Mark Paul / Project-Syndicate: No Robo-Apocalypse
It is now conventional wisdom to think that rapid automation and advances in artificial intelligence will eventually render most professions obsolete, ushering in an age of mass unemployment. But
there is no economic law that says workers must lose out when new innovations are introduced.
DURHAM – The new Gilded Age is here. As the rich and powerful collect the most advanced technological gadgets, average workers are increasingly concerned about the “ rising tide of automation .”
There is plenty of fodder for a narrative about the inevitable large-scale displacement of workers by robots. Proliferating reports assert that technological unemployment will exacerbate economic insecurity and make employment more precarious. While an oft-cited Oxford University study warns that 47% of US jobs are at risk of being taken over by robots, McKinsey & Company tells us that it's not that bad: only one-third of workers will be displaced by machines.
Yet it is simply wrong to assume that such outcomes are inevitable. Historically, automation has created far more jobs than it has destroyed, and advances in technology have led to higher wages, longer life expectancy, faster growth, rising employment, and less dangerous and menial work.
The power imbalances that have arisen during this new Gilded Age, however, challenge the longstanding link between automation and its widely shared benefits. Growing fears of a “surplus population” are understandable. But whether the future of work will serve the many instead of the few is not up to the robots; it is up to us.
The Robots That Weren't
Many commentators have come to regard the twenty-first-century economy through a doomsday lens. But for economists, at least, the task is to take a step back and do what they were trained to do: look at the data. If an automation revolution was upon us, we would expect, for example, to see high-flying productivity numbers, because technological change tends to translate into more output from the same volume of inputs. But the data paint a rather different picture. During the 1947-1973 post-war boom, productivity in the US economy grew at a trend rate of 2.7% per year, compared to just 1.2% between 2006 and 2017 (and actually below 1% in the most recent years). Far from a techno-revolution, the US is actually in the middle of a prolonged period of slow labor-productivity growth, which implies low levels of technological change.
As Adair Turner of the Institute for New Economic Thinking notes, economists have been baffled by these trends, because the stories about rapid automation and paltry productivity growth simply don't add up. For his part, Turner offers several explanations of the phenomenon. Invoking the Nobel laureate economist Robert Solow's famous 1987 quip that the advent of computers was showing up “everywhere but in the productivity statistics,” he suggests that, “information technology may improve human welfare in ways not captured in measured output.” That seems eminently true; and yet an even simpler explanation is that there has been too little automation, not too much.
Beyond the productivity numbers, investment data also cast doubt on the claim that the US economy is undergoing or on the verge of a technological revolution. As Lawrence Mishel and Heidi Shierholz of the Economic Policy Institute have shown , US capital investment over the past decade was the lowest in more than a generation, and investments in both information-technology hardware and software have declined markedly compared to previous decades.
The Great Delinking
Still, even without a technological boom, automation will remain a persistent feature of the economy, as it has been since the Industrial Revolution. New technologies and production methods will disrupt labor markets, and workers will lose their jobs. The creative destruction that awaits us will no doubt devastate communities, occupations, and even entire industries. History has shown that the short- and near-term effects of labor-displacing automation are real.
However, there is an important difference between today and the past. Historically, there has been a robust link between technological advances and workers' living standards. For decades after World War II, average workers' wages rose with the adoption of new technologies. But as the chart below shows, that link suddenly broke in the 1970s. There are many reasons why this happened, but the most important one is that the pendulum of power has swung radically toward corporations at the expense of workers.
While technology has continued to benefit the economy at the aggregate level, the US now has historically high levels of inequality. This has little to do with technological change in general or recent technological changes in particular. What has changed is how those benefits are distributed. There is no economic law that says workers must lose out when new innovations are introduced. On the contrary, the winners and losers in an economy are determined by the rules and institutions that govern it. If capital today wields more power over labor than it did in the past, that is because of public-policy choices, not technology.
