April 12, 2019 / 8:41 AM / a month ago

Column: Energy, employment and economic growth

LONDON (Reuters) - Policymakers in the advanced economies are increasingly worried by the economic, social and political disruption resulting from the decline of traditional manual jobs in manufacturing, mining and distribution.

FILE PHOTO: Miners touch the symbolic last piece of stone coal harvested in a German mine to mark the end of coal mining in Germany after it was handed over to German President Frank-Walter Steinmeier at Bellevue palace in Berlin, April 3, 2019. REUTERS/Fabrizio Bensch

Globalisation, trade, migration, the rise of the internet, and the advent of artificial intelligence/robotisation have all been blamed for the adverse impact on those who make a living from manual labour.

In reality, the loss of manual employment is the extension of a trend dating back more than 200 years that has gradually replaced physical jobs in agriculture, mining and manufacturing with service sector employment.

Relatively rapid change in employment, energy consumption and industrial patterns has been both the stimulus to, and the consequence of, economic growth of the last two centuries.

Returning to the greater employment security and stability of the pre-1800 world would imply a reversion to its more stagnant economy.

For policymakers, the challenge is therefore how to manage the transitional costs for the most affected communities – not try to halt the changes altogether.

ENERGY AND LABOUR

Economic growth in the past two centuries has been propelled by changes in technology, organisation and intellectual capital but the fundamental driver has arguably been an enormous increase in the availability and use of energy, initially from fossil fuels and more recently from renewable sources as well.

Until 1800, almost all power in the economy for food production, manufacturing and transportation was provided by human and animal muscles, supplemented by small quantities of energy captured by wind and watermills.

Since then, there has been a continuous trend towards greater mechanisation and automation, substituting human and animal labour for mechanical power driven by energy from coal, oil, gas, nuclear and now renewables.

The great acceleration in the economy and living standards in the last 200 years has depended on an equally prodigious increase in energy capture and use and displacement of human and animal labour by machines.

On average, each person in North America and Western Europe now consumes more than six times as much energy as in 1800, and thanks to improvements in energy efficiency, the social gains have been even greater.

In terms of delivered energy services, each person in the United Kingdom now benefits from 60 times as much heating, 70 times as much power and over 500 times as much passenger transport as in 1800.

In the process of this great acceleration, tens of millions of manual jobs in agriculture, mining and manufacturing have been eliminated to be replaced by even more employment in the service sector.

In the United States, agriculture accounted for two-thirds of all employment in 1850, but that had fallen to one-third by 1910, less than 10 percent by the 1950s and now less than 1 percent in the 2010s.

Manufacturing employment expanded in the late 19th and early 20th centuries to peak at 35 percent of the total in the 1950s and 1960s but had fallen to less than 30 percent in the early 1980s and is now less than 15 percent.

Instead, the proportion of jobs in the service sector has surged from 18 percent in 1850 to 50 percent by the 1950s and now more than 80 percent in the 2010s.

Mechanisation and industrial development has shrunk or eliminated tens of millions of mostly manual jobs over the past century - including several whole categories of employment.

The U.S. workforce doubled from 42 million in 1920 to 80 million in 1970 and then nearly doubled again to 145 million in 2018.

But the number of workers employed in mining has fallen from more 1.2 million in 1920 to less than 500,000 in 1970 and less than 200,000 in 2018.

Farm employment has fallen from 11 million in 1920 to less than 4 million in 1970 and less than 500,000 in 2018 (“Historical statistics of the United States”, Census Bureau, 1975).

Mechanisation and improvements in energy capture have been responsible for the enormous increase in productivity and economic opportunity but mostly at the expense of manual labour.

At the same time, tens of millions of new jobs, many of them unimaginable in 1970, let alone 1920 or 1870, have been created over the same period, mostly in the service sector.

VANISHED COMMUNITIES

On balance, mechanisation and increased use of new energy rather than manual labour has brought a tremendous improvement in living standards, but the costs for subgroups affecting by the transitions have been intense.

Containerisation transformed the global economy during the 1960s and 1970s, making long-distance maritime trade faster and cheaper, opening new markets and consumption possibilities.

But it was a disaster for hundreds of thousands of dockworkers in long-established communities at ports around the world.

Cranes and straddle carriers handling shipping containers eliminated tens of thousands of former manual jobs involved in loading and unloading ships by hand.

In New York, the number of hours worked by longshoremen fell by 90 percent between the mid-1960s and the mid-1970s in Manhattan and by 60 percent in Brooklyn.

Away from the docks, tens of thousands more jobs were lost in transportation, distribution and manufacturing trades, as freight flows and supply chains shifted to the new container ports in New Jersey.

“The decline of jobs reverberated through New York City’s economy”, economist Marc Levinson wrote in a history of containerisation.

Poor immigrant communities relying on unskilled manual employment were devastated as an entirely new system of goods distribution was put in place.

In London, the same wrenching changes hit dock communities along the Thames, as freight moved downriver to the giant container terminals at Tilbury and then Felixstowe that needed far fewer workers.

The same pattern played out in port cities around the world: containerisation created a small number of skilled jobs, usually at higher pay, but eliminated far more relatively unskilled manual positions.

Strikes and mechanisation agreements between employers and unions aimed to slow the pace of change and provide some compensation for workers affected, with little success.

Containerisation left waterfront communities that relied on large numbers of dockyard jobs scarred by social and economic problems for decades.

NOSTALIGIA AND REACTION

Because of its concentrated impact on certain demographic groups and local communities, mechanisation and the revolution in energy services has often produced a backlash.

Workers in mid-career or living in communities dominated by a single industry may not have much opportunity to retrain and move to another form of employment without loss of income (and status).

In Britain, handloom weavers smashed new automated textile machines in the first decades of the 19th century (the Luddite movement) while agricultural workers smashed threshing machines in 1830 (the Swing riots).

At around the same time, the introduction of sheep farming in the Scottish Highlands, an extension of the enclosure movement that had been eliminating rural jobs in England for two centuries previously, displaced traditional peasant farming communities and produced a similar violent reaction (as well as mass emigration).

Rapid changes in technology and the resulting displacement of workers have often generated a political reaction and a longing to return to an older, simpler, more prosperous age.

Something similar appears to be happening at the moment with an angry backlash against trade, immigration and technological changes that seem to threaten established employment patterns.

But experience suggests machine breaking, riots, strikes, protectionism, anti-immigration campaigns and nostalgia cannot durably hold back the long-term shift in employment and energy patterns.

— The opinions expressed here are those of the author, a columnist for Reuters —

Editing by Richard Mably

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