Dr. Simeon Djankov:

I thank the honourable Chair and members of the committee for this opportunity to address them on some of the main findings in the main publication of the World Bank, the annual World Development Report. This year, the report is on the topic of the future of jobs and how technology affects not just them, but also businesses. Since this topic has been of high interest to the members of this committee and generally in Ireland and the rest of the EU, we believed it to be a good opportunity for us to share some initial views. In the materials provided, committee members have an overview of the report. It will be published at the World Bank-International Monetary Fund annual meeting in approximately three weeks' time. We are meeting today ahead of the publication of the report, so I will share several of its main findings.

The World Bank works not just in Europe, but in 190 or so client countries around the world, making this a truly global report. Our comparative strength is being able to use a lot of economic analyses from around the world to prove and disprove some of the statements around the future of work. Much of the popular economics on this topic over the past decade has made two points. First, new technology - robots, as it were - will rapidly displace workers and, as a result, many economies are heading towards mass unemployment or at least cyclical waves of large unemployment. Second and associated with that, as a result of robots replacing workers in what are often well-paying jobs, inequality in many countries is rising.

Taking these claims seriously, we applied the data to them and discovered that, at least until now, neither has been correct. While there are industries, both basic ones like transport and some services and a number of high-skilled sectors like accounting and legal services, where robots - more generally automation - displace workers, technology also creates many more jobs in traditional sectors as well as many new sectors. As a result, the world gains approximately 30 million net new jobs every year. Many of these go to emerging markets and - I will speak on this in a moment - countries with high levels of human capital, for example, Ireland. There is a high correlation between technology and the possibility of creating jobs and how high the average level of human capital in a country is.

We also looked at the second claim, namely, that due to this disruptive nature of technology, inequality is rising around the world. We document that at least as of now that is also not the case. Income inequality during the past ten to 15 years has been falling, not rising. There are several countries where that is not the case, South Africa being a well-described case. On average, however, income inequality has been reduced during the past decade.

In the report we ask what this means. We found there are two trends that deserve EU attention. The first trend is that while jobs, on average, are not disappearing due to robots as much as feared, the transitions between jobs are getting longer and the average time workers spend on any given job has been drastically reduced. We have numbers for many of the European Union countries. In the past dozen years, data from 2004 until now suggest that the average tenure of workers in any given job has halved from about 14 years on average to about eight years. Workers stay much less time in any given job. There is much more movement. The time workers have between different jobs is increasing quite significantly. More time is spent either finding jobs or spending time in part-time jobs and more flexible labour arrangements.

Why is this interesting for the members of this committee? It is interesting because it may suggest a different way to think about social protection. While our traditional model, especially in Europe, is one where social protection meaning social insurance and pensions are linked to wages in full-time employment, we may need to rethink that set-up with a view to the many workers who have transitions lasting more than a year, sometimes two or three years, during which time they have part-time and more flexible employment. Our report suggests the way to think about these changes to social protection.

What is new about this latest wave of technology is not so much on the worker's side but on the employer's or the firm's side. We document that new technology in many sectors, not only in retail or traditional sectors but in the banking and financial institutions sector, allows a company in a matter of five to seven years to come to a market with new technology and completely take it over. That is a different type of industrial organisation and we have many examples of that in the report. For example, a traditional company such as the Swedish company IKEA took 75 years to become a global force, but now a number of its competitors have taken five to seven years and have become much larger globally. That implies a different industrial organisation but also a different way to think about taxation, tax policy in particular, and competition policy, including in countries like ours. The report is available online and the members will be able to read in detail many of the examples to which I have referred.

I will finish on a personal note. I was a colleague of the members, so to speak, for a number of years. At the beginning of the eurozone crisis I became the finance Minister of Bulgaria. At that time Bulgaria has just adopted what we call the Irish taxation model and our corporate income tax rate decreased dramatically to adopt a flat tax system, a 10% corporate income tax rate and a 10% personal income tax rate, which we have managed to keep to date. When I entered the government and was a member of ECOFIN, I met some of the members' colleagues, former finance Ministers of Ireland, many times and I had core debates with a number of the other members of ECOFIN on the benefits of this type of taxation model. As I recall, this was a difficult period for Ireland and a particularly difficult period for their colleagues to explain why the Irish economy was resilient and would persevere in a matter of a few years. I am very glad to be back here and to see that the Irish economy has persevered and I am sure its income tax system may have improved in some ways but it has persevered with the judgment of time. I will finish on that note. I thank the members for their attention.