Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you. This week, we're thinking about jobs, machines,
Speaker 1: and COVID nineteen. At the start of this pandemic, a
Speaker 1: lot of people decided globalization was dead, the companies would
Speaker 1: pull their factories out of China and supply chains would shrink.
Speaker 1: By and large companies haven't done that, but COVID nineteen
Speaker 1: does seem to have brought forward the day when an
Speaker 1: awful lot of the jobs we see around us are
Speaker 1: done by a machine. In a few minutes, I'll be
Speaker 1: talking about what the future holds with Harvard Economics chair
Speaker 1: and deep thinker about all things labor related Richard Freeman.
Speaker 1: Our chief European economist, Jamie Rush is also going to
Speaker 1: explain why the answer to the biggest question in the
Speaker 1: global economy right now is three point two trillion dollars.
Speaker 1: I'll leave you to work out with the questions, but
Speaker 1: first here's u s A economy reporter Olivia Rockman on
Speaker 1: the truth about robots and jobs in the year of
Speaker 1: COVID nineteen. Adding more robots to factories, retail stores, or
Speaker 1: mines was historically seen as a job killer by workers
Speaker 1: and the unions that support them. But this year, automation
Speaker 1: has allowed sectors of the economy to continue producing with
Speaker 1: fewer people or without any at all, minimizing the coronavirus
Speaker 1: risk for workers. Unions have recognized that automation will continue
Speaker 1: to accelerate to avoid massive outbreaks like the ones seen
Speaker 1: in US meatpacking plants earlier this year. But while they're
Speaker 1: all for protecting workers, their concern is widespread and permanent
Speaker 1: job loss. In many cases, once a company invests the
Speaker 1: cash to implement automation, it's unlikely that they'll take their
Speaker 1: workers back. A highway in Pennsylvania cut five toll worker
Speaker 1: jobs earlier this year after putting an electronic system into place,
Speaker 1: and it doesn't plan to bring any of the employees back.
Speaker 1: Marcus Casey, an economist at the University of Illinois at Chicago,
Speaker 1: spoke with me about how eliminating jobs can exacerbate inequality
Speaker 1: those workers aren't taught new skills. High skill jobs that
Speaker 1: require creative or human touch, so to speak, will remain
Speaker 1: um even in cases where pay is not necessarily much higher.
Speaker 1: For example, skill workers say professors like myself may see
Speaker 1: our pay is relatively flat in the future, However, among
Speaker 1: people who aren't necessarily as skilled, because there will be
Speaker 1: fewer jobs, you might see pay actually decrease because of
Speaker 1: increased competition in those sectors. One solution to the inequality
Speaker 1: problem is increased investment in reskilling, which can help factory
Speaker 1: workers transition into jobs in healthcare, for example, where automation
Speaker 1: is more difficult to implement. That's US President electro Biden's
Speaker 1: plan ensure that employers give workers impacted by automation advanced
Speaker 1: notice and put them at the front of the line
Speaker 1: for new jobs, as well as paid skills training. Currently,
Speaker 1: though the United States, Chile, and Mexico spend the least
Speaker 1: among O E c D countries on policies intended to
Speaker 1: improve job readiness and expand employment. That isn't likely to
Speaker 1: change quickly because health concerns are coming first, and Casey
Speaker 1: says there will be consequences. We already have a long
Speaker 1: term problem with people who are prime age and not working.
Speaker 1: Our employment to population ratio has been declining for many decades,
Speaker 1: and supposed in the future we go from a situation
Speaker 1: where we have a sixty seven or sixty eight percent
Speaker 1: employment of population rate to maybe a fifty employment to
Speaker 1: population rate. Many of those people are young, prime age malls,
Speaker 1: and our social insurance programs tend to direct money away
Speaker 1: from that population. So I'm delighted now to be able
Speaker 1: to talk to Richard Freeman. Herbert Asherman, share of economics
Speaker 1: at Harvard, taught me a lot about labor markets quite
Speaker 1: a long time ago. Richard, thanks for coming on Stephanomics.
Speaker 1: We're talking this week about the impact that COVID nineteen
Speaker 1: has had on workers in the US and Europe, and
Speaker 1: also how fits into the longer term structural changes in
Speaker 1: the labor market that you've spent a lot of your
Speaker 1: life thinking about and studying. And one thing that's come
Speaker 1: up a lot is the unequal way that this pandemic
Speaker 1: has hit society's and households, with poorer people much more
Speaker 1: likely to get sick and more likely to lose their jobs.
