This idea that technology destroys jobs is garbage, by Jim Edwards 6/5/15
There is a popular meme in tech and
economics right now: the idea that technology or robots specifically will take
our jobs and put us all out of work.
This trend is typified by Wendell Wallach, a researcher at Yale, who recently
said we're entering an era of structural high unemployment because tech is
taking all our jobs:
This is an unparalleled situation and
one that I think could actually lead to all sorts of disruptions once the
public starts to catch on that we are truly in the midst of technological
unemployment. Bill Gates has said something similar. This idea is garbage.
Here is a chart showing major
developments in tech, and the UK unemployment rate, since the advent of the
tech era in the 1970s:
At worst, there is no correlation
between the invention of new technologies that come into wide consumer use, and
the employment rate. At best, new tech seems to have coincided with a series of
cycles that have driven down unemployment.
You can draw that blue trend line arrow
wherever you want, of course. You can make the case that the trend is up since
the low unemployment record of around 3% in the early 1970s. But then you
can also draw it back to the Great Depression of the 1930s and watch the trend
fall over time. The point is, we've always adopted new
technologies, and unemployment obeys its own cycles governed by overall
economic growth, not tech.
The most frustrating thing about the
"robots are taking our jobs!" meme is that it feels true on an anecdotal
basis. Business Insider published this recently: So, for example, in 1990 GM, Ford, and
Chrysler brought in $36 billion in revenue and hired over a million workers,
Wallach said. The big three today Apple, Facebook, and Google bring in over a trillion dollars in revenue
and only have about 137,000 workers, he said.
It is true that tech companies employ
fewer people directly. But they create ecosystems that employ more people
indirectly. Think of Facebook, which has more than 2 million advertisers. Or
the hundreds of thousands of sellers on eBay and Amazon. The mobile app industry alone is now bigger than the entire
movie industry. Google
alone is now bigger than the entire newspaper and magazine ad
industry.
Those tech jobs tend to better paid than
the old jobs, too. (I've worked for both paper and digital media companies —
and I prefer the digital paycheck to the pulp one.)
Technology makes us more productive, we
can do more with less. Companies respond to this by doing more. They don't tend
to settle for the cost-savings of having fewer workers to get the same
revenues. Rather, they use the same workers (or hire more) to get bigger
revenues. Here is a chart showing that there seems to be an inverse correlation
between average "productivity" (an economic measure of output per
worker) and the average unemployment rate. The data is drawn from FRED but presented here by ITIF:
The chart shows productivity increases
decline from 3.5% in 1950 to 1.9% in 1980 and back up to 3.1% in 2000. The rise
was due to the Reagan tax cuts and the introduction of the PC. The chart also shows the rise in unemployment
from 4.5% in 1950 to 7.2% in 1980 and a lowering to 5.5% in 2000.
It is true that new tech may destroy
jobs temporarily. Remember all those people who used to be employed making
beepers? All those jobs are gone.
But the workers who did those beeper
jobs are not unemployed. Society is not overrun by an army of destitute beeper
assembly workers, begging for food on the streets, their tattered rags worn
down by little plastic pager boxes clipped to their belts. In fact, British
employment is at a record high right now and the economy is at technical "full employment."
And, just to rescue Bill Gates from
this, he did not actually say that robots would render us all unemployed. he
actually said that robots would render some people
unemployed, a very specific set of workers:
Twenty years from now, labor demand for
lots of skill sets will be substantially lower. I don’t think people have that
in their mental model.
This isn't a prediction of mass
unemployment, it's simply a truism. The motor car destroyed the jobs of
everyone who looked after horses. The smartphone destroyed the beeper industry.
But those people aren't unemployed. They
have new jobs, making or selling something else, something better. Apps,
probably.
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