Why workers still need the state

Most of us entertain rather ambivalent feelings about technology. We love the way in which new products and services make our lives easier and more enjoyable.

But many of us also worry that the next wave of technology could destroy jobs for us or our children.

In the last few years these fears have strengthened. Today the concern is that innovation - from artificial intelligence, to advanced robots and driverless cars - will replace not just repetitive or manual jobs as they have done in the past, but also the creative, thinking jobs which make up the bulk of work in rich countries.

On this bleak assessment, corporations which control the disruptive technologies will prosper and working people will lose out.

Some argue that the internet and mobile apps are already facilitating growth in less secure, temporary and part-time work. The so-called "gig economy", a term which was virtually unknown two years ago, describes the world of contract, part-time and temporary work.

The very term gig economy seems to have become freighted with negative connotations. This is a pity because it is not hard to see the benefits too.

Just as eBay created value by bringing buyers and sellers together, so the internet enables those seeking work, and those needing work done, to connect more easily. It also facilitates more flexible forms of working for those, such as students, older people or with family responsibilities, who do not want to work full-time. Fears that robots will destroy jobs without creating new ones are overdone.

We need to hold on to the truth that technological progress is the main driver of human welfare.

The slow pace of innovation before the Industrial Revolution meant that, for hundreds of years, living standards scarcely rose from one generation to another. Progress requires the application of technology and changes to the nature of work.

What is clear is that welfare-enhancing innovations have always caused dislocation. Think, for instance, of the effect of the rise of car ownership on the vast industry of farriers, grooms, stables and vets that made up horse-drawn transport.

History shows that the number of jobs in an economy is not fixed. When a machine comes along and replaces a person the result, paradoxically, is increased demand, new industries and, in time, more jobs.

The view that technology is a net destroyer of work has, at least in the past, proved to be a fallacy of composition.

Yes, jobs were destroyed and communities suffered, often permanently. But elsewhere, often indirectly, new jobs were created. The net effect was what we have today, a world which is more technologically advanced than ever, and where more people are in work than ever.

Technology pessimists have always assumed, and continue to assume, that jobs lost to machines will not be replaced elsewhere.

The insatiability of human desire and the manifest deficiencies of provision in all sorts of areas of modern life, even in rich countries, from health care to education and social services, points to enormous unmet demand.

So why do we worry? Perhaps because the job destruction/job creation equation is uneven. We cannot be sure that jobs will be created for the same people as lose them. And while change is a certainty we have little idea what the industries or the jobs of the future will be. Who would have guessed in the 1970s that gyms, coffee shops, discount airlines or cellphones would be such a prominent part of our lives today?

Technology will continue to change the nature of work and the returns to workers, generally for the better. Where I agree with the technology pessimists is that this won't always be the case.

But this is not a new problem. Worries about the quality of work, the distribution of incomes and equipping the workforce for technological change are age-old.

So, too, are the solutions. From the Victorian Factory Acts in the UK to the introduction of health insurance before World War 1, to the Minimum Wage in 1998, governments have often sought to alter market outcomes to help those in work.

It has become clear that the market, on its own, often fails to deliver optimal outcomes.

The state is needed to set rules for the private sector and to meet human needs for which the market caters inadequately or not at all.

Far from the technology creating unparalleled challenges for the world of work, the challenges are familiar and the state has levers it can use to alter market outcomes.

The real question is how can we ensure state interventions fulfil social need without undermining the dynamism of the market system? It's a question that is likely to preoccupy policymakers and politicians for a long time to come.

- ©The Daily Telegraph

• Ian Stewart is the chief economist at Deloitte