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Robots, productivity & the destruction of jobs


  • Economy
  • Technology

Richard Yetsenga, Chief Economist, ANZ | January 2019




What will the tech revolution do to jobs? We still don’t know but there are some firm ideas. 



We still don’t have an answer to a fundamental question: what will the tech revolution do to jobs?

Technology is changing how economies function, particularly on measures of wages and business investment - and on the nature of jobs. Continued low productivity growth has been an oddity against this backdrop but recent research (finally) provides some answers as to why this revolution hasn’t shown up in productivity data.

Adair Turner from the Institute for New Economic Thinking suggests the accumulation of wealth from this technology wave is being spent on low-productivity activities. He points to expenditure on domestic help and entertainment and suggests, in aggregate, measured productivity could actually decline.

Other research, cited by the Reserve Bank of Australia, points to an uneven takeup of technology across firms. Such growth is measured as an average across the economy; if the gap between leading and laggard firms is widening, average productivity may not increase.

This is fair enough. But will technology create more jobs than it destroys?



“Whether there are more or less jobs created we will only know in time.”
Richard Yetsenga, Chief Economist, ANZ  


In time

In a recent follow-up to his must-read Homo Deus, Yuval Noah Harari delivers a powerful sense of the scale of changes we may see from artificial intelligence (AI). He argues the current wave of innovation is different because it is driven by technology that offers connectivity and updatability.

“The AI revolution won’t be a single watershed event after which the jobs market will just settle into a new equilibrium,” Harari warns. “Rather, it will be a cascade of ever bigger disruptions.”

In 2018 the US Food and Drug Administration approved the first AI software that can make referrals without needing a specialist to interpret medical imagery. A camera operator is the only human input required.

In autonomous vehicles, Tesla’s testing reveals much-lower accident (or near miss) rates on autopilot (one every 5.4 million kilometres) than when the vehicle is under human control (one every 3.1m km). If you happen to be in metro Phoenix, Arizona, you can now summon a robotaxi from Google’s Waymo using an app on your phone.


Historical experience is consistent with the idea that even if technology doesn’t reduce the aggregate number of jobs, it certainly does disrupt types of jobs - and lives.

A recent report from the Pathways to Prosperity Commission in the United Kingdom suggests during the industrial revolution working-class labourers experienced a decline in living standards for the first 60 years while the income of the top 5 per cent more than doubled.

Consider the introduction of the washing machine: in 1910 there were 500,000 domestic laundry staff in the US. Within 30 years their number had declined by nearly 90 per cent.

Research from Alpha Beta looks at the impact of technological change on the labour market from two perspectives:  the change in jobs across an economy and the change of tasks within specific jobs.

Its key conclusion is these two types of change are negatively correlated; in other words, the more the tasks within a job change to adapt to new technology, the less chance the job itself becomes obsolete.

The wash up

The lesson for domestic laundry staff a century ago is to embrace the washing machine and make it integral to your working life. Trying to wash clothes quicker by hand probably won’t work.

The absence of a measured increase in productivity shouldn’t distract us from the profound impact technology is having on the way economies function.

Whether there are more or less jobs created we will only know in time. What we can be confident about however is there will be very substantial change within the mass of jobs. Many roles will be destroyed; many new roles created.

Richard Yetsenga is chief economist at ANZ

This story is an edited version of a report from ANZ Research You can read the full, illustrated version HERE.



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