European welfare and automation

The current debate about the economy and society focuses largely on growing inequalities, not only between the richest and the poorest regions of the world, but within developed countries as well. What is your view about this?

 

It is true that inequalities are growing globally. The most recent statistics show that the planet’s richest 1% own half of the world’s wealth, and the top 10% of people hold 85% of global wealth. In addition to that, inequalities have reached a historical high point. Such a situation causes huge tension and concerns numerous aspects of people’s lives. One of the consequences of growing global inequality is intensification in migration from the poorest regions of the globe towards the wealthier societies. Furthermore, growing inequalities can also be observed within developed countries. As all recent statistics show, regional differences within countries are growing. Although the EC has been investing significantly in European cohesion policies, and it is true that inequalities between member states have decreased slightly, it is also true that regional divergence is a significant phenomenon that brings with it important consequences. Trust in EU policies is damaged, while people who observe increasing inequalities become more sceptical about the European ideal. Inequalities provide fertile ground for populism. To sum up, growing inequalities are a challenging and dangerous issue in today’s reality.

 

Are growing inequalities mainly connected to the impact of globalisation?

 

We could argue that growing inequalities are a result of increased globalisation, although existing research shows ambiguous results in this respect. When we observe differences within countries, we see that regions that are equipped with better infrastructure, more specialised capital, better conditions for bringing in business, become richer and wealthier faster. In such regions we observe what is called the agglomeration effect. On the other hand, we can observe the depopulation of poorer regions. People leave regions where prospects are lower, which significantly affects the performance of these regions: the number of better-paid jobs is lower there, the education system is weaker and investments are lower. The attractiveness of such regions decreases. The same logic can be applied at a country level: countries with better infrastructure, better equipped in R&D, have a greater capacity to attract new investments and businesses. They also offer higher salaries, so people from poorer countries move there to find better-paid and more stable jobs. But globalisation can also provide a boost for poorer regions, or countries. The dispersion of new technologies and ideas is faster thanks to globalisation, transport is quicker, new technologies mean that traditional industries lose their attractiveness. Proper innovative investments in poorer regions will pay off faster thanks to globalisation and regional attractiveness can develop more quickly. What is important is to find an innovative niche that can help rebuild the attractiveness of the region.

 

Technology, IT and automation are changing the economy and the labour market. Many experts stress that a revolution is already taking place.

 

Robots and the automation of jobs is a reality. In some sectors automation and the implementation of AI (Artificial intelligence) will take more time, in others it will be quicker. Let’s take the example of the banking sector. Nowadays, many banks are rushing to implement the latest automation processes in order to increase their competitiveness, increase their productivity, save costs and improve customer satisfaction. Some studies predict that in the next few years, machines in the banking sector will substitute up to 25% of human work. On the other hand it has been argued that the labour force liberated from this work can be used for higher value tasks and projects. There are also sectors in which automation and AI will not lead to such a rapid destruction of jobs, like healthcare, nursing, or management.

 

What are the main social consequences of automation? Will robots replace human workers in long-term employment? Will social care need to change as well?

 

The impact automation will have on society is still unknown. Some studies say that automation will destroy many jobs, leaving people with no social security and few possibilities to earn money. Other studies claim that the development of technology will create more jobs than it destroys. In my opinion, today’s technological change is an entirely different process, when compared to the industrial revolution in the 19^th century. The speed of change is faster and far wider in scope. Even if new jobs are created, new sets of skills will be needed for them. What type of education system would guarantee that skill sets needed correspond to market demand? With such a rapid pace of change, who can predict what skills will be needed in 5 year’s time? Educational systems are rigid and not easily adaptable. This might be a challenge that is difficult to overcome. If no proper solutions are found, automation could have a heavy impact on society in the medium term.

 

Does a fast-changing economy imply a new approach in education and training? What might be the new disciplines that could make a difference for future workers?

 

A new approach to education and worker training is essential in a fast-changing economy. The current education system is too rigid and traditional. Not only does it not respond to a fast-changing economy, but it also doesn’t respond to a fast-changing society. Young people nowadays use different tools for learning. They have access to the internet and all the knowledge available there. They have tools like YouTube, with which they can learn from watching short movies. They do not read complicated books, or carry out research. The education system does not understand that and does not respond to individuals’ needs, discouraging people from studying. On the other hand, it is also very slow in responding to demand from the labour market. The credibility of the educational system is in decline. Why would a young individual invest his time in a university education, if he hears all the time about the enormous unemployment rate among young generations of university graduates? Why would they invest in education, when they have no guarantee that their jobs will even exist in 5-7 years? Quicker training, new approaches for teaching, the ability to continue learning throughout the duration of a working life: these are solutions that could help people find employment and become active in this changing environment.