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Working Digitally in Just Economies

by Bernhard Emunds Monday, Feb. 26, 2018 at 3:32 AM

Reducing working hours is an attractive scenario, an optimistic picture of a possible future of society. Less than 2% of German workers labor in agriculture, down from 40% in the 19th century. The future of work is person-related work. The state must intervene with subsidies.


By Bernhard Emunds

[This article published in May 2017 is translated from the German on the Internet,]

The number combination "4.0" jumps at us every day. There seems almost nothing that is not connected with these two numbers: Work 4.0, Health 4.0, Society 4.0, and Person 4.0… All these abbreviations go back to the formula "Industry 4.0" – to the most successful coup landed by the public relations of German industry!

A small group of research- and industrial decision-makers of industry and the Federal government invented this formula and started a professional community relations campaign at a Hanover festival six years ago. The claim is that this is a comprehensive radical change of economics that will enormously increase the productivity of work. What is occurring is a fourth revolution: after the industrial revolution, after the implementation of electricity and assembly line manufacture and finally after the introduction of information- and communication technology, the first push of a digitalization of the value-creation process. With "Industry 4.0," German industry and the Federal government propagate an extensive digital modernization of industrial value-creation. Decision-makers in businesses should be motivated to invest in new machines, purchase software and demand services of business consultants. Citizens should be positively-m indeed so the modernization itself and the export of digitalized products of German mechanical engineering and plant construction can be publically promoted. In this way, much money can be earned in German industry as long as the development is not hindered by strict regulation.

In my address, I will discuss possible developments if the economy of Germany and other industrial countries develops as predicted ion the next years and decades with the "4.0" narrative of a "revolutionary" change of value-creation through digitalization. At the outset, I ask what is new in the current digitalization of production and in what areas will there be little change. [1] After this introduction, I focus on the central perspective of economists: on the thesis that work productivity will increase enormously with the current digitalization. After presenting this thesis [2], I show that this new productivity could profoundly "change" our society. I outline three possibilities. First, I assume that the rise of the gross domestic product – that number that grows with the quantity and quality of goods and services produced every year – clearly falls behind the rise of productivity. Here I take up the question often raised in today's digitalization discussion whether the end of the work society is not inevitable with the increased modern productivity. [3] Then I assume the growth of the gross domestic product will keep pace with the strong rise of work productivity. Here an economic problem that dominated the political-economic discussions of the last years will lose much of its explosiveness. [4] Lastly, I pursue the scenario that the productivity increase will only affect some branches and thus contribute to a rapid structural change of the economy – away from industry and toward some services. [5]

"Industry 4.0": A Great Narrative and the Beginnings of a Real Change

The claim that the technologies currently introduced are clearly different from those introduced in the so-called third revolution from the 1970s to the 1990s is connected with the formula "Industry 4.0" implying the fourth revolution of value-creation. This distinction is not obvious since businesses have relied on digitalization since the 1970s. They consistently introduced information- and communication technology to digitally accelerate administrative tasks on one hand and automate production or change to computer control on the other hand. What is in the foreground in the current technological modernization of businesses? New individual technologies (for example, 3-D printing) and a new closer interaction of person and machine (for example, technical assistance and collaborative robots), digital linkage and the partial self-control of the whole value-creation process in an industrial business are examples. The digital linkage includes administrative functions and not only production. Orders are processed automatically, accounts are charged, material and products are ordered and so forth.

In the realm of production, linkage and partial self-control presuppose a new sensor technology and a new robot generation. A flood of data ("Big Data") is constantly produced here and control impulses are taken up. The data flood is processed by a high-powered IT and software and transformed into control impulses. With the keyword "artificial intelligence," the goal is optimizing such "cyber-physical systems" (CPS). The CPS should independently increase efficiency more and more. The "Industry 4.0" narrative, the "story" of a modern revolution of production can and should be countered skeptically. However, changes in the industrial value-creation have occurred for a few years. How intensely they will change the industrial sector altogether and how strongly the productivity of industrial work will increase are unclear.

There are also new developments in business management and in commerce with business-related services. More than digital automation of market segments presses ahead. Big data technologies are utilized in developing new strategies in the area of "customer relations." Offerers and customers meet in online platforms in business-related services (for example, web design and in person- or budget-related services (for example, cleaning). Offerers of smaller services are sometimes solo-independent agents who compete for contracts. This so-called "crowd-working" has not spread as far in Germany as in the US.

