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This is an excerpt from the "Proceedings of the Sixth European Assembly on Telework and New Ways of Working - Telework '99" Aarhuss, Denmark, 22-24 September 1999. The entire proceedings are downloadable as a zipped pdf file (3.5 Mb) by clicking here.

Diane Coyle - The weightless world

Diane Coyle is Economic Editor of the Independent newspaper in the UK, and author of the book "The Weightless World".

The microchip in a musical greetings card contains more computer power than we had on the entire planet in 1945. It's a symbol of the weightless world.

What is weightlessness?

A couple of years ago Alan Greenspan gave a speech in which he noted that economic output used to consist of big, physical things - steel, huge cars, heavy wooden furniture and so on. During the past half century or so, technological and economic changes have meant we produce things of much less bulk: transistors rather than vacuum tubes, fibre optic cables or satellite broadcasting rather than copper wire, plastics rather than metals. Materials have changed and miniaturisation has been pervasive. For example, cars have become steadily smaller and have used more aluminium and plastic in their construction compared to steel and even wood. At the same time, they have become much more sophisticated, with electronic windows, power steering, catalytic converters, stereos - and, increasingly, gizmos such as car telephones and on-board navigational computers.

Economic output is weighs little more than it did half a century ago, yet its real value has risen well over three-fold. Output probably weighs little more than at the beginning of the 20th century despite a 20-fold rise in living standards. The average weight of a real dollar of US exports halved between 1990 and 1996 alone, according to the OECD, which reckoned half of member countries' national output to be "knowledge based" by the mid-1990s. Although here he emphasised miniaturisation and the use of new materials in making the same value of physical output lighter, the Fed chairman could have added the expansion of services as opposed to manufacturing, or in other words the switch away from physical output in all the developed economies. This switch includes not only the "knowledge" economy, whether biotech or software, services ranging from management consultancy to the music industry that make extensive use of computer technologies, but also low-technology services like fast food restaurants.

It might seem an odd observation to make about economic progress, but the fact that it weighs nothing is the key to understanding the new industrial revolution we are living through. People have the deeply-ingrained habit of thinking about economic value as something with physical presence, with weight and mass. As recently as 1985 the volume of computers imported into the UK was assessed by weighing them. Within less than another decade, this had become an absurdity. Computers had become simultaneously so much smaller and so much more powerful that their weight was meaningless.

Economic value is dematerialising

It only takes a few moments thought to confirm this observation. We all still shop for food and clothes, and want to own more cars, TV sets and home computers. But what we pay for is not the stuff, but the design and style. After all, there is a lot less stuff in my little camera.

And the share of income we spend on goods is shrinking compared to the money we spend on child care, eating out, video rental, health care and schooling, insurance policies, lottery tickets, and the TV licence or fees. However, it is essential to distinguish (at least) two types of activity that get lumped together in the services category.

On the one hand, there are the traditional occupations that statisticians call "community, social and personal services": haircuts, cleaning, babysitting, teaching, nursing, government administration and so on. On the other there are "high value added" services such as currency trading, creating financial derivatives, software development, gene research or
making programmes for satellite television. Most of these are high-technology, depending for their existence on modern computer power and telecommunications. They are also dematerialised, or weightless.

Weightlessness has in a sense become a commonplace. It is not too surprising to learn that a third of the increase in global output during the past half century has gone into health and education and a third into "leisure", broadly defined to include the media. Nor that since 1990 American companies have spent more on computers and communications than all other types of equipment combined. Nor that more people work as data processors than, say, for oil companies.

Why has it happened?

The spread of weightless economic activity is down to the phenomenal cluster of technological advances in computer and telecommunications technology. The computing power of a microchip doubles roughly every eighteen months - an observation known as Moore's Law first made by Intel chairman Gordon Moore. The cost of this computer power, has fallen correspondingly, halving every two years. For example, a mid-range £1,000 personal computer contains about
a hundred million transistors (the same computer power as a big mainframe a decade ago). So the information processing power that cost me a precious £1 on a Digital Equipment Corporation VAX mainframe as a hard-up economics student in 1980 would today cost less than 0.01 pence.

