Robots and AI Will Not Create Mass Unemployment

Patrick Cox

Because I make predictions for a living, people ask me what we’re going to do about all the people whose jobs are destroyed by artificial intelligence (AI) and automation.

The silver lining to that question is that it assumes we’re not going to be enslaved by Skynet.

I’ve worked with many accomplished scientists, but I’ve never met anybody who fears that electronic components and software can achieve anything resembling true sentience or self-determination. That’s probably because most of the scientists I know are biologists, so they realize how primitive modern computer technologies are compared to the incredible genetic and neurological complexity of human consciousness.

Fear of mass unemployment due to AI and robotics is, in my opinion, a variant of the same irrational fear.


People and Markets Are More Adjustable Than You Think

Even those who believe AI and robotics will wreck the economy admit that there have been predictions of massive and imminent technological unemployment since the Industrial Revolution, and probably before.

It’s true that new technologies have always made old jobs obsolete, but in free economies, they have never resulted in mass unemployment. Highly bureaucratic and regulated economies are another matter, but we won’t deal with that topic here.

What’s different today, say those who predict massive technological unemployment, is the pace of change. Technology is progressing so fast, they say, people won’t be able to find replacement jobs fast enough to keep up with the falling away of old jobs.

I think they underestimate the ability of people and markets to adjust, which has been greatly enhanced by information technologies. Moreover, markets themselves have built-in mechanisms that moderate the pace of change.

The most obvious impact is the effect job-destroying technologies would have on consumer spending. When unemployment rates grow, consumer spending, economic growth, and investment rates fall.

If unemployment insurance and welfare costs rise, the pressure to raise taxes increases.

Political opposition to the perceived job destroyer would also be a factor, making that industry a likely target.

That kind of environment doesn’t encourage major technological transitions.

Also, we never see an elimination of jobs without the creation of new ones.

Everything Balances Out in the End

Imagine emerging technologies that are so effective at cutting costs, they destroy 20% of all jobs. All other things remaining constant, it would be disastrous—a guaranteed depression.

In practice, cost-saving technologies always create a counterbalancing demand for labor. Somebody has to manufacture, sell, ship, and service these new cost-cutting, labor-saving technologies. Somebody will have to train workers to use the new devices.

There may be some net job loss due to technological innovation. But historically, the elimination of job categories has been due to cost-saving innovations that helped fund net job growth. We can imagine a scenario where more jobs are eliminated than created, but we’ve seen zero evidence that is beginning to happen.

The explosion in technological innovation over the last decade is unparalleled in human history, but we’re not seeing even marginal reductions in job creation due to innovation.

Japan, perhaps the most tech-friendly country in the world, is experiencing severe labor shortages.

Despite widespread adoption of new information technologies, the US is not seeing rapid job obsolescence.

In fact, we’re seeing just the opposite.

Source: ITIF

The Information Technology & Innovation Foundation published an extremely important report last year. The summary includes the following observation:

When we actually examine the last 165 years of American history, statistics show that the U.S. labor market is not experiencing particularly high levels of job churn (defined as new occupations being created while older occupations are destroyed). In fact, it’s the exact opposite: Levels of occupational churn in the United States are now at historic lows. The levels of churn in the last 20 years—a period of the dot-com crash, the financial crisis of 2007 to 2008, the subsequent Great Recession, and the emergence of new technologies that are purported to be more powerfully disruptive than anything in the past—have been just 38 percent of the levels from 1950 to 2000, and 42 percent of the levels from 1850 to 2000.

The summary then reiterates the main point, saying, “Contrary to popular perception, rather than increasing over time, the rate of occupational churn in recent decades is at the lowest level in American history—at least as far back as 1850.”

One reason for this new job stability is that it’s easier and cheaper to create and sell technologies that enhance the productivity of existing workers than to create technologies that destroy jobs. There is no reason to believe this will change in the future.

What will change, therefore, is that individual productivity will continue to improve. That, in turn, will continue to reduce the real cost of living.

Though it’s not reflected in the obsolete consumer price index (CPI) or long-term wage and salary growth, consumers get far more for their money in most categories of consumption than ever before. In general, technological innovation has improved things for many decades—reducing the cost of goods and services, and allowing people to work fewer hours.

This Trend Will Continue

Not that long ago, the consensus among economists was that we would never have a backward-bending supply curve for labor. In plain English, they scoffed at the idea that workers would ever choose to cut back on work hours.

Today, it’s reality. People work fewer hours and take longer vacations. This is possible only because innovation has reduced the real cost of living. We need to work fewer hours to buy the necessities. This phenomenon is even more evident in Europe.

If AI and robotics cut the number of jobs in half, it could happen only because they cut the real cost of living proportionately. Many people would choose to work less, so more jobs would be needed to do the same amount of work.

I’m not saying we won’t experience unexpected disruptions. We will. But in an era of sub-replacement fertility rates, you can stop worrying that automation will destroy all the jobs.

Instead, worry about how the shrinking workforce is going to pay for the healthcare costs of the silver tsunami.

In fact, we know how to fix that problem. Right now, scientists I personally know are working on breakthrough therapies that will rejuvenate the aged, allow them to avoid the diseases of aging, and stay productive much, much longer.

If you demand that politicians and regulators focus on getting those innovations to market, costs will be cut, jobs will be created, and lives will be saved.

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