Driverless cars, data-analyzing computers and robots are all machines that can perform typical “human” tasks. Machines seem to be getting better at doing our job, and the fear of technological substitution of labor is returning to the stage of public debate.

Classical economic theory states that new technologies should be neutral with respect to labor demand. Gains from cheaper production should be transmitted to consumers in the form of expanded supply, causing labor demand to increase and offset the loss of jobs due to substitution for workers with machines.

Yet recent research by Miguel Barroso Morin of Cambridge University tells a different story. He analyzed the impact of the spread of cheap electricity in the ‘30s – spurred by technological progress — on the cement industry. The results were quite surprising: the drastic drop in electricity prices was not met by an expansion in production, and it correlated with a significant decrease in employment. Additionally, the share of income going to workers fell by 11 percent as labor productivity shot up by 36 percent. In this case, technology was not neutral with respect to labor – rather, technology crowded out workers.

One can imagine a similar pattern occurring with automation, especially if we consider the transformative nature of artificial intelligence. As the gap between what humans and robots can do narrows, technology will threaten not only manual jobs but also several high-skill professions.

Strikingly enough, according to an index compiled by Deloitte and the University of Oxford, accountants faces a 95 percent probability of being automated over the next two decades.

Although humans still significantly outperform computers in pattern recognition tasks, recent developments in machine learning seem to indicate our silicon-wired competitors are catching up quickly. Fast forward to 2050, and the most pessimistic can already picture a dismal landscape of wasted human capital as workers sit idle and machines do all the work.

But even if this does happen, not all is lost. According to Erik Brynjolfsson and Andrew McAfee, authors of “The Second Machine Age,” it’s highly possible to attain fabulous levels of wealth through technology.

The real risk is moving toward a labor-light society wherein machine capital ownership would be the only pathway to such wealth. Thus, the biggest challenge countries will face in the future is the tendency of capitalism to generate stark inequalities. Some claim that we are already experiencing this trend today, but its effects may be exacerbated in a labor-light economy.

The same old story

Yet Morin’s view has its notable critics. According to Martin Wolf, there is nothing special with automation when it comes to the labor market: it can be seen as a simple positive production shock that won’t alter the fundamentals of the relationship between technology and the labor market.

Wolf suggests economically significant technological change has, in fact, slowed down in the recent past. Evidence for this can be found in the slow growth of output per worker, stuck at slightly above one percent in the past decade. If countries were in the midst of an earth-shattering technological revolution, then their economies should have seen higher growth in output per worker in recent years.

Furthermore, even considering measures of innovation that escape crude GDP metrics, we fail to see major shifts in the way technology progresses. Take consumer surplus: when a new, economically significant invention is introduced, its price is effectively taken from an infinite value to a finite one, hence increasing consumer surplus immensely. Yet, we have not seen many large gains to consumer surplus being brought forth by today’s seemingly uncanny technology.

In addition, although recent developments, such as quantum computing, may seem impressive, the quick technological growth we’re experiencing today is not equivalent to the ground-breaking advancements of the 18th century. Although today’s high-tech gizmos appear to be changing and improving rapidly, they all pale in comparison to major breakthroughs, such as the development of steam power, electricity or even access to clean water.

The effects of automation would not be apocalyptic, but rather in accordance to a recurring pattern: as new technologies are introduced, some people will find themselves out of work because they have neither the education nor the technological skills to remain competitive within the labor pool.  As discussed in The Race Between Education and Technology by economists Claudia Goldin and Lawrence Katz, technological progress increases the demand for skilled workers relative to unskilled workers, which inevitably leads to disparities in wages and employment. As routine intellectual and manual jobs fall prey to technological substitution, we will not witness the complete disappearance of human labor but further rearrangement of returns to education and access to technology.

The upshot, however, is not all too different from what Brynjolfsson and McAfee worry about: a massive wedge in the economy between the lucky few, highly-skilled laborers (such as programmers), owners of robot capital, and essentially anyone else.

Another revolution

But is this the whole picture? The answer to the age-old conundrum of technological substitution largely depends on the theoretical framework we adopt. It is however clear that, at the present state, most jobs are safe from a total wipe out and there seems to be no impending risk of labor-market catastrophes.

But there is a different, perhaps subtler technological revolution that might be more concerning than automation – the increasing dominance of information technology.

The commercial implementation of information technology has rapidly increased in the past few years. This is favouring a shift away from an economy based on physical capital towards one that is reliant on software, intellectual property and human capital. A quick comparison between Sony and WhatsApp, two firms boasting a similar market value, evinces how there is an information technology revolution. The former employs more than 130,000 workers — the latter, only 46.

