enough for people to want to sell it to you. It's a separate market from the fruit market.

Good that you're starting to learn. If something isn't economically feasible. Do something else. If you can't own your land profitably sell it to someone who can. Different people specialise in different things.

If anyone is confused it would be you. If you can't conceptualise the relationship between costs and returns then you'll never get the gist of it. I never said I had a "divine right " to labour anymore than I said people have a "divine right" to exorbitant wage demands for p1sspoor productivity. If you can't work out that labour costs are inherently linked with productivity then you should maybe study Supply/Demand Dynamics and the relationship between them more closely.

OK I'll take this one last step with you. Firstly there is the concept of the reservation wage. https://en.wikipedia.org/wiki/Reservation_wage That is the amount at which people would rather be unemployed than do your work for you. Secondly, labour sells not just to fruit orchards. But across all industries. It's the same reason why you're willing to do your job, but not pick the fruit. Your job pays better and offers better perks, like consistent employment etc. Those perks actually decrease the wage at which you are willing to accept that employment compared to say, inconsistent employment. It's the same reason why contract workers in most industries get paid about double.

When I was an HVAC tradey, I got paid about $30/hr and was contracted out at $75/hr. If you want contract workers, and you're offering intermittent seasonal work, in far flung places, you're going to have to pay at least double minimum wage. Good luck.

I work as a QS currently, if we want to build a building on Waiheke or in the middle of nowhere, there is a premium on the labour costs of all the different tradeys. It's likely about 50% over the standard contract labour rates. So Electricians go from $80/hr to about $120/hr. Etc.

I'm glad you've lost access to your 3rd world labour markets, long may it remain that way.

Firstly my orchard was in the middle of a relatively high unemployment area (Eastern Bay of Plenty) so hardly remote. Secondly the labour required was during the off season (middle of winter) for other harvesting jobs.
I am a contractor and have been for more than 25yrs so know all about Contract rates and the labour I employed on orchard weren't contractors - they were mostly MSD referrals provided by a contractor. If you only got paid $30/hr by your employer as an HVAC tradie I can only assume he was paying you market rate for your skills.
You need to get some experience as an owner before you start making unfounded and factually incorrect assumptions

Interesting how you say I (the buyer) must pay enough for the people who want to sell me their labour and yet the consumer (the buyer) demands the lowest price possible for the product. Are you that myopic you can't see the conflict or are you just being intentionally selective??

I'm merely explaining why you're not getting your labour. What you're doing is equivalent to going to the supermarket and saying you refuse to pay $2/l for a bottle of milk, and still expecting to get all the milk you want.

It's got nothing to do with the workers. There's 5 million people in this country and rising unemployment. You've been spoiled on exploited 3rd world labour, and you're struggling to come to terms with the current situation so you're lashing out at NZers who have a pretty tough economic treadmill to tread.

What a load of unresearched opinionated unconnected and ignorant rubbish. It's got everything to do with workers (especially the newly unemployed). When they're capable of doing a fair days work they'll get paid a fair wage. Employers, contrary to your assumption, are not here to provide over the mark wages in return for underperforming inexperienced and frankly petulant employees.

Oh forgive me. The supermarket is wrong about the price of milk. Cheers.

all operating as designed

Electricians and plumbers (especially plumbers) tend to be well paid. Both have the capacity to sign of critical work that they have completed.

Electricians have been substantially benefited by technology whether it's solar, installing domestic ventilation systems, and to a limited extent installation of fire alarm systems (these are low voltage DC but similar skills apply).

Electricians can't sign off their own work (at least not legally) unless it's relatively minor alterations or extensions, I'm not sure about plumbers. They command a higher rate because they are a registered trade and they're relatively scarce. Fire alarm system installation is also regulated. Builders and mechanics are also in demand hence their higher rates.

Kind of a bizarre article, I can see where he's driving at but the examples given are off the wall. Who actually thinks plumbers and electricians are low-skilled labourers? And Amazon is a terrible example to look at Big Tech average salaries - they're basically just a massive distributor, so that salary looks correct in that context. What's the median salary for their AWS business? Bet it's in the ballpark of Facebook.

Big tech isn't all about high salaries, attractive campuses and free gourmet food onsite. High-value jobs created by these companies are kept in-house while less-glamourous work is outsourced to third-party providers at low rates.

For example, there are 15k contractors around the world reviewing Facebook content. These moderators can make as little as $28k a year in the US and $6k in India to perform such psychologically draining tasks. Include these in your calculations and the median salary at Facebook should look very different from what you have in mind.

What we see is a product designed in reduction in specified skill set required.

Look at field service of equipment.
1. The scan tool (sometimes remote).
2. Modular parts.
3. The field service operative is now a fitter, not a mechanic.

Massive labour saving in meat industry and ongoing in a hurry.

https://www.youtube.com/watch?v=mdq1uBCI2Kw

Andrew that is an advertorial by Scott Tech. It shows what's possible using their systems. Unfortunately for Scott it hasn't had widespread uptake due to price and installation issues. JBS (one of the worlds largest beef suppliers) has a 50% stake in Scott but it hasn't really helped Scott expand. Check out their share price over the last couple of years or so (NZX:SCT) - all down hill.

Mate in Oklahoma tells me that Covid has given the meat industry a big shove regards tech, too dependent on low wage immigration for too long. Interesting to see what the outcome will be, thinking is Biden will open immigration spigot.