Technology won’t destroy Jobs

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.

http://www.businessinsider.com/new-technology-does-not-destroy-jobs-or-create-unemplyoment-2015-6?r=UK&IR=T