Speaker 1: But we also know that fiscal stimulus, certainly in the US,
Speaker 1: actually increased the disposable income of many lower wage Americans
Speaker 1: in twenty and I think you've also had many parts
Speaker 1: of the world are kind of out break of social
Speaker 1: solidarity in many places, and maybe a new appreciation of
Speaker 1: the value of people in some of these low page
Speaker 1: jobs that we reminded are so important for keeping the
Speaker 1: country going. So when you look back at do you
Speaker 1: think it's going to mark a break with some of
Speaker 1: those long term trends for labor or or more an acceleration.
Speaker 1: My guess is it will more accelerate things because the
Speaker 1: good outcomes that we had on the particularly through our
Speaker 1: almost unanimous Cares Act that really provided the people lost
Speaker 1: their jobs and the low income people are at least
Speaker 1: you know, financial protection. That was a one time thing.
Speaker 1: We may next few days plays something else, but that
Speaker 1: will also be a short term policy. The longer term
Speaker 1: thing is that we've created two different kinds of workers,
Speaker 1: those who work at home using computer technologies and those
Speaker 1: who work interacting with other humans and dangerous settings. And
Speaker 1: so I think the real push is going to be
Speaker 1: to automate more of those jobs and um to do
Speaker 1: more work at home phenomenon um. And that's that benefits
Speaker 1: one group of people, managers, professionals, and that harms another
Speaker 1: group of people, the people we were told next years ago,
Speaker 1: not not so long ago, where the we're going to
Speaker 1: be the heart of the new economy wasn't gonna be,
Speaker 1: you know, guys working in big factories. It was going
Speaker 1: to be all the people who interact with other humans.
Speaker 1: If this COVID is a one off and we don't
Speaker 1: see another another five six years, you know, maybe we'll
Speaker 1: we'll just go back to a more normal phenomenon. But
Speaker 1: there's a certainly a chunk of thinking in the scientific
Speaker 1: community that this is just the first pandemic that we're
Speaker 1: going to say, and they're more coming down the line.
Speaker 1: We're entering an age of pandemics, that this is not
Speaker 1: the first one that's gonna jump um, and the climate
Speaker 1: change is gonna add more to this. So if if
Speaker 1: this is a turning point, it's going to be a
Speaker 1: turning point changing work and I think speeding up automation
Speaker 1: and creating more problems for the lower skill people. Just
Speaker 1: to dig into that a bit, because then obviously is
Speaker 1: quite a lot of debate and pre dates COVID about
Speaker 1: the impact that the next wave of automation and artificial
Speaker 1: intelligence could have on on inequality and on and on jobs.
Speaker 1: And there is an argument that says, actually, this next
Speaker 1: wave is going to be kind of different, and that
Speaker 1: the jobs that we see were being replaced a kind
Speaker 1: of accountants quite high skilled workers UM that have done
Speaker 1: well in the previous few decades, the middle middle manager
Speaker 1: types potentially UM. And you might argue, I mean, if
Speaker 1: we don't live permanently in pandemic, you know, those kind
Speaker 1: of person to person to job jobs, hairdressing, all those things,
Speaker 1: I mean, they hadn't they didn't go away in the pandemic,
Speaker 1: and we're all trying to go back to our addresses
Speaker 1: when we can. So I wonder whether that we're whether
Speaker 1: you're exaggerating the impact of of COVID and not seeing
Speaker 1: potentially the other side of this automation, which does seem
Speaker 1: to have accelerated. Yeah. I've been sympathetic to the view
Speaker 1: that the more skilled people would be replaceable by really
Speaker 1: smart AI UM. But so far the evidence is that
Speaker 1: that hasn't happened. And all the AI experts told us
Speaker 1: accounting is gonna just die off, and in fact, the
Speaker 1: accountants keep increasing, and of course the accountant profession gets
Speaker 1: more computerized and people learn more skills. Yeah, it's hard,
Speaker 1: too hard for me to now see that those are
Speaker 1: the people who are going to be threatened as opposed
Speaker 1: to the clerks in the stores. UM. And and if
Speaker 1: we want to go to a store. I suppose I'd
Speaker 1: rather see a robot. It's safer for me as a
Speaker 1: consumer to deal with the robot that can't carry the disease.
