King’s Own Institute
ACC700 Principles of Accounting
Trimester 2, 2018
Group Assignment (20% in total)
A major component of ACC700 subject is the group assignment. All students in ACC700 have to form groups with members drawn from your lecture group. Groups can be a minimum of three (3) students and a maximum of four (4) students. If you are not currently in a group by week 7, please see your tutor urgently.
Group Assignment Topic & Due Date
Please read the following economist article that is attached at the end of this instruction paper: “The Future of Jobs The onrushing wave Previous technological innovation has always delivered more long-run employment, not less. But things can change” The Economist 18th January 2014.
The article said that the accounting field in particular is highly susceptible to automation in the near future and implied that accounting jobs disappear because of future technological innovation such as automated computer software, artificial intelligence, etc.
Each group is required to prepare report regarding:
What and how does future technological innovation such as artificial intelligence and accounting software automation impact on accountant skills, ethics and career opportunities associated with various accountant designations in future?
Your group will be assessed on three aspects of the assignment:
- Final report of your group: 3,000 words plus or minus 20%, excluding Job Advertisements and Group Work Activity Report;
- Group Work Activity Report including group meeting minutes: around 750 words plus or minus 20%, excluding group meeting minutes (5%); and
- Group presentation based on group assignment: (5%).
The final report with group work report is due by week 11.
Final Report (10%)
The final report of the group should use an appropriate business report format and should include:
- A title page; include all group member full name and student number
- A table of contents (Times new Roman 14 point);
- Introduction (Times new Roman 12 point);
- Appropriate topic headings (Times new Roman 14 point);
- A detailed description on (Times new Roman 12 point):
- What your group have research about current and future technology, accountant skills and ethics and career opportunities for those who pursue accounting careers?
- What information has surprised your group ?
- The technology, the accountant skills, the ethics and the career opportunities your group have researched may reflect an Australian viewpoint. Choose a country that members of your group may have an interest in, or knowledge about. Briefly discuss what aspects of the technology, the accountant skills, the ethics the career opportunities would have to be considered and what changes/adaptations your group might need to make.
- What is your group opinion on the value of studying/taking accounting courses?
- Conclusion or recommendation (Times new Roman 12 point);
- Reference (Times new Roman 11 point);
- At least 12 accounting job advertisements related to accountant or this assignment
- Group Work Activity Report where at least 3 Group Meeting Minutes should be attached.
To identify current required accountant skills and current career opportunities associated with various accountant designations,
- Find at least 12 accounting job advertisements advertised after 1st March 2018 from www.seek.com.au www.careerone.com.au r www.gumtree.com.au or other job advertisement WEB sites and analyse them in your final report.
- Print the above job advertisements in KOI printing facilities that enable to identify the printing dates.
- Attach the printed Job Advertisements as an appendix
To identify the current ethics, please visit the following WEB site.
Please read the following articles and documents for your assignments:
Andon, P., Free, C. and Scard, B., 2015. Pathways to accountant fraud: Australian evidence and analysis. Accounting Research Journal, 28(1), pp.10-44.
Cernusca, L. and Balaciu, D.E., 2015. The Perception of the Accounting Students on the Image of the Accountant and the Accounting Profession. Journal of Economics and Business Research, 21(1), pp.7-24.
Drew, J., 2015. Keep Pace with Tech Changes. Journal of Accountancy, 220(4), p.20.
Henry, B. and Hicks, M., 2015. A Survey of Perspectives on the Future of the Accounting Profession. The CPA Journal, 85(8), p.6.
Murphy, G., 2015. A vision for the future: by using the most current technology and keeping their skills up to date, management accountants can enhance their careers and their organizations. Strategic Finance, 97(4), pp.62-64.
Pan, G. and Seow, P.S., 2016. Preparing accounting graduates for digital revolution: A critical review of information technology competencies and skills development. Journal of Education for Business, pp.1-10.
Sharpe, M., 2016. Investigating How Religiosity, Ethics, and Other Factors Relate to Future Accounting and Business Professionals’ Views on Work-Life Balance. Ethics (January 22, 2016).
Suddaby, R., Saxton, G.D. and Gunz, S., 2015. Twittering change: The institutional work of domain change in accounting expertise. Accounting, Organizations and Society, 45, pp.52-68.
