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Abu Dhabi, UAEMonday 17 December 2018

Robot revolution does not faze the Scandinavians

To make the most of automation, governments need to ensure high standards of education and encourage life-long learning, say analysts

A man looks at models of android robots in Chiba, east of Tokyo, Japan. Kim Kyung-Hoon/Reuters
A man looks at models of android robots in Chiba, east of Tokyo, Japan. Kim Kyung-Hoon/Reuters

Are you in charge of a government and worried about how to save millions of jobs from the threat of automation?

Nordea Bank has the answer: just do as the Scandinavians.

According to the latest Economic Outlook by the region’s largest bank, the best way to future-proof your economy is to have a highly educated workforce and low inequality - two features that abound in the Nordics.

“A lot of work will be replaced by robots,” said the Nordea senior economist Erik Bruce. “The difference is that we're better prepared because we share the view that we should have a fair distribution of income and we make sure people are trained to take on a new role.”

His main advice to policymakers? “Free education probably isn't the only solution, but it's a good start.”

Mr Bruce and his colleague Joachim Bernhadsen cite various studies predicting how millions of jobs will be wiped out due to automation. But the two analysts conclude that, rather than worry about what they call the impending "robocalypse", governments should roll out the welcome mat to the robots.

As the authors point out, the fear that machines will make humans obsolete in the workplace is hardly new (the term "Luddite", which describes people who resist technological change, derives from a group of textile workers who destroyed machinery in 19th century England).

They also take issue with the basic assumption behind some of the more alarmist studies, namely that the next industrial revolution will destroy many more jobs than it will create. Rather, they argue that it will unravel at a more modest pace than many anticipate, and will follow a familiar pattern - transforming, rather than eliminating, many of the workers’ tasks at risk.

There is a catch, however.

To make the most of automation, governments need to ensure high standards of education and encourage life-long learning, since both allow workers who fall out of the labour market to be easily re-trained. The second, and perhaps more controversial aspect, is to minimise inequality. The analysts cite a 2015 study by David Autor that suggests computers and the Internet have already had "a material effect on income distribution in the US" by favouring highly-skilled labour.

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Read more:

Don't be afraid of the robots

Time to accept the robot revolution

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Here’s how Finland and Scandinavia fare on the two issues:

On education, not only do they beat the OECD average in terms of PISA scores - a worldwide exam administered every three years that measures 15 year olds educational standards in 72 countries - they also have an excellent track record at promoting life-long learning. There are no college fees in the Nordics, and just about anyone can afford to study thanks to the safety net of the welfare state. In Denmark, for instance, students aged above 20 receive a monthly stipend of $953 from the state.

In terms of income inequality, it will come as no surprise to learn that the region with some of the highest income tax rates in the world scores particularly well.

If it’s evidence that you need, just look at how globalisation has impacted the Nordics.

Not only have these small, export-oriented economies been enriched by the rise of free trade, they have also so far been spared much of the resulting social unrest witnessed elsewhere.

“Experience from the last 20 years clearly shows that the Nordic model promotes social mobility and equal opportunities,” the analysts conclude in Nordea’s Economic Outlook. “With the right policies, societies can address the distributional consequences of new technology.

"The Nordic countries are particularly well equipped to reap the benefits and meet the challenges from automation.”