For Scotland to be successful we need to create jobs, and Scotland’s IT sector is good at this. Currently* tech firms contribute £3BN of value to the Scottish economy and employ some 70,000 people in over 1,000 different workplaces. They have an increasing demand for graduates, with 66% of firms likely to have hired graduates last year, up from 58% from 2013 and expected to rise again this year. By any standard, this is an important industry.
There is more good news too in that 84% of IT/digital firms expect sales to increase over this year. And, hardly surprisingly, this growth of sales is reflected in 75% of these same companies saying that they’ll increase their staffing as a result. Scotland’s IT companies are doing well. Given the state of the UK’s finances, with more austerity forecast, we need them to do even better.
Some (including such big hitters as Andy Haldane, Chief Economist at the Bank of England, and former US Treasury Secretary Lawrence Summers) have warned of the dangers of the world economy stagnating into an extended period of low or no economic growth. For the UK, the current economic data, showing growth at relatively decent levels, suggest otherwise, but Mr Haldane, in a speech last October, emphasised that there are still ‘reasons to be fearful’, notably around productivity, wage growth and continuing low interest rates. Indeed, one of the biggest problems across the country (UK and Scotland) is that one of the consequences of low productivity is that output is not much better than it was at the start of the financial crisis in 2008.
This is where IT comes in. Given its importance in creating technological advances, and thus improving productivity and output, we need to encourage all our IT entrepreneurs: the stereotypical young graduates with a great idea who need a break to make it into a commercial reality and the more established firms alike. We need more of each to succeed. Government can help, but it needs to have these entrepreneurial individuals champing at the bit in the first place. The conditions for them to succeed – and to build businesses employing more people - need to be more favourable than they are now.
To help create jobs, both the private sector and government need to play their part. I believe a judicious mixture of supply side reform, that is lowering barriers to investment in people, goods and services, with practical government technology-infrastructure projects is the way ahead.
That said, technological unemployment, essentially where machines do jobs that previously required lots of human beings, is going to continue to be a problem. Historically, there have always been periods of painful transition as new technologies promise a ‘great leap forward’. The word ‘Luddities’ has passed into the language to signify those who rage at ‘progress’ and obviously, for those affected, the consequences of technological advancement are severe. Despite this, new technology, whether the Spinning Jenny, the Hoover, the Jumbo Jet or the internet, has continually liberated us from previous drudgeries and advanced the prosperity of the majority. This is the key: there is short-term pain for long term gain.
The astrophysicist, Stephen Hawking, has predicted that robots, or rather artificial intelligence (very much a product of the IT world) may, in time, dominate or even destroy mankind. This is taking technological unemployment to another level, but fortunately Hawking doesn’t see this happening for at least 1,000, if not 10,000, years. However, Hawking’s thesis is simply the logical conclusion to the history of the industrialised world, from the day someone said, ‘hey, if we knock the edges off this rock it rolls along - why don’t we call it a wheel?’.
If your job at your factory disappeared when it closed because robots are now doing the work that you and ten of your former colleagues did, you probably are not very impressed by this argument. This is why we need to have the prosperity that provides the cash that pays for the safety-net for those who, through no fault of their own, are unemployed. We also need the money to improve education so more people can work in new industries, but that’s another story. Ultimately, technological unemployment is a symptom of the growing pains that afflict the economy as we move from one age of industrial progress to another. The alternative is to go backwards.
To emphasise this point, the Office for Budgetary Responsibility has (December 2014) warned that if productivity does not increase, we will probably need a further 10 years of borrowing, unless we want “materially lower” living standards. More borrowing means our children paying (even more) for our mistakes. We do not have a choice. In the twenty-first century, a key driver – no, the key driver of productivity growth is technology. We can strive to make Scotland a major power in the world of technology, or we can wither on the vine. I know which I’d prefer.
Gareth Biggerstaff, MD, Be-IT Resourcing
* Source: The Scottish Technology Industry Survey, 2014.