The Corner

Economy & Business

Panglossing the Robots

Writing in the Wall Street Journal, Andy Kessler maintains that we shouldn’t be too concerned about the ‘robot threat’ to jobs. Much of his argument revolves around the idea that technological change has worked out in the past and so it will work out again:“[T]echnology always creates more jobs than it destroys”.

Maybe so, but history doesn’t always repeat itself. Besides, the past is not quite as reassuring as Mr. Kessler would have his readers think.  Yes, historically technology has created more (and  better) jobs, but over time. What happens in the interim can be on the alarming side. I touched on this lag in the course of a  recent piece on our robot friends for NRODT.

We comfort ourselves with the knowledge that the Luddites were proved wrong, but we forget that proof of that was quite a while in coming. Economic historian Robert C. Allen refers to the decades that it took for real wages to rise in Britain after the technological changes of the early 19th century as “Engels’ Pause.” That’s the same Engels who argued in The Condition of the Working Class in England (1845) that the industrial revolution had made workers worse off. Over the long term, things changed for the better, but what happened in the interim should concern those worried about the political consequences of this latest technological revolution. These were the years not just of the Luddites, but also of the Peterloo Massacre, the Swing Riots, the Tolpuddle Martyrs, and the 1842 General Strike. By the time of the Chartists, a mass movement of the working class, an explicitly political agenda had evolved alongside struggles over pay. Engels took things even further. In 1848 he co-wrote The Communist Manifesto with Karl Marx, not an encouraging thought. 

Giving the examples of the media and Wall Street, Kessler goes on to argue that technology “augments humans, rather than replaces them”. Yes and no. Technology may make humans better at their jobs, but it may also mean that fewer humans are needed to do them. To take Kessler’s two examples, this is something that workers in the financial world are currently discovering, and those in the media have known for a long while. Check out the US Bureau of Labor Statistics data on employment in the media (broadly defined) here. We live in an age of proliferating media, and yet fewer now work in that sector than did in 1990, a time when the overall work force is significantly smaller than it is today.  

Kessler argues that Chinese workers “shouldn’t fear  robots”. On the contrary, they should. As  Tyler Cowen notes, ‘premature deindustrialization’ is gathering pace. Foxconn has reportedly replaced more than half its workforce with robots since the launch of the iPhone 6. With robots able to take on more and more manufacturing more and more cheaply China’s labor cost advantage is worth a great deal less. Why should a firm serving advanced markets locate in China, or India, or Vietnam, or…, when it can base production close to the end-consumer in a rich country where the legal, political and physical infrastructure is so much better? As for the implications of all this for the development hopes of those far poorer nations, mainly in Africa, from where so much of the world’s population growth is forecast to be coming? Not great.

Kessler argues that “jobs that robots can replace are not good jobs in the first place”, yet acknowledges that automation is encroaching into services: “Take doctors, lawyers, investment bankers . . . please”.

Being a doctor is no longer a “good job”?

The reality now is that automation is moving from brawn to brain. Yes, smart folk will still be needed to work with smart technology, but when so much of the brain work is automated, will they be paid so much to do so? I doubt it.

At a less elevated level, Kessler tells us that bank-tellers “are doing higher-end banking tasks now that low-level cash dispensing is handled by ATMs”. Maybe they are, but not a lot of cash is being dispensed into their pay checks. Median pay for bank tellers was $25,000 in 2012 and, according, at least, to one report, “almost a third of tellers and their families nationwide are on public assistance.”

And as technology works its way higher and higher up the food chain, those being displaced will be among the most able, the most educated and the most able to make themselves heard. They are unlikely to take it quietly.

To be sure, Kessler admits that “some” people will get left behind, but:

Yes, some people are left behind. But as society gets wealthier, we can help them catch up. We need to get our education system right, teach the fundamentals of computer science much earlier, and provide continuing education on how to adapt to changing technology and adopt these new tools. I can think of a dozen community-college courses besides French literature to assist displaced workers. Some could even be taught by robots.

There go the adjuncts!

And then there’s this (from the Economic Policy Institute in 2013):

“[T]he number of new graduates with engineering and computer science degrees exceeds the number of graduates who actually find jobs in these fields by 50 percent.”

Meanwhile, a 2012 New York Fed study noted that demand for “cognitive skill” has  fallen since the late 1990s.

What, I wonder, will these displaced workers be taught?

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