Traistaru, D.A., 2016. PERCEPTIONS CONCERNING PROFESSIONAL JUDGEMENT AND ETHICS IN THE EVOLUTION OF THE ACCOUNTING PROFESSION. European Journal of Business and Social Sciences, 4(10), pp.126-135.
Walsh, J., 2014. The Role of Ethics in a Future Accounting Career.
Welsh, D.T., Ordóñez, L.D., Snyder, D.G. and Christian, M.S., 2015. The slippery slope: How small ethical transgressions pave the way for larger future transgressions. Journal of Applied Psychology, 100(1), p.114.
Final Report Rubric (10% in total)
|Current required accountant skills and ethics and current career opportunities associated with various accountant designations|
|No description provided||A very basic description provided with no detail||A good description that shows evidence of some thought and effort||An excellent description that shows evidence of good thought and knowledge||A creative description that engages the reader and shows evidence of excellent thoughts and knowledge||1.5|
|Future Technological Innovation: Strengths, Limitations and How new technology might be used in accounting field|
|No list or discussion of strengths and limitations of the technology provided||Brief list or discussion of strengths and limitations provided||Full list or discussion of strengths and limitations provided, covering many aspects||Detailed list of strengths and limitations provided together with good annotations or discussion||Very detailed, well-written list of strengths and limitations provided together with excellent description or discussion||0.5|
|No examples or discussion provided of how the technology might be used in accounting field||Brief list or discussion of examples provided of how the technology might be used in accounting filed||Full list or discussion of examples provided of how the technology might be used in accounting field, covering many aspects||Detailed list of examples provided of how the technology might be used in accounting field together with good description or discussion||Very detailed, well-written examples provided of how the technology might be used in accounting field, plus suggestions of a range of innovative ways to use the technology||0.5|
|Future required accountant skills and ethics and future career opportunities associated with various accountant designations|
|No discussion of future required accountant skills and ethics and career opportunities||Brief discussion of future required accountant skills and ethics and career opportunities||Full discussion of future required accountant skills and ethics and career opportunities, covering many aspects||Detailed list of future required accountant skills and ethics and career opportunities together with good annotations or discussion||Very detailed, well-written list of future required accountant skills and ethics and career opportunities together with excellent description or discussion||1|
|The technology, the accountant skills, the ethics and the career opportunities your group have researched may reflect an Australian viewpoint. Choose a country that members of your group may have an interest in, or knowledge about. Briefly discuss what aspects of the technology, the accountant skills, the ethics the career opportunities would have to be considered and what changes/adaptations your group might need to make|
|No description provided||A very basic description provided with no detail||A good description that shows evidence of some thought and effort||An excellent description that shows evidence of good thoughts and knowledge||A creative description that engages the reader and shows evidence of excellent thoughts and knowledge||0.5|
|What is your group opinion on the value of studying/taking accounting courses?|
|No description provided||A very basic description provided with no detail||A good description that shows evidence of some thought and effort||An excellent description that shows evidence of good thoughts and knowledge||A creative description that engages the reader and shows evidence of excellent thoughts and knowledge||0.5|
|No references provided, or many in-text and end-text reference errors||References provided but many in-text and end-text reference errors||References provided but some in-text or end-text errors||References provided, only minor in-text or end-text reference errors||In-text and end-text references cited correctly||0.5|
Group Work Activity Report (5%)
Each group will provide a group work report on how the group has worked together to produce the final report. It should not contain the main deliverable itself in the final report. Each group documents how members discuss, and division of responsibilities and describes how the individual efforts capitalised on strengths of each group member. It will be used as evidence of individual contributions in the group. It is therefore in each member’s interest to ensure that their contribution to the final report is complete.
Each group is expected to have at least three group meetings for the group assignment. The minutes of group meetings should be documented and attached as appendix of this group work report, clearly indicating who was present, issues and actions, agreed timelines, and the like. The group work report must indicate that a fair and reasonable distribution of work amongst group members was achieved. Periodic information such as emails or diary entries must be inserted into the correct section in chronological order.
If the submitted group work report suggests that not all contributions were of equivalent standard and effort, differential marks will be awarded to individuals within the same group. It must also document what individual group members understood as their allocated tasks, that individual group members submitted allocated work of acceptable standard and quality by the date that was agreed upon.