For example, Barry Eichengreen of the University of California, Berkeley, points out that it is no secret why companies in the US “treat their workers as disposable parts, rather than investing in them.” The prevailing power imbalance is a direct result of the fact that “board membership for workers' representatives, strong unions, and government regulation of private-sector training are not part of the prevailing institutional formula.”
What Is to Be done?
Although automation is not proceeding at the pace many think it is, policymakers must still address its effects on employment and inequality in the context of the US political economy. As Robert Skidelsky of Warwick University notes, technological unemployment itself is a “very old problem,” but the threat posed by automation and artificial intelligence (AI), in particular, “merits attention, because [it] cannot be solved with the conventional policy responses.”
Skidelsky's own response to automation is to raise a yellow caution flag. “If the goal is to lift all boats as far as possible,” he writes, “then some slowdown of globalization and automation is inescapable.” In the same vein, Nobel laureate economist Robert J. Shiller makes the case for a “moderate tax on robots,” to slow down the adoption of disruptive technologies and stem the increase in inequality resulting from automation.
Skidelsky and Shiller's concerns about the effects of automation on employment and inequality under the current institutional setting are justified. But, rather than stand in the way of technological progress, why not amend the institutional setting, so that technological change once again contributes to workers' wellbeing?
That is how America's more social-democratically inclined counterparts across the Atlantic would approach the problem. The Swedes, for example, have embraced automation with open arms. As the Swedish minister for employment and integration told The New York Times , “The jobs disappear, and then we train people for new jobs. We won't protect jobs. But we will protect workers.” It is little wonder, then, that 80% of Swedes have a positive view of robots and AI. By contrast, 72% of Americans are worried about robots taking many human jobs.
Of course, Americans, unlike Swedes, have good reason to worry. Over the past few decades, the social contract for protecting US workers has been steadily dismantled. To help workers adapt to economic change, a host of scholars have offered recommendations to policymakers. For example, Nobel laureate economist Christopher Pissarides and Jacques Bughin of the McKinsey Global Institute point out that, “Future-of-work debates often overlook the question of how the labor market will evolve and either improve or exacerbate the skills mismatch that is already acute in developed countries.” Accordingly, they call for more spending to develop not just workers' cognitive skills, but also “creativity and social skills.”
The University of California, Berkeley, economist Laura Tyson and Lenny Mendonca of New America would agree. But more than just increased spending, they expect that the “skills challenge will require an epic reinvention of workforce learning and training … on par with the establishment of universal secondary education a century ago.”
Of course, few would object to policies to expand skills training, which tend to receive bipartisan support. A major restructuring of how workers acquire skills – perhaps along the lines of Germany's apprenticeship programs – certainly seems to be in order. And yet reforms along these lines would not change the fact that gains from automation have largely bypassed workers for decades.
Taking the Lead
We have had these debates before in the US. In response to widespread fears about automation in the 1960s, President Lyndon B. Johnson commissioned a report on “Technology and the American Economy.” Issued in 1966, the report acknowledged that unless the US adopted the right economic rules, automation might indeed exacerbate unemployment and inequality. But it also pointed out that public policies, rather than technology itself, should be at the center of the debate over whom automation will enrich and whom it will leave behind.
The fact is that policy actions – and sometimes intentional inaction – got America to where it is today: a deeply unequal society in which millions of workers fear for their jobs and livelihoods. The good news is that smart public policies can also get the US out of this mess. With that in mind, there are a few ideas that should at least be on the table for debate.
The first is the principle of full employment. Under the Employment Act of 1946 and the Full Employment and Balanced Growth Act of 1978 , the US government is authorized to pursue “maximum employment.” That means the US Federal Reserve, in setting monetary policy, has a dual mandate to target employment as well as price stability. And yet, to date, the Fed has been guided almost solely by its self-imposed inflation ceiling, while defining “full employment” as whatever level of employment happens to coincide with that target.
