How Technology Is Destroying Jobs versus Stop Saying Robots Are Destroying JobsâThey Aren't
Comment of the Day

September 11 2013

Commentary by Eoin Treacy

How Technology Is Destroying Jobs versus Stop Saying Robots Are Destroying JobsâThey Aren't

Thanks to a subscriber for these competing articles published by MIT. Here is a section from the former
Not everyone agrees with Brynjolfsson and McAfee's conclusions—particularly the contention that the impact of recent technological change could be different from anything seen before. But it's hard to ignore their warning that technology is widening the income gap between the tech-savvy and everyone else. And even if the economy is only going through a transition similar to those it's endured before, it is an extremely painful one for many workers, and that will have to be addressed somehow. Harvard's Katz has shown that the United States prospered in the early 1900s in part because secondary education became accessible to many people at a time when employment in agriculture was drying up. The result, at least through the 1980s, was an increase in educated workers who found jobs in the industrial sectors, boosting incomes and reducing inequality. Katz's lesson: painful long-term consequences for the labor force do not follow inevitably from technological changes.

Brynjolfsson himself says he's not ready to conclude that economic progress and employment have diverged for good. “I don't know whether we can recover, but I hope we can,” he says. But that, he suggests, will depend on recognizing the problem and taking steps such as investing more in the training and education of workers.

“We were lucky and steadily rising productivity raised all boats for much of the 20th century,” he says. “Many people, especially economists, jumped to the conclusion that was just the way the world worked. I used to say that if we took care of productivity, everything else would take care of itself; it was the single most important economic statistic. But that's no longer true.” He adds, “It's one of the dirty secrets of economics: technology progress does grow the economy and create wealth, but there is no economic law that says everyone will benefit.” In other words, in the race against the machine, some are likely to win while many others lose.

Here is a section from the latter:

Brynjolfsson and McAfee's mistake comes from considering only first order effects of automation where the machine replaces the worker. But when a machine replaces a worker, there is a second order effect: the organization using the machine saves money and that money it flows back into to the economy either through lower prices, higher wages for the remaining workers, or higher profits. In all three cases that money gets spent which stimulates demand that other companies respond to by hiring more workers.

This common sense view is borne out virtually all economic studies looking at the relationship between productivity and jobs. While some studies have found that productivity growth does have some short-term negative job impacts, all the studies find either no impacts or positive impacts on total jobs in the longer term. As the OECD stated in a definitive review of the studies on productivity and employment:

Historically, the income-generating effects of new technologies have proved more powerful than the labor-displacing effects: technological progress has been accompanied not only by higher output and productivity, but also by higher overall employment.

Sure, but those that argue that robots kill jobs argue that this time it's different. As the article states, “Technologies like the Web, artificial intelligence, big data, and improved analytics—all made possible by the ever increasing availability of cheap computing power and storage capacity—are automating many routine tasks.”

But there are two problems with this argument. First, it assumes that productivity growth rates will increase significantly. But there is little evidence that the United States will see productivity growth in excess of 3 percent a year (the best we have ever done). This is in part because despite IT advances that boost productivity in information-based functions, a growing share of jobs involve interacting with people (e.g., nursing homes, police and fire) or doing physical tasks that are difficult to automate (e.g., construction, janitorial services).

Eoin Treacy's view Something that has been at the back of mind for some time is that productivity is an economic concept while employment is a social concept. There is no doubt that the exponential rate of technological development, not least in the automation of industrial, logistics and clerical functions is enhancing productivity.

Whereas once it would have been natural to expect productivity gains to coincide with demand for labour, this relationship can be expected to break down as each individual worker becomes more productive because of the tools he works with and the automated services he can avail of. Naturally this suggests that potentially large numbers of people will be displaced by technology. If one were to stop there, we would end up with a gloomy and potentially dystopian view of the future.

Technological advances have always opened up new areas of creativity for our species by freeing up more of our time. Why should this change? The confluence of advances in the energy, industrial, healthcare, materials and social sectors look set to disrupt our conceptions of work, life, play and saving. There will inevitably be winners and losers but new technologies eventually create demand for new services. Just because we do not yet know what they are does not mean they will not evolve. These changes will require some inventive thinking on the part of governments if societies are to prosper in this environment.

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