Group Work Activity Report Rubric (5% in total)
|Documentation||Group Work Activity Report
No meeting minutes
|Group Work Activity Report
Less than 2 meeting minutes
|Group Work Activity Report;
Less than 3 meeting minutes
|Group Work Activity Report;
3 meeting minutes;
|Group Work Activity Report;
3 meeting minutes;
Other source documents
|Group Participation||Only one persons
|More than one persons
|At least half the students
confer or present ideas
|At least 3/4 of students
|Exclusive reliance on only one person||Exclusive reliance on more than one person||Responsibility is shared
by half the group
|Responsibility is shared
by most group members
|Responsibility for task is
|No interaction; No evidence of discussion or alternatives||Little interaction; little evidence of discussion or alternatives||Some ability to interact;
some evidence of discussion or
|Students show adeptness
in interacting; lively
discussion centres on the task
|Excellent listening and
exhibited; students reflect
awareness of others’
views and opinions in
|Roles Within Group||No effort made to assign
roles to group members
|Little effort made to assign
roles to group members
|Students assigned roles but roles were not
consistently adhered to
|Each student assigned a role but roles not clearly defined or consistently
|Each student assigned a
clearly defined role;
group members perform
Groups will provide a presentation of their assignment in weeks 11 and 12 tutorial. Each person in the group will be required to present a section. All members will conduct some part of the presentation. If any student does not attend their group presenting, the student will not get presentation marks unless a medical certificate has been provided
Times and dates for each group’s presentations will be set in the tutorials in week 9 of the trimester.
Presentation Rubric (5% in total)
|Organisation||Not Applicable||Presentation is not smooth and audience attention lost because there is little sequence of information.||Audience has difficulty
because some of the
information is not in
|Student presents information in logical sequence which audience can follow.||Student shows enthusiasm and presents information in logical, interesting sequence which engages the audience.||1|
|Content||Not Applicable||Some information is not accurate, not sufficient information||Accurate information, not sufficient information||Accurate information, sufficient information||Accurate and in depth information, sufficient amount of information||1|
|Audience Interaction||Not Applicable||Members just read
presentation with no eye contact or no use of appropriate gestures
use eye contact and use appropriate
eye contact and use appropriate gestures while often referring to notes.
eye contact and use appropriate
gestures while seldom returning to notes.
|Communication & Time Management||Not Applicable||Student mumbles, and speaks too quietly for students in the back of class to hear and/or the presentation was too brief or too long.||Student’s voice is low. Audience members have difficulty hearing presentation and/or the presentation was somewhat short or somewhat long.||Student’s voice is clear. Most audience members can hear presentation. The presentation was of the proper duration.||Student uses a clear voice and correct, precise terms so that all audience members can hear presentation. The presentation was of the proper duration.||1|
|Teamwork||Not Applicable||Members have
unclear or no role in
presentation and poor
transition from member to
|Members have a
role in the presentation,
but the individual parts
|Members are well
coordinated and well
prepared for presentation.
equivalent roles, smooth
transitions, and all parts
are integrated with each other.
Some relevant comments in relation to our group assignment from WEB sites
Can Software Really Replace Accountants?
I’s not a reality—yet—but accounting software is poised to eliminate accountants. We are at a tipping point for many similar professions: online education replacing professors, legal software replacing lawyers. As threatening as this sounds to professionals with many years of education and experience invested in a single field of expertise, the phenomenon of new technologies disrupting the workforce isn’t a new concept.
With such a radical technology disruption, there’s always the same cycle of debate: outrage, denial, compromise, and defeat. Ironically, accountants are instrumental in consulting with software developers to create the very technology that will replace them.
Of course, accounting software isn’t new to the accounting profession, and in fact, it has become very useful for many accountants. Even tax filing software hasn’t put accountants out of business. But changes are on the horizon that could likely empower accounting software users to the point when they don’t need accountants any longer, and reduce the process to a turnkey program anyone could follow. Again, automation is a common disruptor. Read about how automated cars are closer to reality than most believe, and how that is set to shake up the industries associated, especially insurance.
The latest evolution for accounting software has been in products moving into the “cloud.” Some software packages, like QuickBooks Online, offer certification programs, which help set accountants apart as the go-to professionals, but others seem to compel users to do more of the accounting themselves. This act of moving accounting online doesn’t precipitate the end of accountants. However, what does push accountants to the margins is how inexpensive and user-friendly the new online accounting software is. Check out FreshBooks, Xero, and Wave, for example.
