Andrew Burton / Getty images Factory of the future: a coffee shop in Detroit, September 2013.
Foreign Affairs From The Anthology: The Fourth Industrial Revolution
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The Next 
Safety Net

Social Policy for a Digital Age

As advanced economies become more automated and digitized, almost all workers will be affected, but some more than others. Those who have what the economists Maarten Goos and Alan Manning call “lovely jobs” will do fine, creating and managing robots and various digital applications and adding lots of value in service sectors such as finance. Those who have what Goos and Manning call “lousy jobs,” however—in sectors such as manufacturing, retail, delivery, or routine office work—will fare less well, facing low pay, short contracts, precarious employment, and outright job loss. Economic inequality across society as a whole is likely to grow, along with demands for increased state expenditures on social services of various kinds—just as the resources to cover such expenditures are dropping because of lower tax contributions from a smaller work force.

These trends will create a crisis for modern welfare states, the finances of which will increasingly become unsustainable. But making the situation even worse will be the changing nature of employment. Twentieth-century social insurance systems were set up to address the risks met by people who worked in mass industrialized economies—ones in which there were generally plenty of jobs available for all kinds of workers. The basic assumption behind them was that almost all adults would be steadily employed, earning wages and paying taxes, and the government would step in to help take care of the unemployable—the young, the old, the sick and disabled, and so forth. Social insurance—provided by the state in Europe and by the market in the United States—was aimed at guaranteeing income security for those with stable jobs.

In twenty-first-century digital economies, however, employment is becoming less routine, less steady, and generally less well remunerated. Social policy will therefore have to cover the needs of not just those outside the labor market but even many inside it. Just as technological development is restructuring the economy, in other words, so the welfare state will need to be restructured

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