Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

Technological development: valuing labour

Daniel Lind and Johanna Helgesson 7th February 2024

Technological innovation at work should be thought of in terms of supporting labour, not supplanting it.

technological,labour,innovation
Technology at work needs to be an arm of labour, not a substitute for it (PaO_STUDIO/shutterstock.com)

Ever since the days of Adam Smith, economic science has taught that technological development always benefits the overall productivity of the economy, leading to automatic increases in wages and improved working conditions. This conventional wisdom is however challenged in a new book, Power and Progress, by two of the world’s leading economists, the Massachusetts Institute of Technology professors Daron Acemoglu and Simon Johnson.

Drawing on a millennium-long western perspective, they argue that the pattern has often been different from what economic theory suggests. But they do identify two historical correspondences: the latter half of the 19th century and the initial decades after World War II. So what explains these exceptions, where technological development was indeed associated with higher productivity, rising real wages and improved living standards for the vast majority?

Labour-friendly direction

The concise answer is that technology needs to evolve in a labour-friendly direction, guided by a normative framework steering society in this direction. Productivity-driven prosperity has historically worked when technological development created many new tasks, rather than merely replacing employees with machines. For labour-friendly technological development to lead to a general increase in prosperity, however, political measures are additionally required to strengthen the bargaining power of workers, compelling capital to share the surplus created by productivity growth.

The industrial revolution in England had been going for nearly a century before technology and policies began delivering economic prosperity to the majority. This unique shift was rooted in technology focusing less on labour-saving automation and more on innovations that increased productivity and created new tasks. Simultaneously, with the legitimisation of trade-union organisation and the advent of collective bargaining, workers’ positions were strengthened against business owners. The expectations of increased prosperity that had existed for almost a century began to materialise.

The initial decades after the second world war also saw technological development furthering industrial production, resulting in increased productivity and new tasks across the economy. Technological development not only drove labour-saving automation but also contributed to a high demand for labour. The direction was similar in many countries: stronger trade union influence, collective wage bargaining and reforms favouring the position of workers in the labour market.

Ideological shift

The deviation from around 1980 can mainly be explained by technological and global development shifting to favour capital owners at the expense of workers. This was compounded by an ideological shift enabling and justifying the elevated position of capital. Inspired by economists such as Milton Friedman and Friedrich von Hayek, employer advocacy strengthened, with a greater focus on maximising profits and share prices. This triggered a pushback against trade unions, deemed hindrances to fulfilling the doctrine.



Don't miss out on cutting-edge thinking.


Join tens of thousands of informed readers and stay ahead with our insightful content. It's free.



While the figure of Smith is essential for the moral justification and political implementation of this perspective, the result has been weaker productivity growth, stagnant real wages, soaring income inequality and a declining wage share in many western countries. Artificial intelligence has further worsened the situation. Intelligent machines are primarily developed to become smarter than humans and perform better tasks previously done by employees. This leads to displacement of the workforce without AI contributing to a sufficient number of new tasks. The way forward should be to guide intelligent technology to favour the contributions of workers to production, focusing on machine usefulness rather than machine intelligence.

Contemporary technological development, therefore, does not lead to significant productivity growth but rather to an insufficient number of job opportunities. What reforms can reverse this trend?

The state can contribute to making innovation policies more pluralistic, with less focus on automation and surveillance. Large corporations, such as Google, Facebook and Amazon, should be split up into smaller units. Higher education and research should become more independent of business interests. Increased transparency is needed, and rules concerning lobbying should be tightened. And the imbalance between capital and labour taxation should be addressed: the tax system should favour employing a worker over accruing capital, and should incentivise investment in lifelong learning.

The overarching message of Power and Progress is that we can choose our future: we are not bound by technological or economic determinism. If we want a different future, it is up to us to dig where we stand.

Exploding inequality

Focusing on Sweden, exploding income inequality is not due primarily to a weakened bargaining position for workers but rather macroeconomic policy. Since the mid-1990s, Sweden has had a centrally negotiated wage mark that is mandatory or guiding for all companies operating in the country—unlike the United States or the United Kingdom, which lack such centralised negotiations, resulting in wages increasing much more slowly than productivity.

Following Acemoglu and Johnson, the primary reform needed in Sweden is not to strengthen the bargaining position of workers but to leave behind fatalistic reference to globalisation and the Friedman doctrine. The question is how an alternative vision should be formulated and concrete policies designed.

The economic policy of recent decades has resulted in Sweden underinvesting in productive capacity in almost all areas. We must abandon the notion that taxes are always harmful to the economy: it is about how we spend the money. And we should recognise that small income differences and equal life chances are most often productive for the economy. Nor should the interests of employers be elided with the common good. Sweden should be more pro-market and less pro-business: competition is often inadequate, not least in construction, retail grocery and the banks.

