The Robots Taking The Jobs Industry – OpEd – Eurasia Review

There is an old saying that the economy is too simple for economists
to understand. There is plenty of evidence of this all around. After
all, almost no economists could see the $8 trillion housing bubble, the
collapse of which gave us the great recession. Back in the stock bubble
days of the late 1990s, leading economists in both political parties
wanted to put Social Security money in the stock market based on
assumptions of returns which were at the least incredibly implausible,
if not altogether impossible.

The endless scare stories of robots taking all the jobs, or the
threat of automation, fit this mode. While this is a recurring theme in
major media outlets, it basically makes zero sense.

Replacing human labor with technology is a very old story. It’s
called “productivity growth.” We’ve been seeing it pretty much as long
as we have had a capitalist economy. In fact, this is what allows for
sustained improvements in living standards. If we had not seen massive
productivity growth in agriculture, then the bulk of the country would
still be working on farms, otherwise we would be going hungry.

However, thanks to massive improvement in technology, less than 2
percent of our workforce is now employed in agriculture. And, we can
still export large amounts of food.

If the robots taking our jobs industry were around a hundred years
ago, it would be warning about gas powered tractors eliminating the need
for farm labor. We would be hearing serous sounding discussion on our
radio shows (we will steal radios from the 1919 future) with leading
experts warning about how pretty soon there would be no work for anyone.
They would tell us we have to prepare for this dark future by
fundamentally reorganizing society.

Okay, that story is about as wrong as could possibly be the case, but
if anyone buys the robots taking our jobs line, then they better try to
figure out why this time is different. After all, what difference does
it make if a worker loses their job to a big tractor or they lose their
job to a robot?

Getting Serious About Robots and Productivity Growth

The basic story of robots taking our jobs is one of a massive
increase in productivity growth. Instead of people driving taxis and
trucks, stocking store shelves, and working checkout counters, all this
work and more will be dealt with by robots. There are three problems
with this story:

1) It has not been happening;

2) No one involved in designing policy expects to happen;

3) It would likely mean more rapid wage growth and improved living standards if it did happen.

On the first point, instead of accelerating to new highs, the rate of
productivity growth has actually been very slow in recent years. We did
have a period of strong productivity growth from 1995 to 2005, when the
average annual rate was just under 3.0 percent. However, this period of
strong growth ended abruptly in 2006 for reasons that are not well
understood.

Since 2006, productivity growth has fallen to less than a 1.3 percent annual rate. While some (including me) had hoped that a tighter labor market would lead to a pickup in productivity growth, to date we are still not seeing it. Over the last two years productivity growth has averaged less than 1.2 percent.[1] Long and short, there is absolutely zero evidence that we are seeing any mass displacement by robots, automation, or anything else.

The second point is that we do have projections about future rates of
productivity growth from folks like the Congressional Budget Office
(CBO, the Social Security Administration (SSA), and other forecasters.
None of these organizations see any sort of massive acceleration in
productivity growth.

In its most recent projections (Table 2-5), CBO put the rate of potential productivity growth at 1.8
percent annually over the next decade. This is somewhat better than we
have seen over the last 13 years, but hardly a story of massive labor
displacement. The 2018 Social Security Trustees Report puts the long-term economy-wide rate of annual productivity growth at
1.68 percent. Since the economy-wide rate tends to be approximately 0.2
percentage points lower than the rate in the non-farm business sector,
this would translate into a rate of productivity growth of just under
1.9 percent in the non-farm business sector. Again, this is somewhat of a
pick-up from current levels, but not very different from the CBO story.

We could look at other projections from places like the OECD and
I.M.F. and other organizations, but they all show pretty much the same
story. None of them show the massive uptick in productivity growth that
would be associated with the robots taking all the jobs.

This doesn’t mean such an upturn is impossible, after all these
organizations all missed the slowdown that began in 2006 and for that
matter the upturn that began in 1995. So their track record in
projecting trends in productivity has not been great, but anyone arguing
the robots taking all the jobs story should realize that they are going
against the consensus in the economics profession.

The last point is that if the robots did start taking more jobs, so
what? We had almost 3.0 percent productivity growth from 1995 to 2005
and in the much longer post World War II Golden age from 1947 to 1973.
These were periods of relatively low unemployment and strong wage
growth.

Suppose robots did start taking more jobs, how fast would the pace of
productivity growth be? A 3.0 percent rate would be very impressive,
but why would the story be different than it was in the past when we saw
productivity growth at this rate? Would it be 4.0 percent annual
growth, 5.0 percent? If so, is there any reason this would not just mean
even more rapid wage growth and/or shorter workweeks and work years?

