Square Deal on Jobs and Skills

By admin, October 19, 2017

On any normal day, open a newspaper on your phone and you will find one of two things. A breathless piece of futurology predicting that robots will soon be able to box better than Anthony Joshua. Or a dismal screed identifying the millions of jobs that will be swept away by the approaching hurricane of automation and artificial intelligence. One day, reporters are falling over themselves with excitement about a machine conducting Andrea Bocelli and the Lucca Philarmonic. The next, they are solemnly dissecting the findings of a new poll predicting the loss of 4 million jobs by 2027 due to automation (1).

The Pollyannas and the Cassandras may both be right. But when you look at the fundamental processes that make up modern life in an advanced country like Britain, the Fourth Industrial Revolution seems to be an awfully long time coming. I am fifty-two years old. In the past half century, very little seems to have changed in the way we handle most of the key tasks of modern existence. We cook on gas or electric stoves. We store fresh food in refrigerators. Most cars rely on an internal combustion engine and planes are still powered by jets or propellers. Our washing machines and dishwashers may consume less energy but they still use the same basic technology. Only in shopping, communication and the retrieval of information has everything been transformed by the mobile phone and the internet.

This is a problem. We need revolutionary new technologies to transform the way we do things if we are to achieve the big increases in productivity that would justify (and pay for) increases in most people’s real wages. If we carry on doing things in roughly the way we have always done, while wasting lots of time tagging photos on Instagram and arguing with strangers on Twitter, we risk returning to the economic Ice Age that prevailed for hundreds of years until the First Industrial Revolution, when output per head and wages were effectively frozen.

Britain needs more robots not fewer, more artificial intelligence not less. Far from being spooked by the potential disruption that these inventions will cause, we should be worried by how long they are taking to leave the laboratory and penetrate our daily lives. Businesses of every size and sector should invest more in the application of automation and machine-learning to their core operations. The public sector should do the same. Hospitals, schools, police forces and prisons all need to make their services more intelligent and more personalised without increasing their cost. These new technologies will help them do so.

We should discount the scare stories about the huge numbers of jobs that will be destroyed as a result. In every age people have predicted that technological advances would destroy more jobs than they create (2). Queen Elizabeth 1 denied William Lee a patent for his knitting machine because she was worried that hand knitters would lose their jobs. “Consider thou what the invention could do to my poor subjects,” the Queen told Lee, “It would assuredly bring to them ruin by depriving them of employment, thus making them beggars”(3). More optimistic but no less wrong, John Maynard Keynes predicted “an age of leisure and abundance” in which people will work only fifteen hours a week (4). At every turn, what commentators fail to realise is that technological change doesn’t just benefit the owners of capital. It makes everyone better off by lowering prices. This leads to increased spending which in turn creates better-paid employment in jobs that previously didn’t exist.

Bring on the revolution

We need the pace of technological change to accelerate. But we must also recognise that the rise of the intelligent machine will disrupt the lives of millions. Technological revolutions always do. Government must understand who will be most affected and help them get ready to adapt.

Our top priority must be to give people who do not go to university a set of technical skills that are valued by employers, and that will form the basis for further learning throughout their lives as new technologies are developed. The neglect of the education of the 50% of our fellow citizens who do not want to pursue academic study after the age of sixteen is the most egregious example of the entrenched snobbery that has disfigured British society and hamstrung our economy since the Second World War. A teenager with academic interests knows very clearly what path they have to take to get the qualifications that will lead to a rewarding career – three or four A-levels followed by a bachelor’s degree at university. A teenager who wants to learn a technical trade is sent to their local Further Education college and expected to choose from among thousands of different vocational courses and qualifications, few of which have any proven value to employers. This educational apartheid has always been a scandal, but in the past those who suffered by it could at least get unskilled jobs. When those jobs disappear, if nearly half of our fellow citizens still lack the technical skills that employers value, there will be an economic and social calamity.

