There is a widely reported threat to our economy: robots are going to replace human workers. It is nothing new… In 1930, Keynes, the famous economist introduced the term “technological unemployment”…
We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to comeâ€”namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.
There is a long Wikipedia article on technological unemployment, where you can learn that people have been concerned about it for centuries… long before we could even imagine robots and computers. It is a recurrent theme of western thought.
Personally, I am unconcerned by technological unemployment as a threat. On the long run, I think that we can create jobs out of thin air if we need to (something I call “transemployment”). I strongly disagree with people like Tyler Cowen who think that regular folks are doomed.
We should first recognize the thesis for what it is. Currently, most people get most of their income through jobs. But jobs provide a lot more than just income. They also provide meaning and a social status. In some countries, like the USA, people often get access to critical health services through their employment. Unemployed people are more likely to be sick or depressed, they are less likely to be seen as viable mates… and so forth. We live in a society where even billionaires have “jobs”. If human labor were to become wholly unnecessary, we are going to substitute for it through transemployment. That is, we will create work that is not strictly needed. I think that this process is well under way. But how will we pay for it all? Well. Consider that if human labor becomes unnecessary, it follows that the wealth is being created by the robots, so it is still there. Some authors fear that technology will result in a radical concentration of wealth, the like of which we have never seen… while a few people will be super wealthy, all of us will slowly starve. Except that fewer people than ever in history are starving! It is true that people without a high school education in the US earn much less than the more educated. And there is an income gap building up. However, in the US, the less educated also enjoy a much higher amount of leisure time. Some of us envy the CEOs, but let us not forget that many of them work 60 hours or more. Do we really want all to focus our lives almost entirely on “jobs” forever and ever? Can’t we imagine a world where jobs are relatively secondary aspects of our lives? Maybe in the future, when we speak with teenagers, we will never mention employment as something they need to be concerned with.
I think that we can’t automate fast enough. I work for a university where too many people spend too much time on routine work, filling out the same forms day after day. We can’t seem to outrun bureaucracy with automation. Hospitals can’t find enough qualified nurses willing to work at modest wages: we need to more automation in health care, and we need it now. China is running out of young factory workers, they can’t get the robots in place soon enough.
I really do wish that we were much further along regarding technological unemployment. My bias as a techno-optimist is to be bullish on technology… but let us look at the signs… is technological unemployment something that we can observe around us?
- Though the economy goes up and down, the unemployment rate worldwide is low. In is under 5% in the US, and even lower in Japan. I don’t think that people advocating imminent technological unemployment have a good explanation for this data point. Yes, some people get discouraged and drop out of the job market, thus artificially lowering the unemployment rate, but that has always been true.
- In the USA, the participation rate, that is the fraction of people who work in the entire population is lower than it was 10 years ago by about 3%. In the last 10 years, the participation rate has been flat in France and in Japan, declining in the US and Canada, while it has been rising in Germany. The participation rate varies greatly from country to country. It is 56% in France, 60.5% in Japan and Germany, 63% in the US and 66% in Canada. It seems difficult to reason about it in absolute terms.
In the US, a lot of people in their “prime age” who are not working are sick in some way….
Participation in the labor force has been declining for prime age men for decades, and about half of prime-age men who are not in the labor force (NLF) may have a serious health condition that is a barrier to work. Nearly half of prime age NLF men take pain medication on a daily basis, and in nearly two-thirds of cases, they take prescription pain medication. The labor force participation rate has stopped rising for cohorts of women born after 1960. Over the past decade, retirements have increased by about the same amount as aggregate labor force participation has declined. Continued population aging is expected to reduce the labor force participation rate by 0.2 to 0.3 percentage point per year over the next decade. (Krueger, Where Have All the Workers Gone? 2016)
But sickness and disability affect disproportionally older people.
Young people outside of the workforce are sometimes “discouraged”, meaning that they do not seek employment because they see no hope of getting a good job. The number of discouraged people in the US has been slowly going down since its latest peak in 2010.
- Firm investments in high-tech equipment and software is falling, relatively speaking. That’s hardly what you’d expect in an economy where robots are taking over? Of course, this is partially explained by the rapidly falling cost of some technologies.
- Worker productivity has been increasing more or less monotonically for the last few decades but it has recently been declining. A technological boost akin to what might lead to technological unemployment should be accompanied by a rise in worker productivity.
- When I was born, everyone dealt with a living and breathing bank teller. These days, I go see a bank teller maybe once a decade. They have been “replaced” by machines. But did you know that there are more bank tellers in the US than ever before? And I’d argue that bank tellers today have more interesting work, doing a lot less in terms of routine work.
Overall, there is scant evidence that we are undergoing a technological-unemployment crisis, if only because unemployment rates are low.