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The future is jobless… or is it?

By Maura Frank
web posted December 12, 2016

“The robots are taking American jobs!”

“What’s wrong with the old-fashioned way?”

“Back in the day, we didn’t need all this technology and we were a lot happier!”

“Whatever happened to good hard labor?”

“The machines are going to replace me!”

All this grumbling and groaning has been on the rise throughout the years as technology develops and plays a larger role int he American economy. With all of these complains bubbling up to the surface of the job swamp, could there be trouble in the air? Are these fears reasonable? Will the robots, in fact, take our jobs? Is our future one like Wall-E? Are we doomed? Is it the end of the world?

Spoiler alert: the answer is no. The world is not ending, the future most likely won't involve robot overlords, and jobs will still exist for generations to come.

I chose this topic because I read an article in The Atlantic in which the author, Derek Thompson, paints a fairly bleak picture in the future and blames it on technology. While some of his arguments have merits, Thompson is not taking into account some economic facts. Thompson looks into the past at factory closings and predicts that the rise of technology will take our jobs, leaving us in a future with no work and only leisure. He waxes poetic about the potentially horrifying repercussions. Perhaps the only ray of light in his long-winded critique of technology’s impact on labor is that people may be able to pursue what they like when they are jobless. So what is he missing?

Workers Share of Output

One thing is context. While it’s true that from 1980-2014, workers’ share of output decreased almost 6%, this fails to take into account things like depreciation and production taxes. In fact, an economist at the Bureau of Economic Analysis named Benjamin Bridgman paints a rosier picture which tempers that previous negative spin by factoring in depreciation and production taxes. Depreciation is an important factor in calculating actual economic information. Since technology is improving rapidly, depreciation happens at a faster rate. Companies have to spend larger amounts of their profits to fix technology or replace obsolete technology in order to have the best and brightest capital. This increasing share of output spent on technology is intricately interwoven with labor’s declining share of output, a connection that must not be ignored.

What else does Mr. Thompson need to think about? Economic growth. One of the first concepts we learned was that of economic growth. Using tools like the production possibilities frontier and supply and demand graphs, we explored the basic idea that the more a country can produce, the better off it is economically. (Of course, there are other things to take into consideration, but I’m focusing on the basics here.) The three factors of production are natural resources, labor, and capital. What’s involved in capital? You guessed it: technology.

Rising Cost of Capital

As technology improves, labor becomes more productive. This increased productivity means economic growth. The production possibilities frontier shifts outwards. Increased productivity of labor results in a greater demand for labor. Technology thus increases the demand for labor while stimulating economic growth.

Are jobs becoming different as technology advances? Yes. Is that bad? Not necessarily. And can people adapt? Absolutely.

Take, for instance, the health industry. In medicine, if there is better technology, more patients can be seen more quickly and with more reliable diagnoses. Technology (and the knowledge of how to use it) makes medical personnel better at their jobs. This increases quantity of visits demanded - in fact, over time, maybe technology can increase demand itself, shifting the curve. And thus we come right back to the winning concept: technology leads to healthier economies.

If I were to write Mr. Thompson, I wouldn’t necessarily criticize his lousy economics. I’d simply encourage him to look beyond the pessimism he’s fallen into and ask that he look more broadly at basic economic ideas. By focusing on the negative parts of technology, he has failed to see the incredible benefits of technology. The past is gone; the future lies ahead of us. Perhaps we can see the light and continue to bring our world to greater economic wellbeing. ESR

This is Maura Frank’s first contribution to Enter Stage Right. © 2016 Maura Frank

 

 

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