There are only possibilities for reducing personnel through automation in a few partial areas of person-related services. One example is the use of new sensor technology in supervising persons needing care (if the person falls or exercises regularly and so forth). A central problem of automation of person-related services is obvious with this example. Care is essentially communication between care-givers and persons needing care. Automation reduces communication. Therefore, the risk is great that persons needing care will become even lonelier with the automation of care.

Person-related services arise in a co-production of service providers and persons needing care… Therefore, there are hardly possibilities for increasing the number of services per day or per hour. An increased productivity as in industry – in the sense of increasing the quantity of goods – makes no sense in person-related services.

The change of value-creation and the current processes of digitalization of work are a wide field. How strongly they will really change our economics and whether the digitalization process in the future will go in the direction marked out in the past or whether it will go in another direction or directions are open questions. A multitude of social-ethical questions is connected with the changes that are already clear today. Here I limit myself to the thesis that a stronger increase of work productivity accompanies the current and imminent digitalization of value-creation. In the following, I will not enter in the very explosive questions of data protection raised by Big Data in business value-creation or the risks of a new precariousness of gainful work (for example, through "crowd-working") nor to the chances and risks for the gainfully employed and their families with the new possibilities of a temporal; and spatial flexibilization of work.

The thesis of the rapid increase of work productivity through digitalization

Economists are interested in one thing above all in the "Industry 4.0" narrative: the claim that work productivity will rapidly increase with the nationwide introduction of the new technology. This is doubtlessly one of the moments of the "story" that has a special social explosiveness. The concept "productivity of work" or "industrial production" is used in the common quantitative sense. Productivity increases when an employable person can produce more goods or services in one hour.

Higher work productivity is not unusual. A continuously increased productivity – one time stronger and another time less – has accompanied the economic development of industrial countries since the industrial revolution. This is a crucial foundation of our prosperity. This rise of work productivity can be realized in more goods and economic growth or in lower overall volumes of working hours. This can happen in two ways: either the number of jobs is reduced leading to more unemployment or the average working hours performed by the employed is reduced. The enormous rise of work productivity was used for both beginning with the industrial revolution, for some for more goods and more material prosperity and for others for shorter working hours, that is for more time prosperity.

Increased work productivity is not new in economic history and plays a part in the discussion of digitalization. However, what the protagonists of "Industry 4.0" promise and some economists predict is that work productivity will increase by leaps and bounds. The change of productivity will have a "disruptive quality."

The prognoses of a rapid rise of work productivity – faster than in West Germany before the oil crisis when the productivity grew five per cent and more per year – the prediction of rapid increases – may be too optimistic. Contrary to expectations, the first wave of digitalization – the "third revolution" from the 1970s to the 1990s – only led to slight productivity gains. This amounted to 1.5% per year in Germany in the last decades. The use of new digital technologies in several forerunner branches was not reflected in a strong increase of productivity in these branches. Nevertheless, work productivity could increase tremendously in the next years and decades. Basic structural changes of society could accompany this because of less gainful work as a consequence of productivity growth (cf. 3), because the economic growth has "jumped" (cf. 4) or because the strong productivity growth was limited to certain branches and a radical change of the economic structure rung in decades ago accelerated away from the industrial economy.

End of the work society?

The inventors of the formula "Industry 4.0," many representatives of German industry and the Federal government expected that economic growth would also pick up speed with the acceleration of higher productivity in the new digitalization wave. On the other hand, many others who spoke in the social discussion about the digitalization of the economy even predicted an end of the work society. The growth of the gross domestic product would lag far behind the increased productivity. Work productivity will increase so intensely that there will only be jobs for a few highly-trained employees. As a result, most citizens will no longer be able to secure their livelihood through work income. Gainful work will lose its central place in society since it will only be performed by a few.

The term "work society" refers to the fact that gainful work is no longer the most important income source and basis of social security in the societies of the global North. Rather, other tasks central to personal development and social engagement fulfill those functions for men and women. Occupational challenges are important in our society as a preeminent field of personal probation and development. Commitment to an enterprise is seen as a key to social integration on account of contacts with colleagues. Whoever is employed and can live from his work income sees himself as an esteemed person who can contribute something to society and who is valuable so he can earn a living…

"Industry 4.0" creates good prerequisites for a basic income because on one hand, many people will be unemployed while on the other hand income necessary for this basic income arises in the digital value-creation. The proposed unconditional basic income that appears in the most different variants is a far-reaching social-political reform concept. It is very unlikely the citizens of Germany will overcome their work-society mentality in a few years… Equality means more than formal equality of rights. It means experiencing oneself in everyday interactions as an equal person in an exchange with others, standing at eye level with them and being treated as an equal.