Applying the reasoning in Power and Progress, Sweden might have been technologically naïve. Allied to extremely low capital taxes, this has resulted in overly capital-intensive companies with an unfavourable technical focus, too few wage-earners and unnecessarily low productivity.

Instead, Sweden should build on its strong trade-union movement, leading to a more labour-friendly path. Politics and the social partners should therefore stimulate a societal discussion on how the developments of technology in general, and AI in particular, can better complement the contributions of employees to production.

Daniel Lind
Daniel Lind

Daniel Lind is research director at the Swedish trade-union-related think-tank, Arena Idé, responsible for a three-year project on productivity and labour markets financed by the five unions within Swedish industry.

Johanna Helgesson
Johanna Helgesson

Johanna Helgesson is a political scientist, working as a trainee at Arena Idé during this semester.

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

u421983467 9c73 b24a0b674750 1 The West’s Defence Now Depends on Trump’s Mood SwingsStefan Stern
u4219834674735ecb6fd43 0 The Dark Side Of The Boom In Last-Mile LogisticsSilvia Borelli
u421983467e464b43d2 1 Why European Security and Sovereignty Depend on Its Digital SectorMariana Mazzucato
u42198346c3fba71fa474 0 As Temperatures Rise, European Workers Face a Looming ThreatMarouane Laabbas-el-Guennouni
u42198346741 4727 89fd 94e15c3ad1d4 3 Europe Must Prepare for Security Without AmericaAlmut Möller

Most Popular Articles

u4219834647f 0894ae7ca865 3 Europe’s Businesses Face a Quiet Takeover as US Investors CapitaliseTej Gonza and Timothée Duverger
u4219834674930082ba55 0 Portugal’s Political Earthquake: Centrist Grip Crumbles, Right AscendsEmanuel Ferreira
u421983467e58be8 81f2 4326 80f2 d452cfe9031e 1 “The Universities Are the Enemy”: Why Europe Must Act NowBartosz Rydliński
u42198346761805ea24 2 Trump’s ‘Golden Era’ Fades as European Allies Face Harsh New RealityFerenc Németh and Peter Kreko
startupsgovernment e1744799195663 Governments Are Not StartupsMariana Mazzucato
u421986cbef 2549 4e0c b6c4 b5bb01362b52 0 American SuicideJoschka Fischer
u42198346769d6584 1580 41fe 8c7d 3b9398aa5ec5 1 Why Trump Keeps Winning: The Truth No One AdmitsBo Rothstein
u421983467 a350a084 b098 4970 9834 739dc11b73a5 1 America Is About to Become the Next BrexitJ Bradford DeLong
u4219834676ba1b3a2 b4e1 4c79 960b 6770c60533fa 1 The End of the ‘West’ and Europe’s FutureGuillaume Duval
u421983462e c2ec 4dd2 90a4 b9cfb6856465 1 The Transatlantic Alliance Is Dying—What Comes Next for Europe?Frank Hoffer

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

S&D Group in the European Parliament advertisement

Cohesion Policy

S&D Position Paper on Cohesion Policy post-2027: a resilient future for European territorial equity

Cohesion Policy aims to promote harmonious development and reduce economic, social and territorial disparities between the regions of the Union, and the backwardness of the least favoured regions with a particular focus on rural areas, areas affected by industrial transition and regions suffering from severe and permanent natural or demographic handicaps, such as outermost regions, regions with very low population density, islands, cross-border and mountain regions.

READ THE FULL POSITION PAPER HERE

ETUI advertisement

HESA Magazine Cover

With a comprehensive set of relevant indicators, presented in 85 graphs and tables, the 2025 Benchmarking Working Europe report examines how EU policies can reconcile economic, social and environmental goals to ensure long-term competitiveness. Considered a key reference, this publication is an invaluable resource for supporting European social dialogue.

DOWNLOAD HERE

Eurofound advertisement

Ageing workforce
The evolution of working conditions in Europe

This episode of Eurofound Talks examines the evolving landscape of European working conditions, situated at the nexus of profound technological transformation.

Mary McCaughey speaks with Barbara Gerstenberger, Eurofound's Head of Unit for Working Life, who leverages insights from the 35-year history of the European Working Conditions Survey (EWCS).

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Foundation for European Progressive Studies Advertisement

Spring Issues

The Spring issue of The Progressive Post is out!


Since President Trump’s inauguration, the US – hitherto the cornerstone of Western security – is destabilising the world order it helped to build. The US security umbrella is apparently closing on Europe, Ukraine finds itself less and less protected, and the traditional defender of free trade is now shutting the door to foreign goods, sending stock markets on a rollercoaster. How will the European Union respond to this dramatic landscape change? .


Among this issue’s highlights, we discuss European defence strategies, assess how the US president's recent announcements will impact international trade and explore the risks  and opportunities that algorithms pose for workers.


READ THE MAGAZINE

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641