Likewise, telephone costs have fallen literally exponentially since 1945. A three minute transatlantic call that costs £0.52 today would have cost nearly £500 in today's money 50 years ago. Between 1995 and 1996, internet access charges fell from an average of more than $60 a month to less than $20 a month.

These price falls, a measure of the speed of technical progress, have given a huge boost to economic activity that relies on computer and communications technology, and will continue to do so. This kind of activity has no specific location, and no clear points of entry and exit across national boundaries. It is global. Globalisation is an inherent part of weightlessness.

Jobs and growth

A big step forward in technology is always ultimately the source of faster economic growth and greater prosperity. But getting from here to there is always the problem. Just as there are type A and type B personalities, the world seems to divide between the geeks who love computers and think in terms of the boundless new opportunities they provide and the technophobes who do not trust the technology and see computers putting people out of work.

So on the one hand you've got gushing optimism. For example, from the magazine Wired : " the possibility of a golden age in which economies are based on limitless ideas, not limited materials. ..... abundance, not scarcity, drives the future, and ... widespread connection can replace widespread alienation." It continues: "The digital society is a place of abundance, not limitations; of choice, not diktat."

Contrast the gloomier prediction made almost simultaneously by one of the world's foremost economists in a special futurology issue of a magazine. According to Paul Krugman of the Massachusetts Institute of Technology, writing as if at the end of the next century: "When something becomes abundant it also becomes cheap. A world awash with information is one in which information has very little market value. In general when the economy becomes extremely good at doing something, that activity becomes less, rather than more, important. Late twentieth century America was supremely efficient at growing food; that was why it had hardly any farmers. Late 21st century America is supremely efficient at processing routine information; that is why traditional white-collar workers have virtually disappeared."

The gloomy view bears a striking resemblance to Marx's theory of overproduction or underconsumption. In Sophies World the ingenue Sophie asks for an example of the self-destructive nature of capitalism. Albert explains that the capitalist uses his surplus money to buy new machinery. "Fewer and fewer workers are required, which means there are more and more unemployed. There are therefore increasing social problems and crises such as these are a signal that capitalism is marching towards its own destruction."

The crisis in turn means the factory owner starts to cut wages. Albert explains: "The workers would be so poor that they couldn't afford to buy goods any more. We would say that purchasing power is falling. And now we really are in a vicious circle."

Is weightless technology going to trigger a similar crisis at the turn of this century? Economic theory does not imply that labour-saving technology will necessarily destroy jobs in aggregate. But the current wave of technical change is favouring some categories of worker over others.

Theory first. Labour-saving technology means the same number can produce more output - or fewer can produce the same output. Their firm has lower unit costs and higher profits. An individual firm's demand for workers will obviously tend to fall. However, in a reasonably competitive industry its cost-savings will be passed on in lower prices and stimulate higher demand. Or alternatively the technical change might have resulted in the creation of new products whose prices fall dramatically and for which there is rapidly-growing demand. The computer manufacturing industry is itself a classic example of this effect. Five years ago few people had personal computers at home and now millions do.

Higher profits tend to be followed by higher wages for the employed. Along with increased investment by firms in the new technology, this tends to stimulate the economy as a whole.

The net impact of labour-saving technical change on jobs depends on the size of these effects, on the speed with which the new technology spreads and is absorbed by different companies, on how easy it is for new firms to start up and for workers to switch jobs, and on the general economic policy framework. A good education system, competitive industries, flexible labour markets and expansionary macroeconomic policies will tend to favour net job creation rather than destruction.

Besides, it is far worse to experience technical change embodied in cheaper new imports than to innovate yourself, as the European countries have discovered with electronics. The moral is that even if it looks as if new technology will cost jobs, the cost will be higher if other countries adopt the new technology first. Keeping pace with the front-runners
minimises job losses.

Industries in the US were swift to adopt information technology. Companies in Britain and France were slower. Lagging behind in information technology has probably hindered long-run job creation in Europe. Especially on the
Continent, there has been scant growth in employment in the private sector at all and especially not in the high-technology sectors that have grown very rapidly in the US. There computers have probably helped create jobs. They are just not the kind of jobs that everybody can do. There has been a change in the structure of employment, one that is just as disruptive and costly in human terms as the mythical large-scale destruction of jobs.

Most jobs created during the past 20 years have been either in skilled high tech areas or in the service industries, a wide category that covers everything from nursing and policing to working as an accountant or designing video games
.
The reason has been the shift in demand in the industrial countries. Manufactures now make up only a small portion of what we buy, and in most cases manufacturing industry accounts for less than a quarter of the economy. There is a clear pattern over time of employment shifting from the high to the low productivity parts of the economy: from farming to factories, from factories to services. The thing that is troubling about this pattern is that it is hard to see where the inefficient and labour intensive areas are going to be in future. For now even service industries are using new technology to improve productivity. This is the phenomenon that created so much angst during the recession of the early 1990s. The risk of redundancy for white collar workers remains much lower than for blue collar workers,
but it was the first time professional and office jobs had been at risk.

My own industry, print journalism, was at the forefront of this trend, which explains why it was brought to public attention so swiftly. Technological advances meant that the craft of printing could be eliminated. That happened in the 1980s, with new printing equipment to replace the old hot metal type and, eventually, the computerisation of newsrooms which could transmit the material for publication directly to the printing plant. Information technology has also allowed papers and magazines to economise on the number of reporters they need. Direct computer input and on-line news wires allow a smaller number of writers to process a larger amount of information.

Other service industries such as retailing and banking have followed the pattern of downsizing as a result of computerisation. There are very many white-collar jobs in which bytes are a cheap and efficient substitute for brains. Companies can reduce their costs by millions of pounds once they have made an initial capital investment in the right information technology - the right stock tracking system or network of automatic cash machines.

Even teaching, where it would once have been impossible to imagine replacing the human being standing at the front of the classroom, is being mechanised. One teacher can reach many more students through video links and on-line methods.

As the share of manufacturing in the economy has shrunk - a trend that started in the early 1960s, long before computer technology had any impact at all - so the number of jobs in industry has declined too. At the same time the number of jobs in high tech manufacturing has either increased since 1970 or decreased far less than in low tech.

This twin migration of job opportunities, out of older industries into newer ones and into services, looks paradoxical. For the expansion of employment in services is explained at the fact that the level of productivity is much lower than in manufacturing, so a lot of workers are still needed. On the other hand, the move within manufacturing has been into the higher-productivity areas, which in theory need fewer workers. Both moves are occurring simultaneously because demand has been growing for both services and high-tech manufactures. If even bedrock services are undergoing their own productivity revolution, what will be left for people to do? Paul Krugman has one answer. He argues that as the computer revolution matures, the highly-skilled elite of professionals and programmers which has done well during the past two decades will itself become obsolete. "The time may come when most tax lawyers are replaced by expert systems software, but human beings are still needed - and well-paid - for such truly difficult occupations as gardening, house cleaning, and the thousands of other services that will receive an ever-growing share of our expenditure as mere consumer goods become steadily cheaper," he writes. The computer-adept professionals of today will be like the cottage weavers of the 19th century who cashed in on the earlier technical revolution in spinning until the development of the power loom made them redundant in their turn.

There are certainly signs that the use of technology in financial services, for example, is eliminating a lot of routine jobs in the banking sector - it started with automatic teller machines and has now got as far as the current introduction of electronic imaging of cheques to avoid the need for human staff to key in values. So perhaps he is right, and as our prosperity continues to increase more people will hire the services of gardeners, cleaners and, who knows, personal trainers and aromatherapists. But there is also a far more significant sector of the industrial economies, one that is growing by leaps and bounds. It incorporates some of the sub-section of services economists describe as "community, social and personal" and much of the voluntary or non-profit sector. Some writers have taken to calling it the "third sector".

This sector includes some of the fastest-growing services such as long-term and health care, housing, education and training, charities - all areas for which demand in the ageing, high-income countries will continue to expand well into the next century, and which can therefore be expected to provide jobs. And the fact that many of the jobs in these fields are now low-pay and low-status does not mean that they will remain so. To predict the importance of the third sector is not to condemn a growing chunk of the workforce to a ghetto of undesirable work. Economics works. These jobs will become more highly valued.

