[China.org.cn] Sun Wenkai: Preparing For a Future Where Jobs Are Replaced by New Techniques

The appearance and development of Artificial Intelligence (AI) have attracted much attention recently as another technical breakthrough after the steam engine, electricity, and internet. The intelligent machine is able to imitate more human behaviors and provide services which only human workers could offer. This means that such machine can, on the one hand, promote people’s quality of life, while on the other hand, it will replace jobs of certain groups. Up till now, AI has been combined with industries such as internet, manufactory, services, and transportation. This combination has stimulated the technical revolutions of those industries. In manufacturing workshops, machines have altered labors at some level. The fact that Alpha Go defeated top chess players has challenged the traditional cognition. As for digital business, JD.com (Jingdong) uses robotic arms to finish works such as unpacking and checking. Amazon's Phoenix fulfillment center utilizes AI techniques to finish jobs in 15 minutes, which needs to be finished in one hour by human workers. Under the circumstances, the analysis and studies of the possible influence of AI on the labor market are necessary.

Like the impact of industrial revolution on agriculture, AI’s influence on traditional employment is inevitable. During the transition from agricultural society to industrial society, agricultural employees in the US decreased from 40% to 4%. In the long term, the capital interest rate will keep declining while the labor cost will keep rising. This provides AI the opportunities to partly alter labors or cover the shortages. A report shows that 47% of the work in America facing the threats of being replaced by AI. We followed the same pattern of the report and found out that nearly 200 million non-agricultural employees in China might be replaced, and the replacement rate will reach 45%. This means that as the intelligent techniques and products have been promoted, such a large-scale labor force will end up finding other ways out, namely either finding new jobs or becoming unemployed. Although the changes may not happen in a while, the fact that such large number of employees being affected by these changes should not be ignored. Except for the risk of unemployment, the development of AI may cause influences on other perspectives, which include:

(1) To further reduce the labor share and deepen the income inequality. This technological advance is equivalent to reducing capital prices, raising the capital-labor ratio of enterprises, reducing overall labor shares, and widening income disparities, notably capital-labor disparities and income disparities among skilled and unskilled workers.

(2) Artificial intelligence can reduce the cost of enterprises, and it is possible to promote the formation of capital-intensive large enterprises, thus raise the level of market monopoly, and bring further welfare loss caused by monopoly.

(3) The expansion of artificial intelligence may lead to the drop in labor participation rate and increase the social security burden. Wages in the labor market tend to be rigid. When jobs have been replaced by new technologies, workers would not be willing to accept jobs with lower income, they may withdraw from the labor market on a larger scale and put pressure on the social security system. These facts have already happened in the United States.

In fact, China’s labor market has adequate ability facing the new technology replacement. This is because the average salary of Chinese labors is not high enough to be replaced at a large scale from the perspective of cost. Meanwhile, since 2011, the total number of Chinese labors has been declining, which means the machine will mostly compensate the shortages rather than replace people's job. Such situation is consistent with the original motivation of some developed countries on the invention of industrial robots. Moreover, technological advance has also created new job opportunities.

Although previous facts show that China’s labor market has not been largely affected by technological progress, China should notice the possible threats and prepare for it, especially from the level of policies, within which the first is the policies that integrate the development of AI and manufacturing industry. Actually, the Chinese government has already formulated policies to promote the AI industry. For instances, China’s technology innovation strategy “Made in China 2025” points out that in the next decade, China will mostly focus on intelligent manufacturing, and AI is the basis of it. Another example would be the five-year Robotics Industry Development Plan released by the government in April 2016, which provides a clear blueprint for the robotics industry of China from 2016 to 2020. Chinese regulator also released a three-year guidance for Internet plus Artificial Intelligence development in May 2016. This guidance also proofs that AI has been upgraded to a national strategic level. Those plans and policies above should be stepped up to ensure that China could take the priority on the development of AI.

Here, some specific measures are suggested:

First, scale-up the coverage of social security and the collection of social insurance, so that the groups of people who have been affected by the technological replacement could spend a smooth transition period. The government should particularly focus on areas or industries where the impact of AI replacement is larger than the others.

Second, fully play the role of national taxation and income distribution policies in order to balance the impact of AI on different groups. The government could narrow down the income gap through secondary distribution.

Third, prepare to undertake educational reforms so as to make sure the labor force could adapt to market changes as soon as possible. That needs more investments in education, vocational training, and on-the-job training.

Fourth, make sure the spontaneous adjustment mechanism for the labor market, especially the wage adjustment mechanism, being fully utilized. This means that the government should avoid over-intervention in the labor market, which may cause the appearance of structural unemployment.

Finally, the government should also notice the appearance of monopoly, and execute anti-monopoly policies or other regulatory measures to avoid the loss of welfare caused by monopolization in the industry thanks to technical progress.

The author is a research fellow at NADS, RUC.