Speaker 1: There was an old challenge that on the one hand,
Speaker 1: we've talked a lot about the risk of automation and
Speaker 1: the likelihood the automation is going to take jobs, at
Speaker 1: least in the chunk of the workforce, and yet we
Speaker 1: have this problem, ongoing problem, a very low labor productivity
Speaker 1: relative to the past. So what's the answer to that,
Speaker 1: Because on the face of it, it does seem a
Speaker 1: conundrum that we're that the automation could be destroying jobs
Speaker 1: but somehow not increasing our productivity the amount that we
Speaker 1: can make per person. Yeah. Well than some of that
Speaker 1: has to do with the sectors. Almost the ast bulk
Speaker 1: of the first automation things have have been factories, and
Speaker 1: productivity there has done reasonably well. So it's been in
Speaker 1: the in the server sectors where it's been slower, and
Speaker 1: that's where the workforce is shifted. Two. If we begin
Speaker 1: to see more automation in the service sectors, we will
Speaker 1: see productivity go up and there will be job problems
Speaker 1: and the wages would go up in some of these
Speaker 1: service sector jobs. The few that are left wages, so
Speaker 1: at least we will have wage growth if even if
Speaker 1: we've lost the jobs. No, No, correctly, So I I
Speaker 1: don't think if if we have a reasonably well organized economy,
Speaker 1: that we're going to see mass unemployment. These these things
Speaker 1: eight million, hundred million jobs disappearing, and depending on which
Speaker 1: country there or which area of the world they're talking about,
Speaker 1: I mean that what should happen is the workers will
Speaker 1: find some other jobs, and those that that will put
Speaker 1: downward pressure in those labor markets. And so I think
Speaker 1: the actual our concern should be much more what is
Speaker 1: automation going to do to the structure of wages? And
Speaker 1: that gets back to your earlier thing. Is it gonna
Speaker 1: harm the wages and the accountants and the managers or
Speaker 1: is it going to harm the wages of the clerks
Speaker 1: in the Your restaurant then has no waiters or waitresses,
Speaker 1: but just buttons. You have been in one in China
Speaker 1: where you just pushiate buttons. I assume there are a lot,
Speaker 1: must be more in Japan and Okay, then there's you
Speaker 1: feel safer, um, you etcetera, and um and it's more
Speaker 1: maybe it's more efficient, it's as well. And if that's
Speaker 1: going to be the way of the world, then where
Speaker 1: are the people who would have held those jobs going
Speaker 1: to go? We we just said we have to worry
Speaker 1: about them. I think, um, I would not. I would
Speaker 1: not trust natural forces teaching your automation to take care
Speaker 1: of the poorer and less skilled people. I think that's
Speaker 1: something we as societies have to deal with. So at
Speaker 1: one point you made them over the years, which I
Speaker 1: think is probably more much more accepted now that when
Speaker 1: you were first teaching me about it in the the Deities.
Speaker 1: Is the power of institutional change and the institutions rules,
Speaker 1: social morays, and how they have affected what happens to
Speaker 1: workers in the labor market, what happens to wages. You
Speaker 1: know that it's not just these aren't unstoppable forces that
Speaker 1: we can do nothing to control. We have a new
Speaker 1: administration in the US. Given what you know, you know,
Speaker 1: what could the Biden administration do to improve the outcomes
Speaker 1: for labor in the next few years. I'll take three
Speaker 1: things are one, Biden is incredibly committed to trade union reforms,
Speaker 1: So he is I've never seen a president speaks so strongly,
Speaker 1: and sometimes it seems like a voice from the past.
Speaker 1: Sometimes a voice from the past. He was around in
Speaker 1: the past too, We know that. So so he said
Speaker 1: g F. D. R said that Americans encourage unions, and
Speaker 1: that's what I'm gonna do, um and UM. And so
Speaker 1: he has a there is a pretty wealth set out plan.
Speaker 1: I don't know if they can get it through the
Speaker 1: Congress that would indeed strengthen that, but they're certainly gonna try.
Speaker 1: The second area that I think they will move is
Speaker 1: in the occupational health and safety area, the ocean, which
Speaker 1: should have stepped forward in the pandemic as a major
Speaker 1: force making sure workers are protected. In the US current
Speaker 1: debate or is where the Republicans want to give employers
Speaker 1: who bring workers back to unsafe workplaces UM protection against
Speaker 1: legal suits for you brought me back to an unsafe
Speaker 1: workplace and that that's that that's insane, it's some level
Speaker 1: UM and it will just cause more to disaster for everybody.
Speaker 1: And so I think there'll be a big push on
Speaker 1: the ocean. And we should be doing obviously more R
Speaker 1: and D and how can we protect workers in workplaces? UM,
Speaker 1: that would be a more natural thing to do the
Speaker 1: third area that that that they that they will push
Speaker 1: something with training people for the new technologies. And so
Speaker 1: there's a there's a big move inside the parts of
Speaker 1: the U. S. Government that they need really major uh
Speaker 1: changes in training. Um. I think the administration will will
Speaker 1: love this when it when they see what it's being planned.
Speaker 1: So so they'll they'll be those those uh, those friends.