If that’s not enough to instill fear in a well-educated accountant, think about how the Uber app has shaken up the taxi business, and how AirBnB is threatening the tourism industry. Giving consumers a way to do something effectively themselves for cheaper, and with ease, is a recipe for a paradigm shift.
Accounting software won’t replace accountants all at once, just like universities won’t disappear once Massive Open Online Courses (MOOCs) become the standard fare, and there will be exceptions, just like there will likely always be students who think it’s better to pay an amount that exceeds any reasonable ROI to obtain a liberal arts degree in person. Some exceptions will likely outlast predictions, especially for CPAs who play a critical role in large publicly traded organizations, for example, that need credentialed experts to conduct audits and sort through other complex regulatory issues.
Automating accounting for small business owners and entrepreneurs won’t be a bad thing either, as many would prefer to have turnkey programs to handle the grunt work of a task that once cost a good bit of a start-up’s small budget. Financial advisors will still have a role to play in helping entrepreneurs decipher the numbers, but it’s likely the software will come more complete with better industry standards, and give feedback on the financial health of the business being monitored.
You are talking about what is available in todays market , those cheap softwares but we are talking about future here and , when it comes to future it is important to know that artificial intelligence , a power full computer system exists and is in developing stages as we speak Well probably you haven’t heard of artificial intelligence that are rapidly developing at present which can take own decisions come up with own solutions can even explain what happens to particles , dna and more complex situations such as what happens inside your mind, surgeons and also engineers who made these systems are also being replaced. Accounting is something that humans made up all these formulas and theories all human made up stuff not earth natural theories. An artificial intelligence system can do and explain any of the things you said very efficiently and with no or minimum error. therefore it can be replaced. It’s just a matter of time that people trying to figure out how to manufacture these systems in mass quantity and in cost effective ways.
I think what you don’t understand is what an accountant does these day. We aren’t the ‘bookkepers’ in the traditional sense anymore. We are if anything advisers, and the field itself has done fairly well at adapting to the change in technology. So much of what we do is about getting the bigger picture, analyzing data & financial statements, essentially making up for unskilled workers they are allowed to have in other departments due to accounting software. Our courses are geared towards accounting software, and no matter what type you have, it is a system that must be ran by PEOPLE. If you have simple step by step instructions on how to use this system, great, but someone will need to be answering why the numbers look the way they do during a company’s yearly audit. Someone is will need to answer the IRS when they want to review your returns for irregularities & it won’t be H&R block because you sign an agreement waiving them of those responsibilities. If anything, a person with an accounting background is valued even more because i promise you, it’s not that popular of a major. AP, AR , Payroll, etc are filled with people with barely a degree, all they do is data entry. Your official accounting department, finance, and internal audit of the company have to be college educated with a degree in accounting or finance, and preferably be a CPA. So for all these unskilled workers they are now allowed to have doing data entry, they try to make up for their errors at the last stop before the financials statements: the accounting department. And the fact you’ve reduced it down to tax preparation is laughable, few accountants enjoy tax or do it willingly, so honestly, i’m glad there’s more technology out for it. Maybe now people will stop assuming accountants give a flying eff about someone’s taxes who make only 40k per year. But here’s the catch, tax preparation isn’t meant to be hard or a secret, the IRS has a step by step guide, they don’t expect people to need professionals in order to do taxes. So the fact that people need a software to do a step by step guide, of a step by step guide that is published every year that shows you what to do says a lot. You can buy software, you can outsource to H&R block, but the people using those services aren’t who accountants typically serve. Accountants are going to be doing taxes of a non profit, of large corporations with complex structures. Your idea of what an accountant does is very low level, i was doing corporate taxes for an international company during my junior year of college, i doubt they were going to h&r block. In other words, most true accountants have nothing to worry about because that’s not their market. H&R block does taxes, ok? Well when the government calls you saying you owe taxes on a property you just bought,that should have been paid by a previous owner, i doubt H&R block is gonna follow up with you on that problem & do the correct research. Don’t talk about what you don’t know, there are vast levels to accounting and it’s not just in ‘tax’ lol as if there’s one type of tax
The Future of Jobs
The onrushing wave
Previous technological innovation has always delivered more long-run employment, not less. But things can change
Jan 18th 2014 The Economist
IN 1930, when the world was “suffering…from a bad attack of economic pessimism”, John Maynard Keynes wrote a broadly optimistic essay, “Economic Possibilities for our Grandchildren”. It imagined a middle way between revolution and stagnation that would leave the said grandchildren a great deal richer than their grandparents. But the path was not without dangers.
