Why the robot revolution risks an economic 'death spiral' for Australia Greg Jericho

In promoting his 10-year tax plan, Malcolm Turnbull suggested people want governments to undertake "long term planning". However, a new research paper out this week from the IMF highlights how economies could be set for a major shake-up in the future and how sticking with the belief that better wages for workers comes from reducing company tax in order to spur capital investment is a rather wishful proposition. Economics research papers generally are not known for their optimism, but the IMF paper titled "Should We Fear the Robot Revolution? This research goes very much to the heart of primary political debate in this country about jobs, equality and the role of government. When Malcolm Turnbull took over the prime ministership he loved to talk about how it was the most exciting time to be alive – innovation was on the rise, agility was all the go! But for many workers it is a rather worrying time. In the past decade since the global financial crisis real wages have stalled, underemployment has risen, wage growth has plummeted, businesses have sought to move away from enterprise bargaining, and the growth areas have been mostly in lower-paid services sectors such as social care. And underneath all that is the feeling – perhaps overstated – that we are soon in danger of being replaced by robots. The IMF paper on the topic notes that there are essentially two camps on this issue – the first is optimistic and believes that, as in the past, greater automation will see some jobs lost, but the demand for many jobs – especially those "that place a premium on creativity, flexibility, and abstract reasoning" – will grow and overall the economy is better off. The other side of the coin are those who note these are not your grandparents' robots we're talking about. These are robots that make use of AI in order to do work previously believed to be non-automatable precisely because it was seen as creative, flexible, or needing abstract reasoning. The paper considered a range of scenarios – from the more traditional one where robots replace only low skilled work to where robots are able to replicate a range of work and then a final one where robots "can do anything". And the results are not good for workers. Essentially the shift sees national income move from labour to capital – as the returns from investing in robots to do work previously done by people increase. They note that "the most common arguments for technology optimism do not stand up to scrutiny". Even in scenarios that fit with the more optimistic view of automation, the paper concludes that "automation is very good for growth and very bad for equality". The authors suggest that "in scenarios where the traditional technology disappears and robots take over the automatable sector, the economy either ascends to a virtuous circle of ongoing endogenous growth or descends into a death spiral of perpetual contraction.