Returns on capital are skyrocketing and the traditional concept of employment may already be evolving. Soon enough we might have to say goodbye to lifelong jobs as they give way to “portfolio careers.” Workers may constantly need to stand ready to take up temporary jobs, retrain and relocate in order to act on the best opportunity available.

This trend has been apparent for quite some time, especially in highly dynamic markets. One can argue that it is largely due to market regulation and underlying macroeconomic fundamentals, but it does highlight an indirect and somewhat overlooked channel through which technology affects the labor market.

Something is indeed disrupting the way we work: it just turns out it is not a dystopian horde of robots but rather a large-scale rearrangement of means of production ultimately caused by good old human ingenuity.

 

Syria’s recent refugee crisis has instigated debates about the economic effects of refugees seeking asylum in foreign countries. While some countries, such as Hungary, are deploying armies to prevent refugees from entering, others such as Germany are openly embracing them in the hopes that they will bring economic benefits. The stark disparity in reactions naturally begs the question: what really are the economic effects of accepting refugees?

Since October, millions of Syrians have been racing across international borders to seek asylum from their war-ravaged country. Syrian refugees now account for one in five people in Lebanon and one in ten in Jordan. Both the World Health Organization (WHO) and the United Nations High Commissioner for Refugees (UNHCR) fear that these countries’ fragile infrastructures and limited resources may be approaching their breaking points, and that the mass exodus is altering the social, cultural and economic climate of Syria’s neighbors.

The notion that refugees pose an economic burden still remains prevalent. Many countries point to the initial costs of building temporary housing, feeding refugees, and paying for jobs and skills training. In order to prevent Syrian refugees from entering, some countries have even constructed barriers, and Hungary has gone so far as to deploy armed forces.

Refugees have also begun seeking asylum throughout all of Europe. Yet Europe, similarly to Syria’s neighbors, is providing little refuge, fearing that letting some refugees in will encourage more to come, and that these refugees are destined to become an economic burden.

An article earlier this month in the International Business Times reported that three hundred UK judges in an open letter criticized government officials over their repose to the migrant crisis saying it is “too low, slow and narrow.” In a September news release, Amnesty International cited key facts on resettlement efforts of Syrian refugees, noting that Germany and Sweden have received 47 percent of Syrian asylum applications while the remaining 26 European Union countries have pledged around 8,700 resettlement places, well under one percent of the refugees. Gulf countries, like Qatar, Saudi Arabia and Kuwait have offered zero resettlement places to Syrian refugees, as is also the case with other high-income counties, such as Japan.

Governments who refuse refugees typically emphasize the negative impacts that refugees might bring. They cite that the costs of strained public welfare budgets will hinder economic growth, reduce jobs, drive down wages and waste tax dollars. The UNHCR issued a report on the impacts of large refugee populations in January 1997, in which it cited how refugees in Zaire were receiving services and entitlements that were not available to the local poor populations.

But until recently, quantitative methods and empirical data that tell a very different story have been noticeably missing, as economists focused only on the “costs” of refugees on their hosts. Today, new evidence appears to defy public perceptions that refugees are a burden.

According to Alexander Betts, the Director of the Refugee Studies Centre (RSC) at the University of Oxford, refugees bring measurable economic benefits and development potential. They are a younger population with new skills and expand the consumption of food and commodities, which stimulates growth of the host economy.

“The RSC’s research has shown that, with socioeconomic rights, refugees can make an enormous contribution,” writes Bett in a June 2014 report entitled “Refugee Economies: Rethinking Popular Assumptions.”

Betts’s research shows that the economic impact of accepting refugees is generally positive, especially if immigrants are well-educated, as most Syrians are. Recent figures released from the U.N. and other aid organizations have shown that the majority of Syrians seeking asylum in Europe come from upper-middle class, and well-educated backgrounds. From an international trade standpoint, accepting Syrian refugees is a policy decision that could potentially lead to economic benefits.

In a recent report issued by the World Bank examining the impacts of Syrian refugees on Lebanese trade, a one-percent increase in Syrian refugees increased Lebanese services exports by about 1.5 percent, after just two months.

The main impacts, according to Roger Zetter of the Refugees Study Centre at Oxford University, “are seen in investment and capital formation – for example, in additions to the housing stock or to infrastructure, or in the start-up of new businesses.”

He cites the Eastleigh area of Nairobi, where many Somali refugees settled, as a textbook example. It can best be described as “a country within a country with its own economy,” according to the Norwegian Council for Africa, on account of its robust business sector.

