Occupations are changing as the jobs total grows

Have you heard that most of the jobs being created in the economy these days are part-time? No? Good. Yes, you have? Sorry, your info's out of date.

It was true last year, but not this year. As this week's figures for the labour force from the Australian Bureau of Statistics showed, of the 176,000 additional jobs created in the first six months of this year, 93 per cent were full-time.

That, BTW, was an exceptionally rapid annualised rate of growth of 2.9 per cent. Doesn't sound like the economy's dead yet.

Admittedly, it was a very different story last year. The calendar year saw growth in total employment of just 100,000 jobs – a very weak 0.8 per cent – of which 135 per cent were part-time.

Huh? Think about it: there must have been a fall of 35,000 in the number of full-time jobs. And there was.

It was a particularly bad year, and with all the happy scare stories about the rise of the "gig economy" it was enough to convince a lot of education-leavers that their chances of ever getting a decent, full-time job were low.

Moral: don't count your nightmares before they've hatched.

Dr David Gruen, a deputy secretary in the Department of Prime Minister and Cabinet, noted in a speech this week that "the displacement of jobs by technology ... is one of the developments that is leading to a sense of unease among many in the community."

People may fear that their own job may be taken over by a machine, or worry there'll be insufficient meaningful jobs for their kids.

Maybe, maybe not. Before we leap to cataclysmic conclusions, Gruen reminds us that fears of technological advances rendering many jobs obsolete is an idea with a long pedigree – back to the Luddites going around smashing machines in the early 1800s.

In the 200 years since then, employers have never ceased seeking out the newest and best labour-saving technology, but so far this has failed to cause mass unemployment.

Coming to today, Gruen says there's little sign of a quickening in the rate of change in occupations that might signal big, new technology-driven changes in the labour market. Nor is there any sign of the rapid improvement in the productivity of labour that you'd expect to see if there was widespread replacement of workers with machines.

But what's been clear for some time, he says, is that jobs across the economy are not equally susceptible to being displaced by technology and automation.

"Routine or predictable tasks are more susceptible to displacement than non-routine tasks. This observation applies to both manual and cognitive tasks – whether manual or cognitive, routine tasks are easier to automate than non-routine ones."

Dr Alex Heath, of the Reserve Bank, has used the stats bureau's figures on workers by occupation to see how these distinctions have affected our workforce over the 30 years to 2016.

She finds no sign of a recent quickening in the pace of change in occupations, but she certainly does find such change over the 30 years since 1986.

The proportion of routine manual jobs (such as labourers and machinery operators) in total employment has fallen from 40 per cent to 30 per cent, while the proportion of routine cognitive jobs (such as salespeople and clerical workers) has fallen from 27 per cent to 24 per cent.

In contrast, the number of non-routine manual jobs (such as nurses and hospitality workers) has risen from 6 per cent to 11 per cent, with non-routine cognitive jobs (such as management and professional occupations) rising from 27 per cent to 36 per cent.

This means routine jobs' total share of the workforce fell by 14 percentage points, whereas non-routine jobs' share rose by 14 points.

The share of routine and non-routine manual jobs fell by 5 percentage points, meaning the share of all cognitive jobs rose by the same.

(If you're wondering, over that 30-year period, total employment grew by almost 5 million jobs – an increase of more than 70 per cent – with the extra jobs spread about equally between part-time and full-time.)

Gruen says we should expect these trends to continue. But he makes a point first made by American economist Daron Acemoglu, that there's not one big trend going on in the workplace, but two.

The one that gets all the headlines is automation – jobs being taken over by machines. But the trend that gets much less notice – thus contributing to the public's excessive anxiety – is the continuous creation of new, useful, complex (that is, non-routine) jobs.

We've seen that, for at least the past 30 years in Oz, both trends have been at work. One displacing jobs, the other creating them. And so far, their effect on the composition of jobs has been roughly equal, and hasn't prevented continued growth in the total number of jobs.

Of course, it remains possible that the digital revolution will cause an acceleration in trend of displacement of jobs by machines, thus overwhelming the creation of new, complex jobs.

But another American economist, David Autor, has explained that certain tasks are particularly hard to automate.

These are tasks "that people understand tacitly and accomplish effortlessly, but for which neither computer programmers nor anyone else can enunciate the explicit 'rules' or procedures ... [The] tasks that have proved most vexing to automate are those demanding flexibility, judgment and common sense – skills that we understand only tacitly".

Of course, it's possible that "machine learning" may overcome these problems, but there's another constraint on machines taking all our jobs away to remember: the need for interpersonal skills in a growing number of jobs, plus our human preference for being served or helped by humans, not robots.

Don't discount the human factor.

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ETHICS IN ECONOMICS

Australian Conference of Economists, Special Session, Sydney, Friday, July 21, 2017

The notion that ethics has anything to do with economics, that economists should subject their professional behaviour to some sort of ethical standard, is such a foreign one that we have a long way to go in just accepting the idea, let alone finding a way to put it into practice.

I don’t pretend to have all the answers, though I do have some strong opinions. And it probably won’t surprise you to know that, as a journalist, my work is subject to a clear and detailed ethical code, set by the journalists’ union, accessible on its website, endorsed by many media companies and updated as necessary. Journos don’t delude themselves that they merely explore a “positive” science, without resort to “normative” considerations.

