Automation Alone Isn’t “Killing Jobs”

Interesting op-ed by Tyler Cowen:

Although the labor market report on Friday showed modest job growth, employment opportunities remain stubbornly low in the United States, giving new prominence to the old notion that automation throws people out of work.

Back in the 19th century, steam power and machinery took away many traditional jobs, though they also created new ones. This time around, computers, smart software and robots are seen as the culprits. They seem to be replacing many of the remaining manufacturing jobs and encroaching on service-sector jobs, too.

Driverless vehicles and drone aircraft are no longer science fiction, and over time, they may eliminate millions of transportation jobs. Many other examples of automatable jobs are discussed in “The Second Machine Age,” a book by Erik Brynjolfsson and Andrew McAfee, and in my own book, “Average Is Over.” The upshot is that machines are often filling in for our smarts, not just for our brawn — and this trend is likely to grow.

How afraid should workers be of these new technologies? There is reason to be skeptical of the assumption that machines will leave humanity without jobs. After all, history has seen many waves of innovation and automation, and yet as recently as 2000, the rate of unemployment was a mere 4 percent. There are unlimited human wants, so there is always more work to be done. The economic theory of comparative advantage suggests that even unskilled workers can gain from selling their services, thereby liberating the more skilled workers for more productive tasks.

Nonetheless, technologically related unemployment — or, even worse, the phenomenon of people falling out of the labor force altogether because of technology — may prove a tougher problem this time around.

Labor markets just aren’t as flexible these days for workers, especially for men at the bottom end of the skills distribution. Through much of the 20th century, workers moved out of agriculture and into manufacturing jobs. A high school diploma and a basic willingness to work were often enough, at least for white men, because the technologies of those times often relied on accompanying manual labor.

Many of the new jobs today are in health care and education, where specialized training and study are required. Across the economy, a college degree is often demanded where a high school degree used to suffice. It’s now common for a fire chief to be expected to have a master’s degree, and to perform a broader variety of business-related tasks that were virtually unheard-of in earlier generations. All of these developments mean a disadvantage for people who don’t like formal education, even if they are otherwise very talented. It’s no surprise that current unemployment has been concentrated among those with lower education levels.

There is also a special problem for some young men, namely those with especially restless temperaments. They aren’t always well-suited to the new class of service jobs, like greeting customers or taking care of the aged, which require much discipline or sometimes even a subordination of will. The law is yet another source of labor market inflexibility: The number of jobs covered by occupational licensing continues to rise and is almost one-third of the work force. We don’t need such laws for, say, barbers or interior designers, although they are commonly on the books.

Many expanding economic sectors are not very labor-intensive, be they tech fields like online retailing or even new mining and extraction industries. That means it’s harder for the rate of job creation to keep up with the rate of job destruction, because a given amount of economic growth isn’t bringing as many jobs.

A new paper by Alan B. Krueger, Judd Cramer and David Cho of Princeton has documented that the nation now appears to have a permanent class of long-term unemployed, who probably can’t be helped much by monetary and fiscal policy. It’s not right to describe these people as “thrown out of work by machines,” because the causes involve complex interactions of technology, education and market demand. Still, many people are finding this new world of work harder to navigate.

Sometimes, the problem in labor markets takes the form of underemployment rather than outright joblessness. Many people, especially the young, end up with part-time and temporary service jobs — or perhaps a combination of them. A part-time retail worker, for example, might also write for a friend’s website and walk dogs for wealthier neighbors. These workers often aren’t climbing career ladders that build a brighter or more secure future.

Many of these labor market problems were brought on by the financial crisis and the collapse of market demand. But it would be a mistake to place all the blame on the business cycle. Before the crisis, for example, business executives and owners didn’t always know who their worst workers were, or didn’t want to engage in the disruptive act of rooting out and firing them. So long as sales were brisk, it was easier to let matters lie. But when money ran out, many businesses had to make the tough decisions — and the axes fell. The financial crisis thus accelerated what would have been a much slower process.

Subsequently, some would-be employers seem to have discriminated against workers who were laid off in the crash. These judgments weren’t always fair, but that stigma isn’t easily overcome, because a lot of employers in fact had reason to identify and fire their less productive workers.

In a nutshell, what we’re facing isn’t your grandfather’s unemployment problem. It does have something to do with modern technology, and it will be with us for some time.

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