Likewise, Afghan refugees expanded Pakistan’s trucking business, creating new markets for transport and adding to the productivity of the host country as well as international trade. Similar stories are found in the surprisingly resilient economies of Lebanon, Jordan and Turkey, despite the large inflows of refugees. According to the World Bank, Lebanon is predicted to grow 2.5 percent, which is remarkable considering the spillover from the war in neighboring Syria. Jordan and Turkey have also seen economic growth throughout the inflow of refugees.

Germany’s Chancellor Angela Merkel recognizes the opportunity Syria’s refugees provide because she is wary that Germany will soon suffer from the effects of an aging economy. Moreover, a study commissioned by the German government showed that migrants actually pay more taxes than they take out in public benefits, leaving a net surplus.

Last year, according to the International Business Times, Germany invested $2.7 billion for its 203,000 migrants, or just under $14,000 per refugee. This year Germany expects to accept 800,000 at an estimated cost of $11 billion.

Yet, many European countries, particularly Great Britain, continue to oppose accepting refugees, despite recent research that suggests refugees can actually benefit economies.

“A lot of politics is relatively fact-free in this arena, and we need to much better understand what drives migration before we can form the right policies,” Hein de Haas told The WorldPost. In general, “migration has a relatively small – rather than radical or negative – effect on economies,” Hein de Haas said.

The reality remains that more refugees are staged to flee Syria as the war escalates with Russia’s involvement. More Syrians are willing to risk the perilous journey, even for temporary asylum, to escape deplorable living conditions.

In light of new facts and research, political leaders need to see beyond the near-term costs of accommodating a new work force. If the international community allows itself to remain burdened by timeworn dogmatic thinking, then it stands to risk sacrificing the benefits of accepting refugees.

Across the Western world, the prospect of a job out of college causes many recent graduates to salivate like Pavlov’s dog. But will that job be fulfilling? Will it render the worker satisfied, fill the integral part of a person’s life dedicated to meaningful work?

For an increasing number of Americans, the answer is no. A 2013 worldwide Gallup poll found that “13% of workers feel engaged by their jobs…63% not engaged…[and] 24% actively disengaged,” and a 2012 Gallup poll of the United States and Canada determined that out of American workers, 19% felt satisfied, 16% somewhat satisfied, 21% somewhat unsatisfied, and 44% completely unsatisfied.

Considering that the average American spends over 1,700 hours a year at work, extensive unhappiness at work contributes to overall dissatisfaction with life. Numerous psychological studies have identified workplace satisfaction as one of the three most important factors in determining happiness. Work can provide individuals with a sense of purpose, meaning, and fulfillment, especially if workers can have significant control of their work. However, without control, employees find displeasure at their workplaces.

Perhaps the main reason for this chronic dissatisfaction with working life is the lack of control that many employees can assert over their lives. According to a study by the consulting firm Blessing White, 72% of workers would leave their current jobs because they want more control over their work, while 44% would even work for themselves to increase that autonomy. The study concludes that workers are “becoming increasingly individualistic and managed outside of the rigid company-driven structures of yesteryear.”

The most prevalent business model is hierarchical and, in many respects, antiquated; a board of directors of between nine and twenty people makes decisions regarding personnel within the company, profits, production, and distribution. Supervision and management then emanate from the top. As Ricardo Semler, CEO of Semco, noted, while productivity, expertise, and knowledge have increased and sped up production, this pyramid structure has changed little from the 17th century. It inherently minimizes employee control and can potentially lead to worker dissatisfaction. Instead, many workplaces could benefit from embracing a democratic paradigm that emphasizes participatory initiatives.

Businesses have already begun implementing this new paradigm. The John Lewis Partnership (JLP), which runs retail department stores, practices a model of democratic organization and profit sharing. Every employee is also a partner who is entitled to elect administrators. The Partnership also offers an incentive for better work by providing a bonus as a share of annual profits in addition to a wage. In the end, between 40 and 60 percent of profits return to the employees.

The Spain-based Mondragon is another successful example. Founded in 1956 in the Basque region of Spain, Mondragon consists of a series of workers’ cooperatives operating in finance, industry, retail, and knowledge. It employs about 85,000 people and constitutes the 7th largest company in Spain. The workers in the cooperative determine production, distribution, the fate of profits, and their directors. The workers can voice their opinions with their managers as equals. Though Spain itself has seen some economic turbulence, Mondragon has proved remarkably stable.

