What impact will automation — the so-called “rise of the robots” — have on wages and employment over the coming decades? This question crops up whenever unemployment rises nowadays.
In the early 19th century, David Ricardo considered the possibility that machines would replace labor. Karl Marx followed him.
Around the same time, the Luddites smashed textile machinery that they saw as taking their jobs.
The fear of machines then died away. New jobs — at higher wages, in easier conditions and for more people — were soon created and readily found, but that does not mean that the initial fear was wrong. On the contrary, it must be right in the very long run: Sooner or later, we will run out of jobs. For some countries, this long-run prospect might be uncomfortably close.
So, what are people supposed to do if machines can do all — or most of — their work?
Recently, automation in manufacturing has expanded even to areas where labor has been relatively cheap. In 2011, Chinese companies spent 8 billion yuan (US$1.3 billion) on industrial robots. Foxconn, which builds iPhones and iPads for Apple Inc, hopes to have its first fully automated plant in operation sometime in the next five to 10 years.
The substitution of capital for labor is moving beyond manufacturing. The most mundane example is one you will see in every supermarket: checkout staff replaced by a single employee monitoring self-service machines. (Though perhaps this is not automation proper — the supermarket has just shifted some of the work of shopping onto the customer).
For those who dread the threat that automation poses to low-skilled labor, a ready answer is to train people for better jobs. However, technological progress is also eating up these better jobs. A wide range of jobs that we think of now as skilled, secure and irreducibly human may be the next casualties of technological change.
As a recent article in the Financial Times said, in two areas notoriously immune to productivity increases — education and healthcare — technology is already reducing the demand for skilled labor.
Translation, data analysis, legal research — a whole range of high-skilled jobs may wither away. So, what will the new generation of workers be trained for?
Optimists airily assert that “many new types of job will be created.” They ask us to think of the lead drivers of multicar road trains (once our electric cars join up “convoy-style”), big data analysts or robot mechanics. That does not sound like too many new jobs to me.
Imagine a handful of technicians replacing a fleet of taxi drivers and truckers, a small cadre of human mechanics maintaining a full robot work force, or a single data analyst and his software replacing a bank of quantitative researchers. What produces value in such an economy will no longer be wage labor.
We can see hints of that future now. Twitter, the social-media giant, is an employment minnow. It is valued at US$9 billion, but employs just 400 people worldwide — about as many as a medium-size carpet factory.
It is not true that automation has caused the rise of unemployment since 2008. What is noticeable, though, is that structural unemployment — the unemployment that remains even after economies have recovered — has been on an upward trend over the last 25 years. We are finding it increasingly difficult to keep unemployment down.