Speaker 1: But there have to be major tax changes as well. Um.
Speaker 1: And how the Biden administration will will be able to
Speaker 1: reduce the tax cut given to the billionaires and their
Speaker 1: friends and do something more for ordinary citizens. We'll see.
Speaker 1: Richard Freeman, thank you very much. Okay, thank you. Now,
Speaker 1: what value would you put on the ability to lead
Speaker 1: a normal life? While you might say it's priceless, but
Speaker 1: Bloomberg economists say it's three trillion dollars. That's the net
Speaker 1: benefit to the global economy of countries with vaccination programs
Speaker 1: for COVID nineteen being able to get back to normal
Speaker 1: in That analysis was carried out by Chief of Mere
Speaker 1: economist Jamie rush Our, Chief Asia economists Chang Shu, and
Speaker 1: senior global economist Beyond Van Roy and Jamie rush Is
Speaker 1: with me. Now. Jamie briefly how did you come up
Speaker 1: with this number just over three trillion dollars. So we
Speaker 1: thought of it as a bounding exercise. We asked ourselves,
Speaker 1: and what's the best that it be possible for these
Speaker 1: economies of everything just happens to go just right. And
Speaker 1: so the way we approached it is we divided the
Speaker 1: world into three groups of countries. We thought that there
Speaker 1: are some that have got a chance perhaps of achieving
Speaker 1: herd immunity, some that would only be able to vaccinate
Speaker 1: the vulnerable populations, and some who probably even struggle to
Speaker 1: do that. So it's that first group of countries that
Speaker 1: has the best chance of getting back to normal. There'll
Speaker 1: still be cases in those countries, but widespread transmissions pretty unlikely.
Speaker 1: That means very low fatalities, very low personal and societal risks.
Speaker 1: So it's these countries which have a good chance of
Speaker 1: getting back to normal um. So what we did to
Speaker 1: work out of your countries in this group is we
Speaker 1: just compare the number of those is that are on
Speaker 1: order with the size of the population um and we
Speaker 1: found that about sixteen major economies are able to do that,
Speaker 1: and they're accounting for about half of world GDP and
Speaker 1: a third of the population, so thinking that what's the
Speaker 1: best that's possible for them, or maybe they can get
Speaker 1: back to their pre crisis trend, just maybe. So we
Speaker 1: estimate that in four Q and taking into account the
Speaker 1: impact of fresh lockdowns that the last the last three
Speaker 1: months of this, that's right, yep, the last few months.
Speaker 1: We were looking at those and we think that on
Speaker 1: average those sixteen economies are about six percent below their
Speaker 1: pre crisis trend level of output. So if you're able
Speaker 1: to vaccinate a very substantial portion of the population in
Speaker 1: those countries, then maybe if everything goes right, you could
Speaker 1: get back to that trend level. So six pc increase
Speaker 1: in GDP, which is about three point two percent of
Speaker 1: world GDP. In that second group with countries but just
Speaker 1: able to vaccinate the vulnerable populations. We think there are
Speaker 1: about eleven major economies and these are mostly emerging market
Speaker 1: economies and they don't make up a huge amount of
Speaker 1: world GDP. But we think that vaccinations in the vulnerable
Speaker 1: could have a very big impact on the economy because
Speaker 1: if you think of it, it will very significantly reduced fatalities,
Speaker 1: so intensive care beds won't be overburdened the risk of
Speaker 1: death most people will be very low, and so you
Speaker 1: should still see a very meaningful boost in g d P.
Speaker 1: But because these economies that are in this group a
Speaker 1: bit smaller, you only add an extra half percent to
Speaker 1: world GDP. And and so it's those two groups that
Speaker 1: account for the three trillion dollar boost. I mean, I
Speaker 1: understand these are just kind of broad magnitudes. We're not
Speaker 1: we're not saying that these exact numbers. But is there
Speaker 1: are you making an allowance here for the impact on
Speaker 1: of of lockdowns? I mean, is the assumption that you're
Speaker 1: saying that there will be no further lockdowns whereas there
Speaker 1: might have been lockdown what's the what's the assumption there?