Ways of working

In the novel Microserfs, hero Daniel has a job testing Microsoft programmes for bugs. Several times every day he checks the company's share price. "The stock closed up $1.75 on Friday. Bill has 78,000,000 shares so that means
he's now $136.5 million richer. I have almost no stock, and this means I'm a loser."

An economy which is creating winners and loser is one where inequality is growing. Insecurity and inequality are overriding characteristics of the jobs market - especially in Britain, where inequality has risen faster since 1980 than in any other developed country. E.g. The ratio of incomes in the top tenth of the pay scale (above £30,000 a year in 1996) and the bottom (below £9,000 a year) increased by nearly a full point in the 17 years after 1979.

What we have is a Winner Takes All Society. and it goes back to a phenomenon identified as "the economics of superstars" a decade and a half ago.

There are two reasons a field with stars, such as sport or the movies, generates a more unequal distribution of income than teaching or accountancy, say. First, the economic output of a movie star has no marginal cost. Gwyneth Paltrow makes the film once. It can be shown to one or one million people with no extra effort by the actor. Secondly, audiences will prefer to watch a film starring him than one with an unknown actor - even one who is objectively almost as handsome or talented. These supply and demand factors combine to deliver the biggest market share, and
biggest incomes, to those who become stars. Trivial differences in talent are magnified into huge disparities in earnings.

Weightlessness is extending superstar economics into more and more fields. The number of fields where both conditions - effectively zero marginal cost to generating extra output and a concentration of demand on the stars, the
first in each niche - is growing rapidly. For example, it is increasingly true of all the multimedia industries, from software to music and TV. It is also true for any profession where the expertise of the stars can be reproduced using the new technologies - for instance, surgeons who can operate, advise or teach through video links and software; or successful currency traders like George Soros who can leverage the amount of business they do in the financial markets, and the degree to which those markets move in their favour when their trades become known.

Also get winner-take-all at the level of the corporation. The fact that there are widespread "network externalities", or benefits from using something that grow with the number of users, in the dematerialised industries will reinforce the superstar trend. For example, the Apple Macintosh operating system has always been acknowledged as better than
Microsoft's by industry experts. But Apple has never broken out of its market niche whereas almost everybody uses Microsoft's Windows. If almost everybody does, almost everybody always will because it makes life much simpler.

Maybe there's a mitigating factor. Dematerialisation is also helping to reduce the costs and difficulty of becoming a superstar. You need an idea, a cheap computer and a telephone. He writes: "At the same time that income inequalities become more extreme, mobility between rich and poor also rises." It is a bit like National Lottery fever. People are willing to see a few win millions of pounds because they can also have a chance at untold riches for just £1 a ticket.

The new economy is fertile ground for entrepreneurship. But you have to be can-do about this. It's not easy. People base their sense of identity on what they do most of the day and where they do it. It is little wonder that anybody living in a traditional manufacturing centre in the industrialised world is profoundly uneasy about the wave of economic change and the flexible manner in which they are urged to react to it. It is not just that middle-aged male steelworkers can not easily retrain as nurses or computer programmers because they lack the education or the aptitude. They do not
want to do it. For them to do so would be a betrayal of their culture and community. The traditional jobs have a dignity and resonant history, a romance, missing from modern occupations - just as working the land had a romance for the early urban masses. This is something that runs very deep. I had always told my young son that I worked on a newspaper. One day, aged four, he asked me: "Mummy, when you go and work on your newspaper, do you stand on it or sit on it?" For him, work was something that has a physical presence and connotations of strenuous labour. This was a cultural attitude he had imbibed without any conscious teaching.

There are some people working in weightless industries like financial services, television or software who have been able to take advantage of the new looseness of the jobs market to turn themselves into "stars" and make huge amounts of money. But for people without suitable qualifications, adequate family resources or enough savings, increased flexibility boils down to being exploited more thoroughly by employers who are either unscrupulous or under enormous commercial pressure themselves. They are the victims of the ghastly social Darwinism that has become the hallmark of end of century capitalism.

I find myself torn between the conviction that flexibility is essential in the weightless world, and a distaste for the inequality and unhappiness that are its results.

