Mark Carney, governor of the Bank of England, says it might be decades before jobs and wages growth flow to workers.
That’s the crushing message he delivered in a speech, titled From Protectionism to Prosperity, at the Northern Powerhouse Business Summit in the UK recently.
It’s a stark message and one not usually articulated by a senior policymaker about the impact of technological change on workers and the workforce.
And it’s a stark reality that business leaders will continue to face as the pace of technological change and automation increases.
Worker displacement and low wage growth are likely to remain entrenched, Carney suggests.
That’s already becoming clear when, faced with decade-lows in unemployment, wages are yet to really stir across the developed world. The UK, Japan, the United States and certainly here in Australia – where the labour market is far from tight – workers are yet to see the benefits of higher pay that are supposed to accrue under “Phillips Curve” assumptions.
Carney told his audience: “We meet today after the first decade of falling real incomes in the UK since the middle of the 19th century, in the wake of a global financial crisis, and in the midst of a technological revolution that will change the very nature of work. Substitute platforms for textile mills, AI for the steam engine, and Twitter for the Telegraph and the dynamics echo those of 150 years ago”.
That in itself was troubling – but he added (emphasis mine): “a fundamental challenge is that, while technological revolutions ultimately drive great improvements in prosperity, they first involve painful periods of adjustment. It takes time for new jobs to be created to replace those made obsolete. It can take more than a generation for new skills to be acquired. And decades can pass before gains in productivity flow through to the wages of all workers“.
This, Carney says, is part of the reason for the rise in protectionism across the globe. But he lays the blame directly at the feet of his fellow economists and policymakers who, he said, “have not been sufficiently upfront about the distributional consequences of rapid changes in technology and globalisation.”
“Amongst economists, a belief in free trade is totemic. But, while trade makes countries better off, it does not raise all boats”.
Donald Trump’s heartland and workers across the developed world would probably agree.
Indeed, Carney said “the benefits from trade are spread unequally across individuals, regions and time. As a result, for many citizens of advanced economies, measures of the aggregate gains from globalisation bear little relation to their own experience”.
Unfortunately, his message is that things may not change in a hurry.
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