Just to focus people on where we are right now, the Federal Reserve
Board has been raising interest rates over the last two years in order
to deliberately slow the economy. It is ostensibly concerned that we are
creating too many jobs. The issue is that rapid job growth would lead
to a further tightening of the labor market and therefore more rapid
wage growth. A more rapid rate of wage growth could then lead to an
acceleration in the inflation rate.

If the pace of productivity growth were to suddenly accelerate, the
Fed could be more restrained with interest rate hikes, and possibly even
lower rates. There would little reason to be concerned about inflation
in an environment of more rapid productivity growth.

So, long and short, we do not now see any evidence of massive job
loss due robots, automation, artificial intelligence, or anything else.
That could change in the future, but there is little reason to believe
it would lead to massive job loss.

Robots Taking the Jobs of the Less-Skilled

There is a slightly different story of job-killing robots that many
people seem to have in their minds. This is not one of massive job
displacement, but rather a loss of less-skilled jobs. The idea is that
even if robots don’t lead to a huge increase in productivity growth,
they will lead to the loss of a large share of the jobs now held by
less-educated workers.

This is an old story in economics that originally appeared as
“skills-biased technical change (SBTC).” It was used to explain the
large increase in the gap in wages between college educated workers and
non-college educated workers that opened up in the 1980s. My friends
Jared Bernstein and Larry Mishel showed there was no correlation between any measures of technology and increased demand for more college-educated labor by industry.

The story of skills biased technical change got even weaker as there
was little change in the college-non-college wage gap in the 1990s and
the last decade, even as there was a surge in productivity growth from
1995 to 2005 due to information technology. Clearly this simple story
did not work.

There was a revised version of the SBTC hypothesis in the last decade
pushed most prominently by David Autor. This was the “hollowing out of
the middle” story, which argued middle paying jobs were rapidly
disappearing, leading to a rise in inequality as middle class jobs were
lost to technology. This was counted by a paper by Larry Mishel, Heidi Shierholz, and John Schmitt, that showed the
hollowing out story did not fit the decade of the 00s at all.

In spite of great efforts by economists to link rising inequality to
technology, the data just doesn’t fir the story. That doesn’t mean that
we won’t see technology leading to a rise inequality in the future, just
that we have not seen it to date. It is worth noting in this context,
that while the unemployment rate for workers with less than a high
school degree, just a high school degree, and some college, are all
below their pre-recession lows, the unemployment rate for workers with
just a college degree is still somewhat higher. Workers with just a
college degree have also been seeing the weakest wage growth over the
last four years, as I pointed out in my post last week.

So What If Robots Aren’t Taking Jobs Now or Depressing Wages of Less-Educated Workers, What About the Future?

If we look at the data, it’s very hard to blame robots or technology
more generally for the problems of inequality we have seen to date, but
that doesn’t mean we won’t have this problem in the future. This is true
in the sense that none of us know the future, but let’s think about
this one a bit further.

People don’t get rich from technology, they get rich because we give
certain people ownership of the technology with patent and copyright
monopolies. This is not really an arguably point. Bill Gates has a $100
billion because we will arrest anyone that starts to mass produce
computers with Windows software without paying Microsoft for the
privilege.

The argument is that we want to give people like Gates incentive to
innovate or do creative work. But if we are concerned about inequality
then we can just give these people less incentive. If the argument is
that this will lead to less rapid productivity growth, this is fine.
After all, the issue was that we are supposed to be seeing massive rates
of productivity growth, so who cares if the rate is a little less
massive but we have less inequality? (I argue in Rigged, chapter 5, that there is good reason to believe that we could actually have more rapid productivity growth with weaker protections and more public funding.)

In short, nothing about the robots taking our jobs story makes sense.
It hasn’t been happening, no major governmental agency or international
organization expects it to happen any time soon, and if it did, it
should be a good story for workers. If the robots turn out to be
generating inequality it will be because of our robot policy, not the
robots.

Yes, I write about this one a great deal. This is because the robots
taking the jobs story is constantly appearing in places like the New
York Times, Washington Post, and National Public Radio. They shouldn’t
be taking the argument seriously, but they do. Which means those of us
who care about reality have to do what we can to counter it.

Note: The piece originally said that the economy-wide rate of productivity growth tends to be 0.2 percentage points higher than for the non-farm busines sector. Thanks to dumdedumdum for pointing this out in their comment.

Notes:

[1] Productivity data can be found at the Bureau of Labor Statistics data portal https://www.bls.gov/data/#productivity.

This article originally appeared on Dean Baker’s blog.

Source link

Leave a Reply

%d bloggers like this: