The Fourth industrial revolution

I. In the last several decades, the world saw a breakthrough in the sphere of technology, that is now known as the Third industrial revolution. The most remarkable and influential inventions of this epoch clearly were computers and the Internet. Today the wide public discusses another economic and social phenomenon which has been already called the Fourth industrial revolution. New trends constituting this revolution, are numerous but generally they can be presented as various interactions of two spheres of technology: robotics and artificial intelligence (AI). The former includes all the advances in means and methods of production of goods and services such as 3D-printing or automatic irrigation system. By AI, they usually understand any software that performs some functions more creatively than traditional computers and that is learning by doing. A representative example of AI is Watson system developed by IBM that recognizes lung cancer with better accuracy than oncologists. Being combined, robotics and AI result in powerful technologies such as automated enterprises, smart houses or unmanned vehicles. Despite the fact that all these innovations make our living better, it is impossible to ignore one severe side effect. Since costs of technologies gradually decrease and their implementation becomes easier, many jobs are at risk of automation. This may result in a rise of natural level of unemployment and undesirable widening of the gap between the wealthiest and the poorest. So, lack of working places and growing inequality are two major issues that the world community inevitably will have to deal with. Fortunately, these problems seem to be solvable. A positive approach suggests that natural market forces along with proper governmental and corporate policies will allow residents of the post-revolutionary world to find a job and have an advantage of using technologies of the Fourth industrial revolution. This essay analyses the problem of working places in the context of new reality and provides evidence for the outlined opinion. The analysis begins with a brief overview of the impact that innovations have on the world labour markets. After that, unemployment and inequality issues will be considered, and several propositions of possible curing policies will be made. The summary of possible outcomes of the described challenges will be included in the conclusion of the essay.

II. One of the latest technological trends is appearance of innovations in various fields which disrupt traditional market structures. A few years ago, tickets for transport and events were sold by ticket cashiers only. Today most transport agencies and event organizers have switched to cheaper ways of trading: customers buy tickets using ticket machines or online-booking. Since the cost of machine support became lower than the average cashier’s remuneration, their firing is a profit-maximizing decision for the carrier companies. Similar trends are observed in the labour market of call-center specialists. For instance, modern taxi companies have substituted manual dispatchers with automated systems that always manage operating business processes optimally, do not err and do not get tired. However, the severest alterations occur in the sphere of heavy industrial production. Enterprises of this kind used to provide working places to an enormous number of low-qualified workers. Nowadays, people are preferred to obedient robots which can work quite intensively being controlled by the only operator of the plant. In 2013 Oxford researchers Carl Frey and Michael Osborne estimated the probability that common professions will be computerized. In their paper, they wrote:

We distinguish between high, medium and low risk occupations, depending on their probability of computerization. We make no attempt to estimate the number of jobs that will actually be automated, and focus on potential job automatability over some unspecified number of years. According to our estimates around 47 percent of total US employment is in the high risk category. We refer to these as jobs at risk – i.e. jobs we expect could be automated relatively soon, perhaps over the next decade or two. (Frey & Osborne, 2013, p. 44)

The paper finishes with a table that includes 702 professions and probabilities of their automation. An excerpt from that table is presented below.

0.99Telemarketers. Tax preparers. Library technicians. Photographic process workers. Processing machine operators
0.89 Taxi drivers. Bakers
0.79 Motorcycle mechanics. Truck drivers
0.69 Housekeeping cleaners. Painters
0.59 Museum technicians. Personal financial advisors
0.49 Police, fire, ambulance dispatchers. Agricultural engineers
0.39 Gaming cage workers. Elevator installers and repairers
0.29 Skincare specialists. Wholesale and retail buyers
0.19 Secondary school teachers. Airline pilots
0.09 Fitness trainers. Travel agents
<0.01 Therapists. Photographers. Database administrators. Lawyers. Financial managers

As can be clearly seen from that table and from this fragment particularly, professions that are at low risk of automation usually incorporate either some creativity or face-to-face communication with a client. Also, holders of such jobs often perform some managerial functions or supervise automated production processes. On the contrary, professions that are likely to be computerized in the nearest future share the following characteristics: they do not require high qualification, consist in monotonous repetition of simple algorithmic steps, and with high probability relate to the services sector. It is essential that structural unemployment which necessarily will be provoked by the described reorganization of the labour markets will result not only in economic problems but also in various social issues. A dismissal due to automation of production can become a serious psychological challenge for a fired worker since it is impossible to ignore that you are preferred to a machine. Thus, mass depression, protests and anti-progressive movements are examples of quite possible short-term consequences of the Fourth industrial revolution.

III. Implementation of modern technological advances seems to trigger unsatisfactory changes in the world economy. Many people will lose jobs and will be forced to lower their consumption. This may result in an overproduction crisis, especially in case if many industries would be computerized simultaneously. However, a closer analysis of the underlying issue of unemployment suggests that in the long run, i.e. starting from the moment when the public accepts innovations and begins to think progressively, the economic crisis must give way to a new industrial and intellectual era. Such view can be found in the recent book “The fourth industrial revolution” by Klaus Schwab, the founder and executive chairman of the World economic forum:

The fundamental uncertainty has to do with the extent to which automation will substitute for labour. How long will this take and how far will it go? To get a grasp on this, we have to understand the two competing effects that technology exercises on employment. First, there is a destruction effect as technology-fuelled disruption and automation substitute capital for labour, forcing workers to become unemployed or to reallocate their skills elsewhere. Second, this destruction effect is accompanied by a capitalization effect in which the demand for new goods and services increases and leads to the creation of new occupations, businesses and even industries. (Schwab, 2016, p. 37)