One of the worries Keynes admitted was a “new disease”: “technological unemployment…due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.” His readers might not have heard of the problem, he suggested—but they were certain to hear a lot more about it in the years to come.
For the most part, they did not. Nowadays, the majority of economists confidently wave such worries away. By raising productivity, they argue, any automation which economises on the use of labour will increase incomes. That will generate demand for new products and services, which will in turn create new jobs for displaced workers. To think otherwise has meant being tarred a Luddite—the name taken by 19th-century textile workers who smashed the machines taking their jobs.
For much of the 20th century, those arguing that technology brought ever more jobs and prosperity looked to have the better of the debate. Real incomes in Britain scarcely doubled between the beginning of the common era and 1570. They then tripled from 1570 to 1875. And they more than tripled from 1875 to 1975. Industrialisation did not end up eliminating the need for human workers. On the contrary, it created employment opportunities sufficient to soak up the 20th century’s exploding population. Keynes’s vision of everyone in the 2030s being a lot richer is largely achieved. His belief they would work just 15 hours or so a week has not come to pass.
When the sleeper wakes
Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently. They start from the observation that, across the rich world, all is far from well in the world of work. The essence of what they see as a work crisis is that in rich countries the wages of the typical worker, adjusted for cost of living, are stagnant. In America the real wage has hardly budged over the past four decades. Even in places like Britain and Germany, where employment is touching new highs, wages have been flat for a decade. Recent research suggests that this is because substituting capital for labour through automation is increasingly attractive; as a result owners of capital have captured ever more of the world’s income since the 1980s, while the share going to labour has fallen.
At the same time, even in relatively egalitarian places like Sweden, inequality among the employed has risen sharply, with the share going to the highest earners soaring. For those not in the elite, argues David Graeber, an anthropologist at the London School of Economics, much of modern labour consists of stultifying “bullshit jobs”—low- and mid-level screen-sitting that serves simply to occupy workers for whom the economy no longer has much use. Keeping them employed, Mr Graeber argues, is not an economic choice; it is something the ruling class does to keep control over the lives of others.
Be that as it may, drudgery may soon enough give way to frank unemployment. There is already a long-term trend towards lower levels of employment in some rich countries. The proportion of American adults participating in the labour force recently hit its lowest level since 1978, and although some of that is due to the effects of ageing, some is not. In a recent speech that was modelled in part on Keynes’s “Possibilities”, Larry Summers, a former American treasury secretary, looked at employment trends among American men between 25 and 54. In the 1960s only one in 20 of those men was not working. According to Mr Summers’s extrapolations, in ten years the number could be one in seven.
This is one indication, Mr Summers says, that technical change is increasingly taking the form of “capital that effectively substitutes for labour”. There may be a lot more for such capital to do in the near future. A 2013 paper by Carl Benedikt Frey and Michael Osborne, of the University of Oxford, argued that jobs are at high risk of being automated in 47% of the occupational categories into which work is customarily sorted. That includes accountancy, legal work, technical writing and a lot of other white-collar occupations.
Answering the question of whether such automation could lead to prolonged pain for workers means taking a close look at past experience, theory and technological trends. The picture suggested by this evidence is a complex one. It is also more worrying than many economists and politicians have been prepared to admit.
The lathe of heaven
Economists take the relationship between innovation and higher living standards for granted in part because they believe history justifies such a view. Industrialisation clearly led to enormous rises in incomes and living standards over the long run. Yet the road to riches was rockier than is often appreciated.
In 1500 an estimated 75% of the British labour force toiled in agriculture. By 1800 that figure had fallen to 35%. When the shift to manufacturing got under way during the 18th century it was overwhelmingly done at small scale, either within the home or in a small workshop; employment in a large factory was a rarity. By the end of the 19th century huge plants in massive industrial cities were the norm. The great shift was made possible by automation and steam engines.
Industrial firms combined human labour with big, expensive capital equipment. To maximise the output of that costly machinery, factory owners reorganised the processes of production. Workers were given one or a few repetitive tasks, often making components of finished products rather than whole pieces. Bosses imposed a tight schedule and strict worker discipline to keep up the productive pace. The Industrial Revolution was not simply a matter of replacing muscle with steam; it was a matter of reshaping jobs themselves into the sort of precisely defined components that steam-driven machinery needed—cogs in a factory system.