Catholic social tradition has emphasized this aspect again and again – that everyone brings him or herself in society. Its goal is an active participatory society… Each and every one must be given the possibility of making a positive contribution to society. This occurs under the term "participatory justice" or "partnership justice" and is considered today the central standard of justice of social proclamation and social ethics… The state or another large social entity is obliged to intervene when the individual or small group is overstrained. Participation is also part of freedom. Chances of personal development are also chances of social participation, chances of bringing something into society…

The experience of being acknowledged as a member of society with equal rights who contributes something to society is allied today with reasonable gainful work. Obviously, our society refuses this experience of equal participation to the unemployed and the precariously employed. However, many experience being connected in society as equals through paid work. This experience still seems an important social foundation of democracy. We need a reasonable gainful work for everyone as long as we have nothing else that imparts this experience of recognition and self-esteem.

What does the right to participation through paid work mean for the future orientation of economic- and social policy? Political actors should try to open up access to gainful work instead of excluding many from reasonable paid work or promoting the withdrawal of whole groups from gainful work. If the volume of gainful work strongly decreases in society because work productivity increases enormously, this is a great chance for reducing the (life) working times for everyone. The decline of the total work volume need not lead to more permanent unemployment. It can be used – as in earlier decades – to reduce working hours considerably. Less paid work could be possible for everyone. Everyone could have more free time and more time for relationships and partnerships, for caring work, education and political engagement, relaxation and leisure, play and musical activities. Paid work for everyone could be less important – without ceasing to be important for everyone – through reduction of working hours and dev elopement of those elements of social security not connected to gainful activity.

Reduced working hours is an attractive scenario, an optimistic picture of a possible future of society that can encourage courageous steps… The way to this future may be stony. There is a high likelihood of a painful, structural economic change with mass layoffs and not only the social conflicts around reduced working hours and redistributing income. The prognosis of a strong decline of the work volume and a constant reduction of working hours is a macro-economic statement. Individual branches and certain occupations will be affected by such an economic change where job cuts advance – on the way to a society where all citizens work much less, many women and men become unemployed and are pensioned while no new jobs can be found. Despite these social challenges, the decline of the work volume expected by many, the clear reduction of (life-) working time for everyone, is the right way from a social-ethical perspective.

Relativization of non-ecological problems of intergenerational justice

Historically, this was true and will not be different in the future. A rise in work productivity reduces the total work volume or is connected with economic growth. In nearly all past decades, productivity increases were used in two ways: for more goods or for more free time. This could be possible again in the future with a strong rise of productivity expected by many from a new wave of digitalization of the economy. In the last section, I analyzed the way of a clear reduction of the work volume. Economic growth could pick up speed again with increased work productivity through a new digitalization wave.

In the political-economic debates of the last thirty years, the position was argued again and again that the extent of public indebtedness and the height of legal pensions to be paid out in the future represented enormous problems of intergenerational justice. Those living today, particularly the members of the presently employed generation, would completely overtax the coming generations of taxpayers and social security recipients. The debt service for the state borrowing in the future and the pensions that must be paid in the future to seniors retired from gainful life are so high they can no longer be shouldered by the coming working generations.

Let us leave open the accuracy of these problem diagnoses. The widespread scandal-mongering of the German state indebtedness may elicit only a mild grin from many economists of other countries. Such problems of intergenerational justice will be deactivated as work productivity rises and economic growth accelerates. This is uncontested. These problems would dissolve in thin air if this develops as positively as protagonists of "Industry 4.0" promise. Coming generations of employed persons will have no problems paying the debt service for the public budget and the promised pensions out of the intensely higher value-creation.