We should be ambitious for those who do not go down the academic track – just as ambitious as we are for those who do. Let’s start by dropping the condescending term ‘vocational’ when describing the courses that we offer them. Vocations are for vicars.  Young people need to know that the skills which employers require are technical, that learning them is not easy, but requires focus, discipline and commitment – as well as a solid grasp of English and maths. We do them a great wrong when we give them soft soap about what has value in the world of work. They must hear the truth: that technical education is going to be the only defence against obsolescence at a time of rapid technological change. Not because today’s technical skills won’t themselves become out of date, but because someone who has mastered the technical skills required today has a better chance of keeping pace with evolving technology and retaining that technical mastery in the very different world of the future.

Technical education should start in school. David Cameron and George Osborne were right to back former Education Secretary Ken Baker’s idea for University Technical Colleges (UTCs). We now need to learn from the small number of successes and greater number of failures in that well-intentioned programme. Alongside UTCs’ advantages – a focus on technical skills and a teaching environment that feels more like the workplace than the classroom – there is a fundamental flaw which has hobbled them: the attempt to persuade young people to move to a new school at the age of thirteen or fourteen rather than eleven. Lord Baker may be right that, in the ideal world, thirteen or fourteen would be a much better age for children to decide what sort of school they want to go to for the rest of their compulsory education. But his quixotic attempt to use the tiny UTC programme to change the whole English education system was bound to fail: and his insistence that they should recruit at a point when no other schools do, has doomed many of them to become dumping grounds for the pupils that other secondary schools do not want to keep.

We need specialist technical schools but they should be set up as free schools, competing with other secondary schools to recruit young people at eleven, and offering them a standard secondary curriculum for their first two years before moving them onto a specialist technical programme. Some argue that it is wrong to expect young people who aren’t naturally academic to do the EBacc of five GSCES (English, Maths, a single science, a humanity and a modern foreign language). But it would be wrong to make an exemption that implies that we are expecting less from young people with a technical bent. We should create a technical variant of the EBacc that is open to anyone at a specialist technical school or UTC. Every student should be expected to sit the EBacc but the technical variant should replace the requirement for a modern foreign language with a second single science or a technology GCSE like Design Technology. In this way, we could maintain the principle of equal ambition and equal rigour in both technical and academic programmes, while reflecting the different interests of the young people pursuing them.

Once pupils have completed their general education and sat their GCSEs, those whose aptitudes are more technical than academic should be offered the opportunity to gain qualifications that employers value through an apprenticeship or a full-time course in college. Instead of college courses that bear little relation to the modern world of work, young people should be offered a choice of fifteen T-levels, designed by employers, each one relating to a recognised technical route like engineering and manufacturing or finance and accounting. All T-levels should involve a substantial work placement with a relevant employer (5). Instead of low quality apprenticeships involving little off-the-job training and delivering few transferable skills, young people should be offered apprenticeships that follow the demanding new standards being developed by groups of employers and involving at least 20% off-the-job training as well as a rigorous assessment at the end. These are the reforms I pioneered as Skills Minister. They are now being implemented by the government.

Once T-levels and the new apprenticeship standards have been created, we will have gone a long way towards offering less academic teenagers the chance of a world class technical education. But we should not stop there. The country’s competitiveness and the next generation’s employment chances will both depend on persuading more people to acquire higher technical qualifications at some point in their working lives.

At the moment, most of those with an ambition to achieve the status of a higher technician must find an employer to offer them a degree apprenticeship – or sign up for a three year full time BSc course at university. A few take a Higher National Diploma, a Higher National Certificate or a Foundation Degree but the number of people taking these qualifications has dwindled to almost nothing, as they lack the support of government, universities and employers. The number of degree apprenticeships remains small so most of those who think they might benefit from further study apply for places on full time degree courses.