The way old jobs were done changed; new jobs were created. Joel Mokyr, an economic historian at Northwestern University in Illinois, argues that the more intricate machines, techniques and supply chains of the period all required careful tending. The workers who provided that care were well rewarded. As research by Lawrence Katz, of Harvard University, and Robert Margo, of Boston University, shows, employment in manufacturing “hollowed out”. As employment grew for highly skilled workers and unskilled workers, craft workers lost out. This was the loss to which the Luddites, understandably if not effectively, took exception.
With the low-skilled workers far more numerous, at least to begin with, the lot of the average worker during the early part of this great industrial and social upheaval was not a happy one. As Mr Mokyr notes, “life did not improve all that much between 1750 and 1850.” For 60 years, from 1770 to 1830, growth in British wages, adjusted for inflation, was imperceptible because productivity growth was restricted to a few industries. Not until the late 19th century, when the gains had spread across the whole economy, did wages at last perform in line with productivity (see chart 1).
Along with social reforms and new political movements that gave voice to the workers, this faster wage growth helped spread the benefits of industrialisation across wider segments of the population. New investments in education provided a supply of workers for the more skilled jobs that were by then being created in ever greater numbers. This shift continued into the 20th century as post-secondary education became increasingly common.
Claudia Goldin, an economist at Harvard University, and Mr Katz have written that workers were in a “race between education and technology” during this period, and for the most part they won. Even so, it was not until the “golden age” after the second world war that workers in the rich world secured real prosperity, and a large, property-owning middle class came to dominate politics. At the same time communism, a legacy of industrialisation’s harsh early era, kept hundreds of millions of people around the world in poverty, and the effects of the imperialism driven by European industrialisation continued to be felt by billions.
The impacts of technological change take their time appearing. They also vary hugely from industry to industry. Although in many simple economic models technology pairs neatly with capital and labour to produce output, in practice technological changes do not affect all workers the same way. Some find that their skills are complementary to new technologies. Others find themselves out of work.
Take computers. In the early 20th century a “computer” was a worker, or a room of workers, doing mathematical calculations by hand, often with the end point of one person’s work the starting point for the next. The development of mechanical and electronic computing rendered these arrangements obsolete. But in time it greatly increased the productivity of those who used the new computers in their work.
Many other technical innovations had similar effects. New machinery displaced handicraft producers across numerous industries, from textiles to metalworking. At the same time it enabled vastly more output per person than craft producers could ever manage.
For a task to be replaced by a machine, it helps a great deal if, like the work of human computers, it is already highly routine. Hence the demise of production-line jobs and some sorts of book-keeping, lost to the robot and the spreadsheet. Meanwhile work less easily broken down into a series of stereotyped tasks—whether rewarding, as the management of other workers and the teaching of toddlers can be, or more of a grind, like tidying and cleaning messy work places—has grown as a share of total employment.
But the “race” aspect of technological change means that such workers cannot rest on their pay packets. Firms are constantly experimenting with new technologies and production processes. Experimentation with different techniques and business models requires flexibility, which is one critical advantage of a human worker. Yet over time, as best practices are worked out and then codified, it becomes easier to break production down into routine components, then automate those components as technology allows.
If, that is, automation makes sense. As David Autor, an economist at the Massachusetts Institute of Technology (MIT), points out in a 2013 paper, the mere fact that a job can be automated does not mean that it will be; relative costs also matter. When Nissan produces cars in Japan, he notes, it relies heavily on robots. At plants in India, by contrast, the firm relies more heavily on cheap local labour.
Even when machine capabilities are rapidly improving, it can make sense instead to seek out ever cheaper supplies of increasingly skilled labour. Thus since the 1980s (a time when, in America, the trend towards post-secondary education levelled off) workers there and elsewhere have found themselves facing increased competition from both machines and cheap emerging-market workers.
Such processes have steadily and relentlessly squeezed labour out of the manufacturing sector in most rich economies. The share of American employment in manufacturing has declined sharply since the 1950s, from almost 30% to less than 10%. At the same time, jobs in services soared, from less than 50% of employment to almost 70% (see chart 2). It was inevitable, therefore, that firms would start to apply the same experimentation and reorganisation to service industries.