Ricardo Semler, the charismatic CEO of the Brazilian company Semco, has been the driving force towards a form of industrial democracy and autonomy for his workers. When Semler first took over the company from his father, it was in disarray. He then fired the management and ended all position titles. He resolved to treat his employees like adults, allowing them to set their hours, elect their supervisors, receive compensation for productivity, and deliberate financial statements. His goal was to make working at Semco a “seven-day weekend,” his philosophy a radical restructuring of work. He mused, “The purpose of work is not to make money. The purpose of work is to make the workers, whether working stiffs or top executives, feel good about life.”

Semco experienced an annual average rate of growth of about 40%, including a 900% growth clip in one ten-year period. The number of employees expanded from about 100 to 3,000. Turnover is now a mere 1%. When Semler first ascended to CEO, Semco was primarily a shipbuilding company but now produces 2,000 other products, some of which are high technology, and manages banking and services for top multinationals like Wal-Mart. It has increased its industry ranking in machinery from 56th to 4th. Through the initiative of one man, Semco has repositioned itself at the forefront of both its industry and worker participation.

Despite fundamental differences in geographical location, each of these companies shares common values in delivering increased worker participation. As the high rate of employee dissatisfaction attests, both workers and businesses can gain from alternative, democratic workplace organization, examples of which have stood as viable options for employees and the bottom line.

Perhaps most importantly, democratic workplaces can increase employee happiness. From a purely utilitarian standpoint, the notion of improving the daily lives of millions of workers is in and of itself worthy of consideration. The key component of workplace engagement is providing for worker control, which serves to motivate and increase the happiness of workers. Dan Pink, a management expert, analyzed various studies and concluded that allowing employees to have autonomy, mastery, and purpose motivates workers best.

Workplace democracy can offer a number of benefits to both the employees and the business as a whole. Through profit sharing and offering rewards to workers based on contribution in extra effort and ideas, businesses can provide incentives. Collective and individual performance-based compensation spurs greater productivity.

Another advantage for businesses that implement democratic models is their ability to attract the best talent. For many bright people, the prospect of participating in key decision-making and controlling their work could provide a large incentive to apply for and potentially work at a specific company. Juxtaposed with a hierarchical model in which executives delegate tasks in a top-down manner, democratic workplaces are much more attractive.

Once the best and the brightest come to a specific company, democratic practices can keep turnover low and employee loyalty high. With increasing levels of worker happiness, companies need not fear workers walking. If employees feel that they control their work and receive just compensation for it, they have no incentive to leave.

While the employees can derive more satisfaction from their work, businesses themselves can stand to benefit from allowing for worker input. Happy workers are productive workers. Workers disengagement, according to Gallup, costs about $300 billion a year, a significant portion of American GDP.

Democratic firms, by harnessing the ideas and input of their employees, can gain increased innovation. Workers can often offer valuable insight into methods for improvement. As they spend hours a day with their jobs, many employees know much about their work. In industries that require high levels of skill, many employees are experts. Tapping into this expertise can lead to innovation. A study of workplace organization from the Canadian Journal of Economics found that “both decentralized decision-making and information-sharing are correlated with innovation.” The company as a whole stands to profit from its workers’ ideas.

Democratic workplaces are now more feasible than ever before thanks to better technology. Advances in technology have enhanced capabilities for information sharing, facilitating the ability of businesses to obtain employee input and provide for worker participation in decision making.

Opposition to workplace democracy often comes from management that does not wish to yield control to employees. However, as both theory and practice attest, relinquishing control and decentralizing decision-making can increase company profits. A transition requires a commitment from management; Semler at Semco, for instance, pushed very heavily for meaningful reform.

While workplace democracy is by no means perfect—it often requires time to exchange ideas and appears to be better-suited for smaller companies—it can have a meaningful impact on even the largest companies. Mondragon, for instance, a company of 85,000, has only deepened its commitment to workplace democracy as it has expanded. In even large businesses, allowing worker participation and providing for a non-hierarchical chain of management can be feasible provided that workers and the company establish procedure. Workplace democracy is by no means chaos—it is highly organized by employees who stipulate certain practices.

Business leaders, workers, and policymakers alike should herald workplace democracy as a worthwhile paradigm. For the former two groups, worker happiness, productivity, and creativity should be paramount goals—they strengthen companies and improve well-being. For the latter group, the ideal of this new birth of democracy corresponds with the chief objective of public policy: increasing opportunity for human potential, fulfillment, and self-determination. In the end, the chance to pursue democracy inevitably fosters the right to pursue happiness. If, following other initiatives, more companies move towards a participatory paradigm, we can also move towards a more democratic and, more importantly, a happier society.