Though lucrative for the university, the result is often unsatisfactory for the student and expensive for the taxpayer. Many of these students are over-qualified for the jobs they end up doing (6) and will not earn enough to pay back the full cost of their studies by the end of the 30-year repayment period. Instead of letting peer pressure, and a lack of alternatives, force them into a commitment to borrow around £50,000 for a three-year bachelors’ course, we should offer them a new option: two year courses leading to Technical Diplomas at Level 4 and 5 and costing up to £6,000 a year in fees. Like T-levels and the new apprenticeship standards, Technical Diplomas should be national qualifications, designed by employers, and serve both as a standalone mark of technical proficiency and as a staging post towards a full bachelor’s degree that some might choose to complete later in life. We should encourage less academic universities to become Technical Universities and specialise in the provision of Technical Diplomas, technical degrees and degree apprenticeships.

Many of the less academic students currently doing three-year BSc courses at less good universities would get the same or better skills from a Technical Diploma. They would be able to start paid employment a year earlier and would be much more likely to be able to pay back £20,000 of loans than £50,000. Other young people, who would otherwise stop their studies at Level 3 because they don’t want to study for three more years and take on large debts, might choose to take Technical Diplomas because of their shorter duration and the relatively low borrowing involved. Since the take-up of Technical Diplomas would save the taxpayer the cost of some student loans that are never going to be repaid, the government should be willing to provide an enhanced teaching grant for universities teaching them so that they can keep the cost of these courses down below £6,000 a year. It should also offer maintenance grants for students whose families are not well-off so that those who will most benefit from these qualifications have a strong incentive to pursue them.

If we want to improve people’s resilience to future shifts in technology, we also need to improve the training opportunities for older people in work. We should encourage employers to invest in improving the skills of their existing employees so they can adapt to changing requirements. The apprenticeship levy that I helped devise as Skills Minister, provides an obvious source of funding. Employers who have demonstrated their commitment to apprenticeships by spending over half of the apprenticeship levy that has been allocated to them on apprenticeship training, should be allowed to spend a further 20% of their levy funds on other training programmes completed by existing employees who need to learn new skills. Like apprenticeship standards and T-levels, these courses should require accreditation by the Institute for Apprenticeships and Technical Education and should involve an element of off-the-job training and external assessment.

Within a decade, we should aim to have transformed the quality (and labour market value) of technical qualifications and apprenticeship standards by trusting employers with their design; to have established a network of Technical Universities across the country, with at least one in each city and county; to have persuaded at least 20% of each cohort of school leavers to go onto a Technical University to take a two-year Technical Diploma; and to have achieved a massive increase in both the number and quality of training opportunities for people who are in work. If we do all this, the Square Deal will have revolutionised technical education in the UK and given large numbers of working people the wherewithal not just to survive the Fourth Industrial Revolution – but to thrive.

Dangerous delusions

The hyperbole in the debate about artificial intelligence and robots has spawned an appetite for simplistic solutions to the problems people believe will ensue. Two ideas in particular are attracting the uncritical attention of politicians while offering little in the way of intellectual rigour:  the robot tax and the universal basic income.

The robot tax originates in a proposal by a Member of the European Parliament, Mady Delvaux. She suggested that there might be a “need to introduce corporate reporting requirements on the extent and proportion of the contribution of robotics and AI to the economic results of a company for the purpose of taxation and social security contributions.” (7) The basic argument is this. If a company invests in equipment to automate a process, those currently employed in the manual process will lose their jobs and the government will lose corresponding revenues from income tax and national insurance. The suggestion is that companies who invest in robots should be charged a special tax, to fund general government services or the retraining of workers displaced by the robots.

The main reason the idea has become fashionable is the surprising endorsement by Microsoft founder, Bill Gates, who in February 2017 told the Quartz website, “Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.” (8)

I can only assume that the interviewer’s question took Mr Gates by surprise because a moment’s reflection quickly reveals fundamental flaws in the idea of a robot tax. When a company automates a process that previously required manual operations by one or more workers, it rarely replaces the workers with an individual robot. Usually the entire process is redesigned to take advantage of the new capabilities of intelligent machines. It would therefore be almost impossible for tax authorities to identify the specific investments that led to the replacement of human workers by an automated system, and tax them separately from the company’s other fixed assets. And how would the tax be assessed? Would the employer be liable for the amount that was paid in taxes and national insurance by the people who used to be employed in the previous process? Or for some percentage of the additional profits generated by the newly automated process? What would happen if these profits were eventually eroded as competitors adopted the new process and started passing on the cost savings to customers? Would the robot tax still be due?

