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: Innovation & Competition Policy

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.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

Read about event More on this topic
 

Upcoming Event

Apr
2
13:30

Find my virus: Mobilising AI and big data to fight COVID-19

At this event, the panellists will discuss the role of AI and big data in the fight against the coronavirus crisis.

Speakers: J. Scott Marcus, Alex Sandy Pentland, Georgios Petropoulos and Marietje Schaake Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author
 

Blog Post

Artificial intelligence in the fight against COVID-19

Artificial intelligence can help fight the coronavirus through applications including population screening, notifications of when to seek medical help and tracking how infection spreads. The COVID-19 outbreak has triggered intense work on such applications, but it will take time before results become visible.

By: Georgios Petropoulos Topic: Innovation & Competition Policy Date: March 23, 2020
Read article More on this topic More by this author
 

Blog Post

Big data versus COVID-19: opportunities and privacy challenges

All available resources need to be brought to bear on the novel coronavirus COVID-19. To what extent can digital technology help? What risks are there in using big data to combat COVID-19, and what policies can mitigate any limitations that these risks impose?

By: J. Scott Marcus Topic: Innovation & Competition Policy Date: March 23, 2020
Read article More by this author
 

Opinion

Europe may be the world’s AI referee, but referees don’t win

The EU needs to invest in homegrown technology.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance, Innovation & Competition Policy Date: February 19, 2020
Read article More on this topic More by this author
 

Podcast

Podcast

The EU's plan to catch up on artificial intelligence

While the US and China have been setting the pace when it comes to Artificial Intelligence, the European Union seems to be lagging behind. What are the Commission's plans to finally catch up? Will AI increase the gap between big and small companies? This week, Nicholas Barrett is joined by Julia Anderson and Guntram Wolff to discuss the EU's plan for AI.

By: The Sound of Economics Topic: Innovation & Competition Policy Date: February 14, 2020
Read article More on this topic More by this author
 

Blog Post

The dynamics of data accumulation

The bigger you are, the more data you can harvest. But does data accumulation necessarily breed monopolies in AI and related machine learning markets?

By: Julia Anderson Topic: Innovation & Competition Policy Date: February 11, 2020
Read article More on this topic More by this author
 

Podcast

Podcast

Industrial revolutions might not be as fun as they look

AI promises a new industrial revolution but history warns us that industrial revolutions aren't always that fun for people in the eye of the storm. This week, Nicholas Barrett and Maria Demertzis spoke with Dr. Carl Frey, author of the book "The technology trap: capital, labor, and power in the age of automation", and Robert D. Atkinson, President of Information Technology and Innovation Foundation (ITIF), about how artificial intelligence will affect the job market.

By: The Sound of Economics Topic: Innovation & Competition Policy Date: February 5, 2020
Read about event More on this topic
 

Past Event

Past Event

The quality and quantity of work in the age of AI

At this event, the panelists will discuss the implications of Artificial Intelligence on the labour market and the future of work in general.

Speakers: Robert Atkinson, Anna Byhovskaya, Maria Demertzis, Carl Frey and Daniel Samaan Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: February 5, 2020
Read article More on this topic More by this author
 

Blog Post

Do AI markets create competition policy concerns?

AI markets are young and their structure is yet to crystallise. Is European competition law ready for what happens next?

By: Julia Anderson Topic: Innovation & Competition Policy Date: January 23, 2020
Read about event More on this topic
 

Past Event

Past Event

The European AI policy: writing the first lines of the code

At this closed-door event, an open discussion with Margrethe Vestager will contribute to her work on artificial intelligence. The aim of these discussions is to set out a policy and regulatory approach in the form of a white paper, including the human and ethical implications of AI.

Speakers: Margrethe Vestager and Guntram B. Wolff Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: January 21, 2020
Read article More on this topic More by this author
 

Podcast

Podcast

AI in Europe: a conversation with Google's CEO

It seems almost inevitable that Google will be big part of Europe's future. And Europe will be a huge part of Google's too. This week, Alphabet, Google's parent company, hit $1 trillion market cap for the first time. Can Google's AI be socially beneficial? Are big tech companies intrinsically bad? This week, Guntram Wolff talked to Google and Alphabet's CEO, Sundar Pichai.

By: The Sound of Economics Topic: Innovation & Competition Policy Date: January 20, 2020
Read about event More on this topic
 

Past Event

Past Event

Partnering with Europe on responsible AI: a conversation with Sundar Pichai, CEO Google and Alphabet

At this event, Google's and Alphabet's CEO Sundar Pichai will elaborate on his views on Artificial Intelligence.

Speakers: Sundar Pichai and Guntram B. Wolff Topic: Innovation & Competition Policy Location: SQUARE, Mont des Arts, 1000 Brussels Date: January 20, 2020
Load more posts