Speaker 1: As the base case we've we've just assumed that the
Speaker 1: lockdowns are in place now, stay in place until until
Speaker 1: the spring um and then the vaccine gradually allows these
Speaker 1: to unwind. But it means that the countries that will
Speaker 1: get the biggest boost in the vaccine will obviously be
Speaker 1: the ones that have got the tightest lockdown condition or
Speaker 1: the lowest levels of g d P, So like the
Speaker 1: UK calls into that category, Spain as well, where there's
Speaker 1: really a lot of scope for improvement if they can
Speaker 1: they can they can move past the crisis phase of
Speaker 1: the pandemic and what you say the UK, of course
Speaker 1: this is to throw something else in the mix. But
Speaker 1: of course the UK in those three months is also
Speaker 1: going to be going through the sort of the final
Speaker 1: stage of Brexit, is actually not going out of the
Speaker 1: sort of transition period of Brexit where we were still
Speaker 1: following all the European rules. You spend you spent quite
Speaker 1: a lot of time thinking about what's going to happen
Speaker 1: to the UK next year. Do you think we're going
Speaker 1: to be able to see the effect of Brexit in
Speaker 1: the numbers or is it just going to be crowded
Speaker 1: out by this big boost from vaccinations and the bounce
Speaker 1: back of the economy generally as you come out of
Speaker 1: the pandemic. Well, I think if there is an impact
Speaker 1: from Brexit, it's likely to happen just before there's a
Speaker 1: boost from the pandemic, So you probably would see in
Speaker 1: the numbers because it would happen in the first quarter
Speaker 1: of this year. Um. And it's I don't think it's
Speaker 1: that likely that that would be a huge proportion of
Speaker 1: the population vaccinated by the end of them. Um. I
Speaker 1: mean I guess that the interesting thing about Brexit is
Speaker 1: that some of the policies that are in place to
Speaker 1: deal with COVID are also going to work pretty well
Speaker 1: for the Brexit shock, because both COVID and Brexit disruption
Speaker 1: would be a pretty similar, uh supply side disruption to
Speaker 1: the economy, something that's hopefully temporary that would eventually go away,
Speaker 1: and so it calls for the same sort of policy settings.
Speaker 1: So in the UK we have a large furlough scheme
Speaker 1: to protect workers protect jobs that would work if there's
Speaker 1: disruption for Brexit or if there's continued disruption for COVID.
Speaker 1: So in some ways it's it's helpful those those policies
Speaker 1: already in place. Um, when you think about what your
Speaker 1: sort of base cases for next year, how much is
Speaker 1: how much does the pace of vaccination affect where the
Speaker 1: global economy ends up at the end of next year
Speaker 1: relative to where it might have been. No, I think
Speaker 1: I think the realistic base cases that a portion of
Speaker 1: the population is vaccinated in advanced economies, and because it
Speaker 1: starts with the vulnerable groups, that that reduces fatalities quite
Speaker 1: substantially and allows people to go start living their lives
Speaker 1: a bit more normally. I mean, the big unknown is
Speaker 1: how the people that aren't in the vulnerable groups will
Speaker 1: behave once the vulnerable people are vaccinated. That's the that
Speaker 1: could be like the huge upside surprise to activity next year,
Speaker 1: where it could just be a massive dempscaph and everyone
Speaker 1: just stays and stikes are still scared. It's perfectly possibly
Speaker 1: it goes either way. So I think that it's it's
Speaker 1: um it's not a question even it's not a question
Speaker 1: of the medicine. It's not even a question of kind
Speaker 1: of the standard economics. It's a a what are people's
Speaker 1: behavior response going to be to this? And to be honest,
Speaker 1: we just don't know. I have to say anecdotally, my
Speaker 1: sense is that people are dying to go on lots
Speaker 1: of holidays to extend that they can and go and
Speaker 1: restaurants and other things. Now, how long that will last?
Speaker 1: I think, isn't it? Because if you think back, if
Speaker 1: you think back to the summer, I mean, people were
Speaker 1: clamoring to get out and go to restaurants, fly, go home.
Speaker 1: And it's one of the reasons why the economy picked
Speaker 1: up so fast over that period is that people were
Speaker 1: willing to do things even though that risk still existed,
Speaker 1: so I'm fairly optimistic that's something something will be a
Speaker 1: fairly major boost as vaccines wrong. Now, Jamie Rush, thank
Speaker 1: you very much, thanks for listening to Stephonomics. We'll be
Speaker 1: back next week with more on all things economic. Remember
Speaker 1: you can always find us on the Bloomberg Terminal, website,
Speaker 1: app or wherever you get your podcasts, and you can
Speaker 1: get a lot of news and analysis from Bloomberg Economics
Speaker 1: during the week by following at Economics on Twitter. This
Speaker 1: episode was produced by Magnus Henrison, with special thanks to
Speaker 1: Olivia Rockman, Richard Freeman, Chang Shue, Beyond, Van Roy, and
Speaker 1: Jamie Rush. Lucy Meekin is the executive producer of Stephonomics.
Speaker 1: Send ahead of Blimpberg podcast Beast Francesco mm hm hm