Blog Post

Jobs and robots: Europe’s Debate Over the Destiny of the Welfare State

This blog is part of a series following the 2019 Bruegel annual meetings, which brought together nearly 1,000 participants for two days of policy debate and discussion.

By: , and Date: September 20, 2019 Topic: Digital economy and innovation

Artificial intelligence, big data, machine learning, and the internet of things are bringing huge transformative changes in society. The questions that have been increasingly on the table are what these changes imply for the future of work, and what they imply for the future of European welfare states. A 2013 study by Frey and Osborne about the future of employment claimed that the jobs of as much as 47% of the US workforce might disappear in a small number of decades. Subsequent studies have taken a different approach and concluded that outright net job losses would not be more than roughly 10%, taking into account new jobs that emerge as well as old ones that disappear. Looking to the European labour market, work done by another Bruegel fellow, Georgios Petropoulos, found that those parts of Europe that had the highest density of robots actually had lower than average unemployment.

Technological changes are therefore likely to drive significant changes in the workforce, but there is considerable uncertainty about how this will translate into employment rates and joblessness. The one thing that pretty much everybody agrees is that these changes are going to lead to large changes in the workplace. A great many jobs will be affected even if they don’t necessarily disappear.

One related phenomenon is the growth of various forms of non-traditional employment and self-employment. This is not an entirely new trend. In the literature, we see papers going back to the 1980s talking about increasing labour flexibility, and it probably existed before then as well. It essentially represents a move away from traditional full-time employment to other forms of work. While it may not be an entirely new phenomenon, it’s moving at an unprecedented speed. Examples of this shift are situations where multiple workers share one job or multiple jobs share one worker, as well as the kind of “platform work” provided by ride-hailing services such as Uber and Lyft and by labour clearinghouses such as Amazon Mechanical Turk.

This raises many questions.  What does this imply for the benefits of non-traditional employees and the self-employed, including platform workers? Where should they get their pensions? Where should they get their health insurance? What about disability and other types of insurance? What about maternity and paternity leave? What about unemployment benefits? Is unemployment insurance even meaningful for the self-employed?

At Bruegel’s 2019 annual meeting, researchers and stakeholders were able to revisit these topics with policymakers who will be key participants in shaping Europe’s response: Ann Mettler, Head of the European Political Strategy Centre (EPSC) at the European Commission; Laura Tyson, professor at the University of California Berkeley; Jamie Heywood, Regional General Manager, UK, Northern & Eastern Europe, Uber; and Alexander Stubb, Vice-President, European Investment Bank, and a former Prime Minister of Finland. They were joined by J. Scott Marcus, senior fellow at Bruegel and co-author of the study on Digitalisation and European welfare states recently published by Bruegel.

Mettler reinforced the thought that the very notion of what constituted a job had already been evolving in recent years. In the early years of her time at the Commission, she and outgoing President Jean-Claude Juncker had perceived an urgent need for a public policy response in light not only of the economic crisis, but also the risk of increasing polarisation and fragmentation of the labour market due to automation. At European Union level, the response came in the form of the adoption of the European Pillar of Social Rights. Even if not legally binding, the Pillar enshrined the principle that “Regardless of the type and duration of the employment relationship, workers, and under comparable condition, the self-employed have the right to adequate social protection.” This was a big change because until then, it was for the most part those with permanent contracts who enjoyed the full benefits of social protection.

Laura Tyson, who served as a senior policymaker under US President Bill Clinton, agreed that there had been a large change in the nature of jobs and contracts, however, she disputed the idea that this will lead to large scale unemployment. “There’s nothing in economic history and there’s nothing in economic theory, there’s therefore nothing in economic evidence, to suggest that as technology changes, we end up with long-run technological unemployment.” She thus views the current wave of technological disruption mainly as a transition challenge rather than as a long-term systemic problem. In line with Mettler, she emphasised that a profound rethinking of education and training will be necessary to match the modern job market’s need for new skills. Technological changes will lead to substantial dislocations that will unevenly affect workers depending on their skills, occupations and gender or cultural background. It will be hard to equip citizens with the right skills when there is not yet a clear view on which ones are needed. Tyson also offered the view that Europe is lagging behind in lifelong learning.

Returning to the issue of contracts and benefits, Jamie Heywood suggested that flexibility is needed in both directions: changes that will help workers, in addition to those that bring benefits to companies. As technology changes the nature of the relationship between companies and individuals who doing the work. Heywood cited an academic study analysing data from Uber drivers in London which showed that “85% of the workers had previously been in full-time work, and that in order to return to full-time work, they would want to earn 35% more per hour.” With that, he highlighted that that flexibility has a monetary value to those drivers. At the same time, he also recognised the need to ensure better social protection systems.

Looking at Europe’s role in the broader global economy, Stubb pointed out that the disruptions caused by AI, machine learning, big data and the Internet of Things go beyond economics. These shifts will change politics and change the way communities view their society. It touches the core of the concept of democracy, and it has ethical implications about the relationship between humans and machines.

Europe’s comparative strength may be its ability to set well-reasoned rules for business operations that can drive global standards, he said: “If Europe is good at one thing, we are a regulatory superpower. Once you regulate, others follow. So, do smart regulation. The giants will follow, the Chinese will follow, and the rest of it.”

Technological change thus poses significant challenges yet at the same time offers substantial new opportunities. Public policy, in the EU and in other developed countries, needs to play a large role in enabling the broader society and the economy to adapt. Europe has a chance to play a leadership role in social protection, as it recently did for privacy with the general data protection regulation (GDPR). Some positive steps have already been taken, but there is surely a need for more to be done in order to adapt to this emerging new world.

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