The idea of a robot tax is not just impractical. It would also be the wrong response to the spread of automation. We will only see steady increases in average wages if workers’ productivity improves. Productivity improvements will only happen if companies invest in new capital equipment. We should be encouraging such investment by offering companies tax incentives (like the doubling of the annual investment allowance), not penalising them by imposing new taxes. The only sure result of a robot tax would be lower investment, lower productivity and lower wages.

An equal confusion characterises the current enthusiasm for the idea of a universal basic income. The concept is simple. Every adult would receive a basic income from the government and would keep that income whatever else they earned. The basic income would be set at a level sufficient to cover the cost of meeting a person’s basic needs. It would be funded out of general taxation.

Like the robot tax, the universal basic income has some unlikely champions. Milton Friedman argued for what he preferred to call a “negative income tax” chiefly because it would restore incentives to work and cost much less to administer than means-tested benefits. But his support should set alarm bells ringing with the universal basic income’s traditional supporters on the left. Milton Friedman was not in the habit of backing government interventions that would cut inequality or improve the incomes of the poorest.

In practice, according to the OECD, the introduction of a universal basic income paid to all adults at a flat rate would lead to a cut in the benefits received by the most vulnerable in society as well as an increase in taxes (9). Currently, the government is able to target help on those who need it most and can therefore afford to be modestly generous. If, in future, everyone were to receive the same basic income, the poorest would suffer a big drop in their income, while average earners’ taxes would go up.

The main objection to the idea of a universal basic income is not practical but moral. Its enthusiasts suggest that when intelligent machines make most of us redundant, we will all dispense with the idea of earning a living and find true fulfilment in writing poetry, playing music and nurturing plants. That is dangerous nonsense. Mankind is hard-wired to work. We gain satisfaction from it. It gives us a sense of identity, purpose and belonging. We may redefine work to include child-rearing and taking care of elderly relatives and finally start valuing these contributions properly. But we should not be trying to create a world in which most people do not feel the need to work. Nor should we separate the concept of income from the concept of effort.

Our response to the Fourth Industrial Revolution should be to lean in. There is nothing to be gained by trying to hold back the tide. We should embrace the spread of artificial intelligence and encourage businesses and government agencies to invest in its wider application. The new world will be full of opportunity. What people need, and what this Square Deal would give them, are the skills to make the most of it.

Notes

(1) Royal Society of Arts. 2017. The Age of Automation: Artificial Intelligence, Robotics and the Future of Low-Skilled Work. Available at https://www.thersa.org/discover/publications-and-articles/reports/the-age-of-automation?utm_medium=referral&utm_source=Guardian&utm_campaign=age-of-automation&utm_content=report

(2) Lewis, J. Bank of England, 2016. Robot Macroeconomics: What can theory and several centuries of economic history teach us? Available at: https://bankunderground.co.uk/2016/09/06/robot-macroeconomics-what-can-theory-and-several-centuries-of-economic-history-teach-us/amp/

(3) Acemoglu, D. and Robinson, J. 2012. Why nations fail: the origins of power, prosperity, and poverty. Random House Digital, Inc., pp. 182ff

(4) Keynes, J. M. 1930. Economic Possibilities for our Grandchildren. Available at: http://www.econ.yale.edu/smith/econ116a/keynes1.pdf

(5) Sainsbury, Lord D. and others, Department for Business, Innovation and Skills and Department for Education. 2016. Report of the Independent Panel on Technical Education. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/536046/Report_of_the_Independent_Panel_on_Technical_Education.pdf

(6) Wolf, Professor A., Dominguez-Reig, G. and Sellen, P. Education Policy Institute. 2016. Remaking Tertiary Education: can we create a system that is fair and fit for purpose? Available at: http://epi.org.uk/wp-content/uploads/2016/11/remaking-tertiary-education-web.pdf