There are several reasons why the second effect will prevail. First, under the new order, some jobs will necessarily be in demand. This trend mostly relates to programmers and engineers since they are ones who create and control automated systems. Second, transition to new reality is always accompanied by the appearance of new wants and business-ideas. To satisfy public’s wants and to bring their ideas to life, entrepreneurs will create many working places and thus contribute to the reduction of unemployment. A good illustration of this process is the emergence of mobile applications market that happened in 2008 due to a breakthrough in IT. Currently, the market is about 76 billion dollars, it provides jobs to more than 12 million developers (the figure is comparable to Moscow population size). Finally, historical data demonstrate that previous technological innovations did not alter the natural level of unemployment significantly. The graph presented below shows the unemployment rates in the UK from 1881 to 2015 (Denman, 1996, p. 15). During this period, many revolutionary technologies were invented. Electricity, cars, radio, conveyor, computer, and the Internet are the cases in point. Their implementation destroyed a lot of professions, however, in the long run the natural level of unemployment did not show an upward trend.

The conclusion that employees should draw from the history is that in highly automated industries they still will be valuable for employers only if they possess high qualification and can perform various creative tasks. Therefore, broad education will become more and more beneficial with years. This is a chance for governments and corporations to influence the potential issue of unemployment. Improvements of education and founding of different refresher courses can facilitate transition of an economy to a new reality. In general, even though for some time automation of jobs will be more intensive than generation of new working opportunities, in the long run entrepreneurs equipped with the latest technological innovations will create new industries and raise demand for qualified labour to the sufficient level. The question is how many laid-off employees will be able to apply for more advanced work.

IV. Beyond unemployment, increasing global inequality is expected to be the other result of the Fourth industrial revolution. It is quite possible that this issue will be much more serious than the unemployment problem and will require bolder reaction from authorities. Both advances in robotics and a wide spread of AI-based software necessarily lead to a decline in the number of people who benefit from the capital-intensive production. Implementation of the most advanced technologies is reasonable in the industries with large-scale output. There is a risk that in the near future all the profits from such industries will be concentrated in the hands of few shareholders and managers, since ordinary workers are supposed not to participate in the production process. As can be seen from the overview of the income inequality issue by the Organization for Economic Co-operation and Development, historically, global inequality was caused mostly by industrialization:

In 1820 the world’s richest country – Britain – was about five times richer than the average poor nation. Now, America is about 25 times wealthier than the average poor country. The Gini coefficient for between-country inequality stood at only 16 in 1820 (i.e., very low). It soared to 55 in 1950, and has been stable since. The driving force of inequality since 1820, in other words, has been industrialization in the West. <…> As globalization ebbed [in 1914-70], rich countries had more freedom to steer domestic policies and used it to narrow differences between rich and poor. As globalization spread again after 1980, the opposite happened… (Zanden, 2014, p. 207)

Since the continuing industrialization process is expected to be largescale and radical, its consequences in regard to national and cross-country inequality can be even more dramatic. A widening gap between rich and poor may provoke social and political conflicts within the countries and increase tension in the international relations. It is important to mention that spread of robotics will result in reshoring of manufacturing back to developed countries from overseas because cheap labour force will no longer make offshore production attractive. Welfare of the developing countries, where a lot of goods are produced currently, will be in a danger. Probably, this will stimulate economies of the Second world to establish local high-tech enterprises and will allow them to become more independent of the western economies. Globally, the inequality problems can and should be solved by governmental intervention in the markets. For instance, taxes imposed on successful robotized corporations can lower inequality being distributed among the population as transfers. Also, it is necessary to improve capitalists’ responsibility to the public not just legally but, what is more important, ethically. A good example that demonstrated a possibility of fair redistribution of income is Norway where 97% percent of national oil income is saved in the Government Pension Fund Global. The remaining 3% are utilized by the government to improve national infrastructure so that all the citizens benefit from the oil industry. This fact shows that socially-oriented organization of business allows to avoid unwelcome consequences of inequality. States that are concerned with social morality and suppression of illegal corporate activities have better chances to overcome this aspect of robotization.

V. To conclude, the world is anticipating the first fruits of the Fourth industrial revolution which consists mostly in a spread of robotics and artificial intelligence. This essay showed that these inevitable changes can result in severe social and economic shocks, the major ones are high unemployment and inequality. Due to automation of jobs, the gap between developed and developing countries can become much wider than it is now. However, under the optimal scenario, the Fourth industrial revolution can bring a new era in human history, an era of prosperity and rapid intellectual development. This scenario can be approached by implementation of governmental and corporate policies aimed to smooth the distribution of world and national income and retrain low-qualified workers in order to relief their adaptation to new reality. Such reforms require reorganization of social relations and people’s view on inequality. The real outcome of robotization will be between the two polar options but, nevertheless, authorities, corporations and ordinary people should take these issues seriously and start working on their solutions. It is essential to note, that the scope of this essay is limited mostly on the issues of employment and income distribution. To understand other challenges associated with automation of jobs and their possible solutions, a broader and deeper analysis is required. For instance, the issues of age and gender work discrimination can be considered in context of the Fourth industrial revolution.

Denman, J., McDonald, P. (1996). Unemployment statistics from 1881 to the present day.  Labour Market Trends, 104, 15-18.
Frey, C., Osborne, M. (2013). The Future of Employment: How Susceptible are Jobs to Computerisation? Oxford: Oxford Martin School, Programme on the Impacts of Future Technology.
History of the Government Pension Fund Global. Retrieved December 21, 2019 from
Schwab, K. (2016). The Fourth Industrial Revolution. World Economic Forum.
Zanden, J., et al. (eds) (2014), How Was Life?: Global Well-being since 1820. OECD Publishing.