ROBOTS WILL DO EVERYTHING YOU DO NOW ONLY BETTER—WHAT THEN?
The S&P 500 is at record highs, having finally regained all it lost in the 2008 financial crisis. It would be cause for celebration if it didn’t feel so out of touch with the “main street” reality of continued high unemployment. As a recent New York Times headline read, “recovery in the US is lifting profits, but not adding jobs.”
The NYT goes on to blame the divide between rising corporate profits, recovering stocks, and stubborn unemployment on big gains in productivity over the last few years. The article notes that the giant industrial conglomerate, United Technologies, “does not need as many workers as it once did to churn out higher sales and profits.”
While United Technologies (and other manufacturing firms) may not be adding jobs, it’s strange to blame today’s high rate of unemployment on the trend. Due in large part to automation, manufacturing jobs have been disappearing for over 30 years. During that period, unemployment has been as high as 10.8% and as low as 3.8%. A better headline might read, “recovery in the US is lifting profits, but not adding traditional jobs in manufacturing and that’s nothing new.”
Credit: MJ Perry, Carpe Diem, BEA, BLS
It’s rarely noted, but even as manufacturing jobs have steadily decreased, total manufacturing output has steadily grown. Since World War II, manufacturing output in the US has risen over 700%. While rising productivity is often demonized as a job killer, in truth, it is a very powerful force for good in the modern economy.
The time and creativity that productivity growth frees—and it’s been happening since the Industrial Revolution—is responsible for every modern invention from healthcare to high tech, smartphones to non-invasive surgery. If humans hadn’t started using machines to do some things for us, most would still be working in the fields with few moments to spare pondering economic theory, let alone inventing new technologies.
One argument says that this time is different because soon robots will be able to do everything a human does. But it’s misguided to assume we can forecast what humans “will do.” What that statement really means is, “In the future, robots will do everything humans dotoday.” But what exactly it is that humans will do in the future is anyone’s guess—and few, if any, have ever successfully predicted it.
Before the 20th century, most folks in the West farmed. Now, thanks to massive productivity gains in agriculture, virtually none do. To a 19th century farmer that would imply nothing less than the collapse of the economy. Why? Because the thing most people did back then was farm. Our farmer might understandably wonder, “What will we do when machines perform our jobs for us? How will we make money? How will we survive?”
We are gifted with the vision of our times and cursed with the temptation to extrapolate that vision into the future. How could our farmer know that in 2013 humans would be paid to make movies, pick up garbage, write online, build robots, clean bathrooms, engineer rockets, lead guided tours, drive trucks, play in garage bands, brew artisanal beer, or write code?
The revolution in agricultural technology liberated vast resources and made us all richer and the economy more diverse as a result. And while one might think that those riches should have accrued to only those making agricultural tech, thus permanently widening the income gap, no such thing happened in practice. While those making agricultural machinery undoubtedly made some bucks, the next economic waves provided different work and income for many levels of skill and motivation.
This is understandably a firebrand topic right now. If current unemployment marked the beginning of mass technological unemployment, you can be sure mass social unrest would be quick to follow. But we can’t prove it’s structural yet. Unemployment is a typically lagging indicator. (Click ‘show recessions’ here to see how unemployment continues long after recessions end.) In the last sizable downturn in the early 80s, unemployment didn’t drop below 7% for four years after the recession ended. And that preceded two decades of virtually unbroken growth.
We don’t know precisely what the future holds, but we do know that most in the developed world—even the poorest—live longer, healthier lives than they did a century ago. And while the world will never be a perfect place, technology and productivity have freed more minds to ponder, play, and invent today than ever before.
Image Credit: Mixabest/Wikimedia Commons (banner), photologue_np/Flickr (featured, body)
The stock market highs have little to do with actual value and much more to do with price inflation. The Fed has been monetizing US debt to the tune of 85 billion dollars a month. While that quantity of money printing ‘should’ result in massive price inflation, the refrain from the apologists is always, “but there is no price inflation”. Yes there is, it is in the price of stocks, bonds, etc., not to mention other prices that get short shrift in the calculation of the CPI like food and energy. But that is quite the aside from the subject of the article.
Historically one of the prime mechanisms whereby society benefited from improvements in productivity has been reductions in prices. The jobs lost in sectors where technological improvements displaced workers were made up with new jobs that resulted from people having to pay less for the goods produced by the new technology. Because they paid less for those goods, they had more to spend on other things, creating new employment opportunities in those other things. A major problem is however, that nowadays we rarely see the price reductions. This is by design, this is deliberate.
Central banks have an inflation target. They deliberately inflate the money supply every year to ensure that there will be roughly a 2% price inflation. Inflation is no accident, they do this on purpose. Ostensibly they do this to make sure there is no ‘deflation’, because they assume deflation will result in unemployment. Skip over for a moment that they are wrong in this (mostly). What this means is that if overall productivity has grown by 2% in the economy due to improvements in technology, which would normally result in a 2% reduction in prices, they inflate the money supply by 4% sufficient to eat up the reduction that would otherwise occur and to create an increase of 2% beyond that. So society as a whole does not gain the benefit of the price reductions. (The mechanism whereby they do this actually transfers the purchasing power gains to investment bankers and super wealthy speculators. This is why the income disparity has grown five fold in the last 40 years since we went to a totally fiat currency.)
I could write tomes about how the government’s central planners have indeed created a structural unemployment that is every bit as severe as that of the Great Depression. This is for a large part hidden by the way they define the unemployment statistic that they quote. When they say that unemployment is 8%, they are deliberately not counting those people who have been out of work for so long that they have largely given up hope of ever being employed. They are also not counting the people with university degrees and such who are working part time jobs as waiters or whatever while they are hoping to get a ‘real job’ for which they studied.
I have little hope that these structural impediments to employment will ever be fixed. Indeed I fully expect the central planners to extend their hooks ever further to become an ever greater albatross around the neck of the economy. That said, there is something these central planners could actually do, something they could win elections with. I wish we could get more people behind the idea, because it would address quite nicely a lot of problems, including the problem of technological unemployment, to whatever degree it may be a problem. That is the idea of a basic income guarantee.
A basic income guarantee is a sum of money that is paid to every citizen every month whether they are working or not, rich or poor. It is not means tested in any way, every citizen gets it, young and old alike. Because it is not means tested it requires very little bureaucracy. The trick is to fold existing welfare, unemployment benefits and social security all into that one thing, to pool all the money those programs would spend and distribute it evenly. Here however is a major caveat. You change the tax code such that anyone not below the poverty has a tax increase such that someone earning $20K a year including the basic income guarantee, starts to have some of it taxed back. Someone earning $30K a year essentially has it all taxed back. This way you ensure that people who do ‘not’ actually need it are not getting a free lunch on the backs of the country. It also increases the amount that can be dispersed in a revenue neutral fashion.
Done this way, the basic income guarantee would be roughly $900. a month to every citizen, including the kids, so single moms would actually be able to support their family. Impoverished seniors would be no worse off than they currently are under social security. The only ones who would lose out are retirees who are relatively wealthy who would no longer be living large off the backs of the taxpayer.
With a basic income guarantee in place, the minimum wage could be abolished, effectively ending unemployment. Someone getting a $4. an hour job would actually be better off than they are now with a $7. job they often cannot find, as the basic income guarantee would supplement that. There are a very great many jobs that could be profitably created if people were legally allowed to work for $4. an hour.
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