A new wave of technological progress may dramatically accelerate this automation of brain-work. Evidence is mounting that rapid technological progress, which accounted for the long era of rapid productivity growth from the 19th century to the 1970s, is back. The sort of advances that allow people to put in their pocket a computer that is not only more powerful than any in the world 20 years ago, but also has far better software and far greater access to useful data, as well as to other people and machines, have implications for all sorts of work.
The case for a highly disruptive period of economic growth is made by Erik Brynjolfsson and Andrew McAfee, professors at MIT, in “The Second Machine Age”, a book to be published later this month. Like the first great era of industrialisation, they argue, it should deliver enormous benefits—but not without a period of disorienting and uncomfortable change. Their argument rests on an underappreciated aspect of the exponential growth in chip processing speed, memory capacity and other computer metrics: that the amount of progress computers will make in the next few years is always equal to the progress they have made since the very beginning. Mr Brynjolfsson and Mr McAfee reckon that the main bottleneck on innovation is the time it takes society to sort through the many combinations and permutations of new technologies and business models.
A startling progression of inventions seems to bear their thesis out. Ten years ago technologically minded economists pointed to driving cars in traffic as the sort of human accomplishment that computers were highly unlikely to master. Now Google cars are rolling round California driver-free no one doubts such mastery is possible, though the speed at which fully self-driving cars will come to market remains hard to guess.
Brave new world
Even after computers beat grandmasters at chess (once thought highly unlikely), nobody thought they could take on people at free-form games played in natural language. Then Watson, a pattern-recognising supercomputer developed by IBM, bested the best human competitors in America’s popular and syntactically tricksy general-knowledge quiz show “Jeopardy!” Versions of Watson are being marketed to firms across a range of industries to help with all sorts of pattern-recognition problems. Its acumen will grow, and its costs fall, as firms learn to harness its abilities.
The machines are not just cleverer, they also have access to far more data. The combination of big data and smart machines will take over some occupations wholesale; in others it will allow firms to do more with fewer workers. Text-mining programs will displace professional jobs in legal services. Biopsies will be analysed more efficiently by image-processing software than lab technicians. Accountants may follow travel agents and tellers into the unemployment line as tax software improves. Machines are already turning basic sports results and financial data into good-enough news stories.
Jobs that are not easily automated may still be transformed. New data-processing technology could break “cognitive” jobs down into smaller and smaller tasks. As well as opening the way to eventual automation this could reduce the satisfaction from such work, just as the satisfaction of making things was reduced by deskilling and interchangeable parts in the 19th century. If such jobs persist, they may engage Mr Graeber’s “bullshit” detector.
Being newly able to do brain work will not stop computers from doing ever more formerly manual labour; it will make them better at it. The designers of the latest generation of industrial robots talk about their creations as helping workers rather than replacing them; but there is little doubt that the technology will be able to do a bit of both—probably more than a bit. A taxi driver will be a rarity in many places by the 2030s or 2040s. That sounds like bad news for journalists who rely on that most reliable source of local knowledge and prejudice—but will there be many journalists left to care? Will there be airline pilots? Or traffic cops? Or soldiers?
There will still be jobs. Even Mr Frey and Mr Osborne, whose research speaks of 47% of job categories being open to automation within two decades, accept that some jobs—especially those currently associated with high levels of education and high wages—will survive (see table). Tyler Cowen, an economist at George Mason University and a much-read blogger, writes in his most recent book, “Average is Over”, that rich economies seem to be bifurcating into a small group of workers with skills highly complementary with machine intelligence, for whom he has high hopes, and the rest, for whom not so much.
And although Mr Brynjolfsson and Mr McAfee rightly point out that developing the business models which make the best use of new technologies will involve trial and error and human flexibility, it is also the case that the second machine age will make such trial and error easier. It will be shockingly easy to launch a startup, bring a new product to market and sell to billions of global consumers (see article). Those who create or invest in blockbuster ideas may earn unprecedented returns as a result.
In a forthcoming book Thomas Piketty, an economist at the Paris School of Economics, argues along similar lines that America may be pioneering a hyper-unequal economic model in which a top 1% of capital-owners and “supermanagers” grab a growing share of national income and accumulate an increasing concentration of national wealth. The rise of the middle-class—a 20th-century innovation—was a hugely important political and social development across the world. The squeezing out of that class could generate a more antagonistic, unstable and potentially dangerous politics.