While it's time for the Fed to take its full-employment mandate seriously, that alone won't be enough. To eliminate involuntary unemployment, the US government should also enact a job guarantee , whereby the government would provide employment to all working-age adults who want it. This is precisely what Johnson's presidential commission proposed in 1966. The goal, then as now, is to place a true floor in the labor market, thereby ensuring that workers displaced by technological change do not have to suffer the horrors of long-term unemployment .
A second priority is to revise intellectual-property law, which plays a central role in determining how the rewards from advances in technology are distributed. Unfortunately, as Mordecai Kurz of Stanford University notes, IP law in the US has evolved in ways that impede innovation and exacerbate inequality, hurting both consumers and workers.
Since the 1970s, the US has continuously lengthened the term of patent and copyright protections, effectively promoting government-sanctioned monopolies . This has created such a mess that there is now actually bipartisan support for rolling back IP protection. But while curtailing the duration of IP protections would certainly help, it would not ensure an equitable economy. For that, we need to eliminate most of the innovator rents that are currently distorting the economy.
To that end, policymakers should prioritize publicly funded innovation, the fruits of which would be free and available to all. As Mariana Mazzucato of University College London reminds us, the state once led the way in creating new markets and funding basic research, and it needs to assume that role once again. By establishing a public stake in technological change, the government can ensure that innovation benefits the many rather than the few. For example, whereas many private-sector players are using AI merely to extract rents, such as through digital marketing, this powerful technology could just as well be used to reduce the incidence of work injuries, improve job quality, and raise living standards.
Sharing the Load
Yet another idea for policymakers to consider is what is known as “work sharing.” In 1930, John Maynard Keynes famously predicted that, within a century, “Three-hour shifts or a fifteen-hour [work]week” would be sufficient to provide for the needs of society. Yet today, we are still working ungodly – even inefficient – hours.
This need not be the case. By reducing work hours, work can be shared more evenly, and workers can be kept on the job during economic downturns and transitions. In fact, after the 2008 financial crisis, German firms temporarily reduced hours instead of laying off workers, and unemployment there actually declined . In the US, 26 states already have work-sharing arrangements of some kind; the goal should be to expand these nationwide.
A final priority is higher education. Over the past 20 years, the wage premium for college-degree holders has been nearly flat , though it remains well above that of workers with just a secondary education. Moreover, earnings have begun to stagnate , and job opportunities to diminish, even for highly credentialed workers. Clearly, education and training are not a silver bullets for all labor-market woes. Yet a well-educated labor force is vital for both the economy and democracy, which means that the burden of providing it should be shared through universal tuition-free higher education, rather than being placed on individuals in the form of crushing student debt.
This list of policy ideas is not meant to be comprehensive. Plenty of other interventions have not been mentioned, such as measures to strengthen collective bargaining, which, as Nobel laureate economist Joseph E. Stiglitz notes, the US Supreme Court further undermined with its recent decision in Janus v. American Federation of State, County, and Municipal Employees . We should also be exploring ways to curb the Silicon Valley giants' market domination, and to socialize the immense profits from personal data that have been reaped by only a few select firms.
Though we are not in a technological revolution, we will of course continue to experience technological change. Some innovations will inevitably destroy some jobs, and that's okay. After all, we should want to destroy the bad jobs in the economy, including those that pay under $15 an hour.
But for technology to deliver widely shared benefits, policymakers must change the rules of the game. At the end of the day, we should not fear the robots; we should fear that our leaders will prove unwilling to fight for the public good.
Mark Paul is a Postdoctoral Associate at the Samuel DuBois Cook Center on Social Equity at Duke University, a Fellow at the Roosevelt Institute, and author of the Roosevelt Institute report “Don't Fear the Robots.” Petroleumworld does not necessarily share these views.
Editor's Note: This commentary was originally published by Project-Syndicate on 07/20/2018. Petroleumworld reprint this article in the interest of our readers and does not necessarily reflect the opinion of Petroleumworld and its owners.
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