On the other hand, questions of intergenerational justice will not be deactivated. How should the total economic increasing together with the value-creation be justly distributed? According to many indications, the distribution conflicts will become sharper despite the larger "cake." Finally, it can be assumed only the profit income will shoot up initially with the successful digitalization. Thus, the additional income will first accumulate with the property owners, particularly the owners of businesses or shares of businesses. Employees must still fight for their share in the higher gross domestic product. If we start from a far-reaching structural change, some groups of employees will be unemployed while the skills of others will be in great demand. How will pensioners share in the increased income? How can the state secure an adequate share in the increased income? With a greater burden on their income from taxes and fees, property owners have many possibilities for shifting and tax evasion. In short, there are distribution questions everywhere: between property owners and employees, between the different groups of employees of the working generation, between these and pensioners and lastly between receivers of market incomes and the state.

The rise of productivity and acceleration of economic growth will not make intergenerational justice unimportant. Rather, the partial ecological aspects of this justice between the generations will move social and international challenges to the top in the priority lists. When more goods are produced, there is a great risk the ecological burden on the earth as a living space will also increase through the economy. This is very clear with the greenhouse gases forcing climate change. The ecological dimension of intergenerational justice will become more important insofar as members of the coming generations will suffer under future environmental damage alongside non-human beings. The challenge of transforming the economy ecologically will be even more urgent than it is today!

The future of work is person-oriented work

The hoped-for rise of work productivity through digitalization is neither possible nor sensible in all branches. Increases in productivity can be expected in industry and in business –related serves, in crafts or trade. Increased quantitative work productivity in person-related services, social work, education, training, care and domestic activities is unlikely. This is also true for artistic work. The crucial reason – as already mentioned – is that the political-economic concept of "productivity" is industrial. Higher work productivity means a working person can produce more products in the same time period. More debtor consultations, more mathematical connections, more infants in childcare, more persons needing care, more cooked meals, more piano lessons per hour – more and more in the same time – makes no sense.

The expected robust increase of quantitative work productivity will only occur selectively. The structural change away from industry to services will presumably accelerate in a few service branches. It will accelerate because productivity increases can be realized in industry and the growth of industrial value-creation falls behind so the number of working persons in industry declines. This will not occur or will hardly be possible in person-related services because increased work productivity is impossible or hardly possible there while work in many business-related services can be more productive through digitalization.

Remember: The productivity of farm work has increased enormously, not only the productivity of industrial work. At the end of the 19th century, 40% of working persons in Germany labored in agriculture. In 1950, a quarter of all workers in West Germany were still working in agriculture. Today, they are less than two percent in Germany. The new digitalization wave could lead to only a few persons still working in an industry in several decades.

In this case, a development that has been underway for five decades could accelerate considerably in the next years and decades. Fifty years ago, every second working person in West Germany labored in the productive sector. Today, it is every fourth person. Around 1950, every fourth working person in West Germany earned his or her livelihood in the service sector. Presently, three of four gainfully employed are in the service sector in all Germany. Less than a fifth of workers are active in social work, domestic services, health, care, education, and training… "The future of work is person-related work." This old formula of Friedhelm Hengsbach heard 15 years ago is even truer today than at that time.

How will the branches of person-related services develop? Will more and more jobs arise here that are comparable with jobs in industry or will we press ahead on the way to the service society where person- and household-related service providers will be working precariously or moonlighting?

The problematic of precarious service jobs could intensify with the new digitalization. The US economist William Baumol (1922-2017) identified the central economic cause of this problematic ("Baumolian cost-sickness"). If work productivity in industry increases, the wages of employees could be raised and their working condition s improved without the cost per product and the price of the manufactured goods skyrocketing for the business. However, the development of work income or conditions may not fall behind the development in industry.

The stronger engagement of the state is an alternative to this. In Germany, the state is the main employer in social work health, care, education, training and state-financed organizations (for example, welfare associations). A great responsibility comes to the state for the change to a service economy with just, attractive jobs in person-related services – to which it did not do justice in the past. Precarious employment has clearly increased in some of these areas… The state must obviously intervene with subsidies so the service society does not become a domestic servant society – at least for the time of transition until employees in person-related services earn as much that they can pay other service providers.

In a striking comparison with some Western European neighbors, German politics misses the structural change to person-related services. German politics does not organize or promote them but remains fixated on industry in its labor market policy. This must be overcome!

Final remark

Who must fear digitalization and a possibly strong increase in work productivity? No one! We will have great changes in the next years and decades of improving the living conditions and chances of development and participation of people in Germany and Europe – even if only a part of the changes occur that many representatives of industry and some economists predict. These chances can be utilized if we keep in view the risks – and do not ignore the conflicts around distribution and social partnership now connected with social change.

Thanks for your attention!

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