The potential for dramatic change is clear. A future of widespread technological unemployment is harder for many to accept. Every great period of innovation has produced its share of labour-market doomsayers, but technological progress has never previously failed to generate new employment opportunities.
The productivity gains from future automation will be real, even if they mostly accrue to the owners of the machines. Some will be spent on goods and services—golf instructors, household help and so on—and most of the rest invested in firms that are seeking to expand and presumably hire more labour. Though inequality could soar in such a world, unemployment would not necessarily spike. The current doldrum in wages may, like that of the early industrial era, be a temporary matter, with the good times about to roll (see chart 3).
These jobs may look distinctly different from those they replace. Just as past mechanisation freed, or forced, workers into jobs requiring more cognitive dexterity, leaps in machine intelligence could create space for people to specialise in more emotive occupations, as yet unsuited to machines: a world of artists and therapists, love counsellors and yoga instructors.
Such emotional and relational work could be as critical to the future as metal-bashing was in the past, even if it gets little respect at first. Cultural norms change slowly. Manufacturing jobs are still often treated as “better”—in some vague, non-pecuniary way—than paper-pushing is. To some 18th-century observers, working in the fields was inherently more noble than making gewgaws.
But though growth in areas of the economy that are not easily automated provides jobs, it does not necessarily help real wages. Mr Summers points out that prices of things-made-of-widgets have fallen remarkably in past decades; America’s Bureau of Labour Statistics reckons that today you could get the equivalent of an early 1980s television for a twentieth of its then price, were it not that no televisions that poor are still made. However, prices of things not made of widgets, most notably college education and health care, have shot up. If people lived on widgets alone— goods whose costs have fallen because of both globalisation and technology—there would have been no pause in the increase of real wages. It is the increase in the prices of stuff that isn’t mechanised (whose supply is often under the control of the state and perhaps subject to fundamental scarcity) that means a pay packet goes no further than it used to.
So technological progress squeezes some incomes in the short term before making everyone richer in the long term, and can drive up the costs of some things even more than it eventually increases earnings. As innovation continues, automation may bring down costs in some of those stubborn areas as well, though those dominated by scarcity—such as houses in desirable places—are likely to resist the trend, as may those where the state keeps market forces at bay. But if innovation does make health care or higher education cheaper, it will probably be at the cost of more jobs, and give rise to yet more concentration of income.
The machine stops
Even if the long-term outlook is rosy, with the potential for greater wealth and lots of new jobs, it does not mean that policymakers should simply sit on their hands in the mean time. Adaptation to past waves of progress rested on political and policy responses. The most obvious are the massive improvements in educational attainment brought on first by the institution of universal secondary education and then by the rise of university attendance. Policies aimed at similar gains would now seem to be in order. But as Mr Cowen has pointed out, the gains of the 19th and 20th centuries will be hard to duplicate.
Boosting the skills and earning power of the children of 19th-century farmers and labourers took little more than offering schools where they could learn to read, write and do algebra. Pushing a large proportion of college graduates to complete graduate work successfully will be harder and more expensive. Perhaps cheap and innovative online education will indeed make new attainment possible. But as Mr Cowen notes, such programmes may tend to deliver big gains only for the most conscientious students.
Another way in which previous adaptation is not necessarily a good guide to future employment is the existence of welfare. The alternative to joining the 19th-century industrial proletariat was malnourished deprivation. Today, because of measures introduced in response to, and to some extent on the proceeds of, industrialisation, people in the developed world are provided with unemployment benefits, disability allowances and other forms of welfare. They are also much more likely than a bygone peasant to have savings. This means that the “reservation wage”—the wage below which a worker will not accept a job—is now high in historical terms. If governments refuse to allow jobless workers to fall too far below the average standard of living, then this reservation wage will rise steadily, and ever more workers may find work unattractive. And the higher it rises, the greater the incentive to invest in capital that replaces labour.
Everyone should be able to benefit from productivity gains—in that, Keynes was united with his successors. His worry about technological unemployment was mainly a worry about a “temporary phase of maladjustment” as society and the economy adjusted to ever greater levels of productivity. So it could well prove. However, society may find itself sorely tested if, as seems possible, growth and innovation deliver handsome gains to the skilled, while the rest cling to dwindling employment opportunities at stagnant wages.