(7) Committee of Legal Affairs, European Parliament. 2016. Draft Report with recommendations to the Commission re Civil Law Rules on Robotics. Available at: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML%2BCOMPARL%2BPE-582.443%2B01%2BDOC%2BPDF%2BV0//EN

(8) Delaney, K, Quartz. 2017. The robot that takes your job should pay taxes. Available at: https://qz.com/911968/bill-gates-the-robot-that-takes-your-job-should-pay-taxes/

(9) Browne, J. and Immervoll, H., OECD. 2017. Basic Income as a Policy Option: Technical Background Note Illustrating Costs and Distributional Implications for Selected Countries. Available at: http://www.oecd.org/els/soc/Basic-Income-Policy-Option-2017-Brackground-Technical-Note.pdf

 

 

 

 

 

 

 

 

 

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8 Comments

  1. David says:

    Nick

    For once I think we are in full agreement, I have been beating this drum for many years.

    Have a great New Year

    David J

  2. Stephen Burnett says:

    Some very valid points made here.

    As an employer of around 60 people, many of them young, can I put in a plea that whatever education structure emerges in the coming years, there should remain an emphasis on achieving a good level of mathematical understanding, and also a good level of communication ability in English. Everybody needs these capabilities (to manage their own personal budgets and to communicate effectively with people around them) and I am concerned that in recent years some young people don’t seem to have reached any sort of competent level in either Maths or English.

    The ability to communicate is fundamental in any form of employment, whether verbal, written etc. We would forget this at our peril.

    I am not sure that you should dismiss John Maynard Keynes’s thoughts about leisure so swiftly. I do believe that as a society we do need to consider how we spend our leisure time. Whether our education system should try to guide and illustrate different leisure options to students is a moot question, but I think it’s interesting to see that “knitting groups” are springing up, and the sales of printed titles such as TLS, New Statesman etc. are increasing – is this because people are finding electronic / digital diversions are no longer diverting enough?

    I think I’m beginning to waffle. I’ve enjoyed reading your output so far. All strength to you. I hope you are able to reach the ears that will listen, and the arms that may start to act.

  3. Stephen Burnett says:

    One more thing! I’m all for investment in robotics and AI. I’m also keen that people should be educated about how AI already impinges on our lives – through social media and the internet in general. Knowing about this is a “life-skill.”

  4. robert says:

    Amazing, not one mention about the OU in all this waffle about education.

    See my other post in housing re workshop units.

    Why is it so hard to employ someone? I would never have dreamed of employing someone when I was actively running my business. Why? Well, the overhead, they are with you for weeks or months but the costs are with you for years. It is not just the salary, with the living wage that is around £20k, then NI, then pension, then the sick leave, the holidays, the training etc etc so anyone, whether they know anything or not costs, what, £30k pa? To cover that cost means I would have to sell about £50k more just to cover it. Since my turnover was £50-70k then not really on. Why can’t there be something like a reverse credit card machine. You employ someone and to pay you use a card in the machine. You transfer the agreed amount of which 30% goes into an escrow account for tax, NI and pension. But the other wrinkle is that the employed person is responsible for all safety issues, if they don’t feel they can do something then they don’t do it. I am also not going to have a worker in my house, hence the business units, but they don’t, won’t, exist.

    Again the bogie of increased productivity is raised. How do you increase productivity? Certainly not by publishing a never ending stream of ‘directives’ and ‘updated directives’ to be read, understood and obeyed. I get caught by the EMC, WEEE and RoHS directives amongst others. The cost of complying with EMC, requiring visits to test sites or buying spectrum analysers and other test equipment was very significant. Increasing productivity on the manufacturing meant NC machine tools, flow solder machines and similar. None were in any way cost effective.

    It might just be that we have reached the limit of health & safety legislation. There is a difference here between being sold poisoned food to chopping a finger off in a lathe because you were a fool. The courts make no distinction. It is noted that all the above article is about technical training. Machines and things, for which there is, and always will be, an accident risk. Again, I simply wouldn’t for a moment consider employing someone in a technical job.