There are two ways to think of the economists’ role. One is that it’s to provide the community with dispassionate advice about the best ways for it to go about achieving its economic objectives. The other is to explain/convince/assert to the community what its economic objectives should be, and hence the policies that must be followed to achieve them.

The term “economic rationalism” was in use long before the sociologist Michael Pusey took credit for coining it, but the growing influence of this Treasury-style thinking during the term of the Hawke-Keating government – the Australian equivalent of what people overseas call neoliberalism – was very much in this second, more missionary approach of telling governments exactly what policies they should and should not be following.

In my own career as an economic commentator it wasn’t until around the turn of the century that I found my own ethical anchor in the slogan, Serve the Reader. Although I haven’t stopped supporting those policies I consider to be better than others, I have switched my mission from trying to persuade readers of the rightness of the economic rationalist cause, to acting as a kind of theatre critic to economics, elucidating the strengths and weaknesses of economic theories and policies for the benefit of my readers. When I see someone – politician, vested interest, economist – using economics to pull the wool over my readers’ eyes, I’m on their case.

Which brings me to the main point I want to make and the main reason I was so easily enticed to be on this panel today. If ever there was a part of the economics profession where behaviour seems most in need of ethical standards it must surely be the relatively new industry of “economic consultancy” – economists who make their living providing economic analysis – usually in the form of econometric modelling – to paying customers, usually industry groups lobbying the government for or against some policy proposal, but occasionally the government itself.

Sometimes I think economic consulting is little more than the up-market end of the public relations industry. I suppose there must be occasions where these consultants provide their clients with analysis purely for their use internally but, for the most part, the analysis is sought so that it can be made public, complete with oversimplified press release, in order to influence public opinion and put pressure on the government.

Often the attempt is made to give this analysis greater authority and credibility by calling it “independent” analysis. I can’t remember ever hearing the economists who produced it contradicting this claim, but nor can I imagine how anyone who believes in the power of market forces could believe that analysis that’s the product of a commercial transaction – where the producer is hoping the paying customer is pleased with what they paid for and will make repeat orders – is in any way “independent”. Is it the behaviour of an independent authority to keep its mouth tightly buttoned while your client, and the politicians who agree with his cause, repeatedly misrepresent your findings to the public?

This lack of independence is just as much the case when Treasury or some other department is commissioning analysis on behalf of the government. Sometimes the government may be genuinely uncertain and in need of external advice, but it’s far more likely it’s after “modelling” intended to help it persuade the public and the Senate that the policy it has determined to introduce should be accepted. In such transactions, Treasury knows what policies it favours, it knows what the government wants to be told, and it has a fair idea which consultants will be more amenable to giving it and its political masters the advice they’re hoping for. Forum shopping is a vice not limited to lawyers. Why do you think successive governments have refused to allow the Productivity Commission to analyse the costs and benefits of the so-called free trade agreements they make? They know the trouble with the PC is that it really does consider itself independent.

You don’t need to be a modeller to know how easy it is for the modeller to get the results desired by the choice of model used and by tweaking the variables. And yet the results are so often presented to the public as though they are God’s immutable truth. There’s no accompanying acknowledgement of the chosen model’s strengths and weaknesses, no admission of the key variables that are driving the models results, no sensitivity analysis, no admission that the model is a combination of both empirically measured variables and mere economic theories about how the variables combine to produce the model’s much touted results. No admission that exogenous variables for the future are set quite subjectively. No admission that many economists would disagree with the particular theories underlying the model you used.

Sometimes cannier modelers seek to insure themselves against criticisms such as these by burying in the very fine print of their reports jargon-ridden acknowledgements of some of them. But they stay mute when their results are presented and debated in a way that makes clear these insurance clauses haven’t been read by the very people who should have read them, as it was always intended they not be. This is ethical behaviour? Caveat emptor makes it all OK?

But I suspect there’s a related, less commercially driven reason why the use of economic modelling in the public policy debate is more about bamboozling non-economists than enlightening them. The other explanation is that, consciously or unconsciously, economists seek to avoid the Wizard of Oz Moment, when we see behind the curtain and realise the powerful wizard is really just a little man shouting into a megaphone, using tricks to make out he knows a lot more than he actually does.

Consider just two examples. Although many economists bang on endlessly about the adverse incentive effects of high marginal tax rates, we purport to show the effects of major tax reform using a model that can represent income tax only as a flat-rate tax. Why? Because it has just a single, “representative” household. We use a model utterly inadequate to the task – because it’s the best we’ve got – and present the results as definitive without any up-front admission that we don’t have the tools to answer the question we’ve been asked.

Or, take the very common modelling practice of assuming a short-term Keynesian world and a long-term neoclassical world. We ask such a model to tell us the long-term economic cost of introducing the carbon pollution reduction scheme. It starts in equilibrium, introduces the disturbance of a CPRS, wobbles a bit, then starts on its inexorable journey back to long-term equilibrium. Then we announce to the punters that our modelling shows the scheme’s long-term cost in forgone economic growth is, fortunately, quite minor. Then we wonder why they don’t trust us.

They say forecasters have a lot to be modest about. I’d add they have a lot to be more ethical about.

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