Technology risks a return to 19th-century wage stagnation and Marxism, Mark Carney warns

Mark Carney, Governor of the Bank of England
Weak wage growth since the financial crisis could indicate the 19th century experience is being repeated, the Governor of the Bank of England told Canada Growth Summit in Ontario Credit: Cole Burston/Bloomberg


Mark Carney said that the expected automation of millions of blue and white collar jobs, bringing with it weak wage growth for those in work, may lead to the ideas behind Communism winning new fans.

“Marx and Engels may again become relevant” if technology destroys jobs, forces down pay and pushes up inequality as a new elite of highly skilled workers and the owners of high-tech machines reap the rewards of the new era, Mr Carney said.

Productivity soared 150 years ago as the industrial revolution took hold and new technology accelerated manufacturing, yet average wages stagnated for decades as machines meant the jobs created were low-skilled.

Recent years of weak wage growth since the financial crisis could indicate this 19th century experience is being repeated now, Mr Carney said.

“Workers cannot generally move seamlessly from one type of work to another in which they can be as productive, so the benefits, from a worker’s perspective, from the first industrial revolution, which began in latter half of the 18th century, were not felt fully in productivity and wages until the latter half of the 19th century,” Mr Carney told the Canada Growth Summit, noting that this stagnation in pay is known as “the Engels’ Pause”.

“If you substitute platforms for textile mills, machine learning for steam engines, Twitter for the telegraph, you have exactly the same dynamics as existed 150 years ago - when Karl Marx was scribbling the Communist Manifesto," the Governor, who is due to step down next year, said.

Karl Marx (right) and Frederick Engels (left) wrote the Communist Manifesto in a similar era of technological change and wage stagnation, Mark Carney said Credit: AP

Mr Carney said there are also signs of  “hollowing out” in the job market as mid-level workers also find computers increasingly able to do specific tasks.

Major law firms, for instance, are investing in artificial intelligence to scan documents to find and analyse key facts among written material - something which is traditionally done by legions of junior lawyers and clerical staff.

Banks are using large volumes of data on customer queries and complaints and feeding it into machines. These can learn the common questions that clients ask, allowing the computers to answer questions directly - removing the need to employ customer service staff.

Services jobs such as driving taxis or lorries could also disappear, as self-driving technology improves.

The trends contrast with previous waves of technological change which have given more manual tasks to machines, freeing up workers to do more productive roles involving more brain than brawn, Mr Carney said.

But the new wave of technology uses machine learning and artificial intelligence combined with enormous volumes of data which could render cognitive workers redundant.

Mr Carney said the pace of the digital revolution could also mean the new jobs created might not keep pace with the older jobs destroyed, leaving large numbers of workers stuck with skills that do not match the jobs available and so with falling pay.

While a large pool of workers could see their situation worsen, the small number with skills to match the new jobs can expect large pay rises.

On top of that, more profits will go to those who own the machines rather than to workers, increasing inequality further.

“If this world of surplus labour comes to pass, Marx and Engels may again become relevant,” Mr Carney said.

The solution is for companies, universities and governments to study the likely impact of new technology and prepare their firms and workers for the changes to come.

“There is a disconnect in expectations. In surveys, over 90pc of citizens don’t think their jobs will be affected by automation, but a similar percentage of CEOs think the opposite, in the number of jobs which will be materially affected,” he said.

The result could be that workers should prepare for jobs which require a higher emotional intelligence, the Governor said, in sectors such as leisure and care, as well as practical employment creating bespoke services and products.