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ECO3032 Economics of Networks and Human Capital

Question 

You are asked to write an intelligent essay that addresses one topic related to this issue of the impact of AI on the role of human capital in the global social division of labour. You can select your topic freely as long as you can analyse it using the framework of the theory of economies with a social division of labour as set out in the ECO3032 lecture notes.

Your selected topic could take the form of (a) a philosophical essay about human capital and the social division of labour based on readings from various authors, (b) an essay on the nature of the network economy, (c) a discussion of a case from the network economy, or (d) a discussion of a case from the gig economy. However, you are not restricted to select any of these possibilities. You could also write an essay that relates in a different way to exploring the future relationship between AI and human capital in the global social division of labour. 

Answer     

Human Capital and the Social Division of Labour

Introduction

The global economy has undergone significant changes from time to time & as a result the economy based on the commodity market has been shifted to the capitalist economy. Division of labour is an integral part of any society & it is prevalent in the society since long time. The basic objective of the division of labour is enhancement of the productivity of the economy. In the past the social division of labour was not so familiar among people in different society & people used to work without having specialisation in any particular field. This resulted in the low level of productivity in the economy (Bench-Capon & Dunne, 2007). In the agrarian economy the role of the division of labour was minimal but after the transformation of the agricultural economy to commodity based economy & further to capitalist economy more emphasis was provided on division of labour. The advent of artificial intelligence has made the division more prominent.

Artificial Intelligence & Social Division of Labour

In the service sector the use of the artificial intelligence has increased significantly. The over use of the artificial intelligence (AI) has large impact on the human capital. Not only in service sectors but in other sectors also the use of AI has contributed a lot in changing the division of labour. The main implication of the division of la


bour is the specialisation of work. If people work in the field in which they have skill & efficiency, it is defined as the specialisation in the respective field (whitehouse.gov, 2017). Specialisation in any particular field leads to higher productivity of the individual & therefore if it is applied in a society, it will improve the productivity of the society as a whole. Nowadays the use of various modern technologies has reduced the scope for the application of human capital by different organisations. In case of financial sectors, transportation sectors & other service sectors the use of modern technologies & software have made large impact on the human capital. If the use of automation technologies increases, it will reduce the application of human capital in service sectors. Since service sector provide employment to large number of people in the economy, the use of the automation technology will create the scope for the gig economy. In case of the gig economy the over use of technology causes loss of employment opportunity. The automation technology leads to the accomplishment of most of the part of the work by technology (Sundararajan, 2015). Only low skilled works will be left for human beings in the society.

For the growth of the economy, development of the technology plays an important role. Technological growth of the economy leads to the increase in the GDP of the economy. With the technological development the working hours required to accomplish any work reduces & this increases the profit of the organisation. Therefore those works which requires lower level of skill are done by labourers of the organisaition. The benefit of this automation technology helps in reducing the working hours of labourers & people can utilise this in other productive work. Hence employment of the economy is affected by the automation in two different ways. The use of automation or AI in any organisaition leads to the displacement of employees & on the other hand they will be absorbed by other organisations which have been established depending on automation based industries (Nilsson, 2014). This is the example of the forward linkage in the economy. It is important to identify that what would be the future impact of the AI on the human capital & division of labour.

The impact of the automation technology will not be same for every section of the society. The low skilled labour will get more benefit in comparison to high skilled labour. After the advent of the automation technologies, the productivity & efficiency of workers with lower skilled level increases. This causes problem for workers with higher level of skill. This results in the reduction of dominance of these efficient workers over the low skilled workers. This will lead to the decline of inequality in the society. This is one side of the automation technology & this is evident in case of technologies which help in mass production. On the other hand after invention of the computer technology & the information technology the situation changed completely. This has helped in enhancing the productivity of employees with higher skill level. The increased productivity of employees increases their bargaining power & as a result it increases the wage of these employees. Hence, it again increases the inequality of the society (Göranzon et al., 2012). Therefore, it is very difficult to anticipate the actual impact of the artificial intelligence. Since there are various dimensions of the artificial intelligence or automation technology, thus the consequence of this technology will be felt by different sections in the society in an uneven manner. For few specific industries it is easier to adopt the automation technology in comparison to other industries. Hence, the impact of this technology will not be felt by the whole economy simultaneously. The incorporation of this automation technology in one organisation leads to the creation of other organisations to provide them support. This will increase the level of employment in these industries. This will generate the base of the social division of labour. Since different industries will utilise the human capital in different manner, therefore, specialisation plays a crucial role in this situation (van Benthem, 2009). Specialisation will enhance the productivity of labour. Utilisation of the artificial intelligence & automation technology by different organisations will segregate the labour market. Few originations will provide employment only to high skilled labours & others will employ low skilled employees to accomplish menial jobs. Due to the AI, on the one hand the labour market is shrinking & on the other hand it is generating lots of jobs to compensate the job loss. The automation technology will generally put more pressure on low skilled workers & this will also lower their wage rate. The situation should change in the long run. The benefit of the automation technology will be confined only within small section of the society if the wage rate does not increase with the increase in the productivity of employees (Durkheim, 2014). Otherwise it will only increase the inequality within the economy.

In case of the automation technology the role of the policy planning is extremely crucial. The actual benefit of this technology can be reaped by the economy only if proper policies are made to support the high levels of productivity & the high level of employment. One of the most important strategies in this regard is the large investment by the government in the research & development field. The AI can be utilised in different productive purposes to improve the overall productivity of the economy. The automation technology can be utilised in the field of management of different fraudulent activities & at the same time in the cyber defence purposes (Foley & Smeaton, 2010). Another important part of the AI is the proper training & educational programmes. It is important to give proper education to people to make them acknowledge of the benefit & technology of the artificial intelligence. The final policy that can be made in this regard is the creation of adequate opportunity to get absorb in the labour market. Proper remuneration should be provided to manage inequality in the economy.

Adam Smith & Social Division of Labour

The main pillar of the division of labour is the commodity economy. Commodity economy consists of different industries like the manufacturing sector, industry related to the raw materials etc. This enhances the specialisation among workers in the commodity market. The proponent of the division of labour in the economics is Adam Smith. According to Adam Smith wealth can be created in a nation only with the help of the division of labour. The specialisation in the labour market helps in enhancing the productivity of the economy & this will lead to the utilisation of human capital in different manner. Those industries which use the highly skilled labour to operate the artificial intelligence will employ highly skilled workers (Adam, 2016). On the other hand since the use of the artificial intelligence helps in accomplishing most of the works, only tasks of lower level are left for employees. Tasks of low level are provided to low skilled workers to reduce the cost of production. In case of different industries as well as different parts of societies the use of the automation technologies is extremely high. In case of industries there are different production lines as well as supply chain to operate the business process. The use of artificial intelligence in these production & supply chain management will reduce the number of employees in the organisation. On the other hand since AI helps in completing most of the work in the organisation, it is essential to provide necessary training to existing employees to perform rest of the tasks in the organisaition (Cohen & Feigenbaum, 2014). If we consider the human capital, proper utilisation of the human capital is on the hand of the organisation. In case of division of labour the organisation has to provide training to employees in order to specialise them in a particular field. Hence, the human capital has to be cultivated in order to adapt themselves with the new technologies. In case of society also the introduction of the automation technology make a large impact & which includes both positive & negative impacts. The introduction of the AI, benefits the society in the form of providing better products & services at a cheaper rate, but on the other hand it increases the unemployment level in the economy.

Karl Marx on Social Division of Labour

The social division of labour is also propounded by Karl Marx. He specifically mentioned the difference between the technical division of labour & the social division of labour. According to Marx the technical division of labour is inevitable for every organisaition & this takes place due to the invention of new technology. In case of social division of labour the division of labour is due to the social hierarchy. Hence the social division of labour can be linked with the human capital in order to explain the impact of the AI on the human capital. With the advent of the AI, different organisaition provides employment to those high skilled workers who can operate these automation technologies (whitehouse.gov, 2017). Organisations have to pay high salary to employees to operate these technologies. On the other hand organisations reduce the number of employees by sacking those employees who are not productive for the organisaition after the incorporation of the automation technology. Hence this section of employees becomes unemployed. Therefore the inclusion of new technology leads to the social division. One section of the society becomes unemployed & other section of the society earns high income. This increases the social inequality.

Conclusion

From the above discussion it can be concluded that the invention of new technology does not affect the society equally. The impact varies from one section of the society to another. The requirement of every new technology is different & on the basis of the requirement every organisation identifies the essential skill to handle those technologies. One of such new technology is the artificial intelligence. Incorporation of this technology leads to social division of labour. Since the automation technology acts as a substitute to large number of employees, therefore it makes these employees unproductive. Therefore the organisation can operate & increase their profit level by reducing the level of employment (Durkheim, 2014). This creates an inequality within the society. Hence, the automation technology affects the human capital & that on the other hand leads to the division of labour.

References

Adam, S. (2016). The wealth of nations. Aegitas.

Bench-Capon, T. J., & Dunne, P. E. (2007). Argumentation in artificial intelligence. Artificial intelligence, 171(10-15), 619-641.

Cohen, P. R., & Feigenbaum, E. A. (Eds.). (2014). The handbook of artificial intelligence (Vol. 3). Butterworth-Heinemann.

Durkheim, E. (2014). The division of labor in society. Simon and Schuster.

Foley, C., & Smeaton, A. F. (2010). Division of labour and sharing of knowledge for synchronous collaborative information retrieval. Information processing & management, 46(6), 762-772.

Göranzon, B., & Josefson, I. (Eds.). (2012). Knowledge, skill and artificial intelligence. Springer Science & Business Media.

Nilsson, N. J. (2014). Principles of artificial intelligence. Morgan Kaufmann.

Sundararajan, A. (2015). The “gig economy” is coming. What will it mean for work?. The Guardian, 26, 2015.

van Benthem, J. (2009). Argumentation in artificial intelligence (Vol. 47). I. Rahwan, & G. R. Simari (Eds.). Heidelberg: Springer.

whitehouse.gov. (2017). Artificial Intelligence, Automation, and the Economy. [online] Available at: https://www.whitehouse.gov/sites/whitehouse.gov/files/images/EMBARGOED%20AI%20Economy%20Report.pdf [Accessed 1 May 2017].

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