    I don’t want to employ anyone anyway, it is obvious that some simple problems just aren’t of interest to the powers that be to solve. So my knowledge will die with me, stuff the lot of you.

  5. Andrew Ferguson says:

    Nick, Woukd argue about the impact of technology in the fifty years we have both lived through on plant earth, thinking of agricultural production which has kept pace with a global population explosion from 1bn to 6bn in 100 years and a further 1bn in the last 15! Even the production of energy has kept pace as we find more efficient and varied sources.
    But your central point is spot on, specifically to the UK, we must indeed embrace technology as you say, this may avoid the need to import another 3m people from the EU to further exasperate our over crowding issues, housing crisis etc. But that’s another story.
    I have worked for nearly 25 years in business outsourcing, and whilst the industry talks loudly of automation, technology and innovation it frankly defaults to the easy option of offshoring. The UK has offshore 000’s of roles to India and other country’s simply to benefit for the labour arbitrage, is staggers me how many low tech admin roles still exist, business can get a benefit to the bottom line in 18 months by offshoring yet technology solutions require far greater investment in both capital and time that they choose the ‘softer’ option. So whilst I applaud the call for investment in technology I believe this should go hand in hand with conservative instincts to support and encourage business through lower corporate tax, reduced NI costs making UK employees more competitive in the global market and increasing those employees disposable income.
    The UK has some of the worlds best technology innovators both at individual and corporate level, and we do need to invest rapidly, that maybe direct monetary investment by government but perhaps more effectively by government policy that rewards and encourages growth by private business.

  6. Graham Jenkins says:

    Nick
    You have missed the point of Universal Basic Income (UBI). Receiving UBI is not meant to prevent work but to provide a secure safety net to provide options and flexibility to work. I find it either condescending or inconsistent that you believe that a wealthy person will invest and work to gain more wealth yet someone who receives £11,000 a year will instantly retire to hedonism. For the poorest it will provide assistance, as do out of work benefits now, but as that person moves into work he will be taxed at a marginal rate consistent with the rest of the work force and not at the effective punitive rate of 64% that Universal Credit will introduce. Currently the ability to move areas to find work is made difficult by the dysfunctional housing market; so often such jobs become the preserve of those with affluent parents, UBI provides that independence for those not so fortunate. There are also many areas that the middle/upper classes are over represented due their fortunate position to volunteer for unpaid roles, take up internships or, as in the case of the arts, remain in unsteady employment, again UBI levels the playing field. We may well find people will change jobs more regularly in the future and need several updates to their skills during their working life, UBI again provides that freedom to move back into training.
    When it was trialled in Canada the main effects were found to be more people caring for their elderly and more young adults returning to training. It is the desire to work and to do things that are worthwhile that makes UBI a viable and moral concept.

  7. Graham Jenkins says:

    “Milton Friedman was not in the habit of backing government interventions that would cut inequality or improve the incomes of the poorest.”
    So Nick, are you saying Thatcher-ism and large swathes of the Tory party who follow his economic teachings are not in the habit of backing government interventions that would cut inequality or improve the incomes of the poorest?

  8. Meanwhile, away from the headlines, practical companies are busy exploiting the potential of new technology, with real gains for productivity.

    Have a look at the short article on this link: http://www.maritimejournal.com/news101/marine-renewable-energy/autonomous-drone-inspection

    This is about Siemens working with a specialist US company to use drones to inspect offshore wind turbines – where the alternative is often to send a boat out with technicians, and stop the turbines so they can go up and have a look. “Automated inspections will lower operating costs substantially and potentially increase the efficiency and lifespan of wind turbines”.

    The article doesn’t say so, but there are also safety benefits. In another part of the maritime sector drones are being used to explore enclosed spaces, which matters because enclosed spaces are a major source of death at sea. You may recall from your time as Skills Minister that safety is a big issue for our sector; intelligent application of automation will help to save lives.

    Clear positive benefits like this need to be better understood to balance some of the nonsense about robots taking over.

What do you think?

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