There is a freedom as well as vulnerability in flexibility. Now, it is obviously not given to all of us to build our own equivalent of Microsoft. But there are two points to make. First, computer technology has brought the superstar effect within the reach of many more people. It actually is open to somebody with a bright idea and enough application to become another Bill Gates. The great man himself is aware of it. "If we stand still we are going to get replaced pretty quickly. Our business is less forgiving than any other I can think of," he said in an interview.

The second point is that for those who have the right kind of education and personality, and in the right conditions, it will be possible to exploit peripheral, short-term or part-time work. Flexible types of work can provide freedom from control by line managers, more free time, more variety, possibly less commuting. For highly skilled professionals, this
has become known as the "portfolio career".

Charles Handy has set out the different ways a typical lifetime career of about 50,000 hours (about half its length a generation ago) can be made up. The "standard" pattern would be 37 hours a week, 37 weeks a year for 37 years. But 45 hours a week for 45 weeks a year would be typical of a high-flying professional after a long education and looking forward to early retirement. A high salary, reward for the level of educational attainment, would fund the long retirement. This variant on the traditional norm has a lot going for it.

At the other extreme, 25 hours for 45 weeks a year for 45 years would characterise somebody slogging away in part-time, low-paid work. A job in the periphery is a different matter. A young person on low pay with no career prospects or a mother forced to accept dead-end, part-time because it is close to home and fits in with school hours does not benefit from the wider variety of working patterns now available in the way a highly-paid professional does.

The advent of the factory system in the Industrial Revolution changed our conception of time. Instead of understanding the passage of time as how long it took to do various tasks, we switched to clock time. This brought
tyranny of owners over workers' time - the clocking in, the restricted breaks, the petty rules.

It used to be worse. A list of 21 rules from the Waterfoot Mill in Haslingden, Lancashire, dating from 1851 includes the following:

"Any person coming too late shall be fined as follows - for 5 minutes 2d, for 10 minutes 4d, and 15 minutes 6d etc.

"The Masters would recommend that all their workpeople Wash themselves every morning, but they shall wash themselves at least twice a week, Monday morning and Thursday morning; and any found not washed will be fined 3d for each offence.

"Any persons found smoking on the premises will be instantly dismissed.

"Any person wilfully damaging this notice will be dismissed."

Times have changed a bit. Even so, people will find that one of the changes in the world of work will be that more of their time is their own. We will become freer to decide what work to do and when. This might raise a hollow laugh from those who work long hours to make ends meet, or professionals whose careers are more demanding and time consuming then ever. But work will inevitably be organised in more flexible ways in weightless economies.

The range of possibilities is wide. Telecommuting is one of them. Varied patterns and hours of work will become more common. Harvard Professor Juliet Schor chronicled a 160 hour increase in the US work year between 1969 and 1989. The Employment Policy Foundation has found that time off has become the most valued benefit a company can now offer its employees, and many American employers are devising ways of increasing the flexibility over time worked, from sabbatical leaves to "time off banks" which allow "deposits" of time holidays, sick leave, maternity leave and so on - to be drawn down as desired.

Flexibility and portfolio careers are potentially far more varied, stimulating and personally rewarding than the tyranny of a life spent in the same or similar factories and offices. People like organising their own time. They will be freer to take career breaks for travel or family reasons, go back to college or retrain, and just be in charge of themselves. According to the programme " Redefining Work" sponsored by the Royal Society of Arts: "The new big idea is that security does not come from the outside. It comes from the inside - from the work itself, from relationships ... above all from marketability, the ability to sell yourself, the versatility to spot, to seize, and to adapt to multiple opportunities in many careers."

The way in which money is paid for labour is changing fundamentally in a world in which what is intrinsically human - intelligence - is an increasingly important part of economic activity, although the social and political structures have not kept up. Tax, pensions and welfare systems are still based on the factory model.

One of the key tasks of economic policy will be to combine the macro-economic benefits of a deregulated labour market with social and educational measures that equip individuals to cope with the risks this imposes on them, and to have a chance of being in the upper league. It is also a key personal challenge for every one of us.

Just as the great inequalities generated by the Industrial Revolution created the political dynamic that led to the extension of the vote, the creation of social insurance and the redistribution of income through the national economy, I hope the scarcities and inequalities of the late 20th century will prompt a political reaction.