Nearly all economic forecasts agree that high unemployment in much of the developed world will most likely persist for years to come. However, could even this dire projection underestimate future unemployment rates?
As improvements in computers, robotic technologies and other forms of job automation continue to accelerate, more workers are certain to be displaced and job creation will become even more challenging. Most economists dismiss concern that this might lead to long-term structural unemployment. Indeed, the idea often elicits outright derision. The conservative media in the US recently mocked US President Barack Obama for suggesting that automation might hurt employment growth. However, Obama was right to raise the question.
A very large percentage of jobs are, on some level, essentially routine and repetitive. It seems likely that, as computer hardware and software continue to improve, many of these job types will become susceptible to automation, particularly to machine learning.
This is not far-fetched science--fiction technology, but rather a simple extrapolation of the expert systems and specialized algorithms that currently land jet airplanes, trade autonomously on Wall Street or beat nearly any human being at chess. IBM’s Watson — the computer that prevailed on the TV game show Jeopardy! — suggests that machine-learning algorithms could soon be able to take on a number of cognitive tasks.
As this technology improves, the systems that it enables will begin to match or exceed the capability of human workers in many routine job categories — a group that includes many workers with college degrees or other significant training. Many service-sector workers will also be threatened by the continuing trend toward technologies that turn their jobs over to consumers.
One of the most extreme historical examples of technology--induced job loss is, of course, found in agriculture in developed countries. In the late 1800s, roughly three-quarters of all workers in the US were employed in agriculture. Today, the number is about 2 percent to 3 percent. Advancing mechanization eliminated millions of jobs.
Clearly, when developed countries’ agricultural sectors shed workers, long-term structural unemployment did not result. Workers were eventually absorbed by other sectors, particularly with the growth of industrial manufacturing, and average wages and overall prosperity increased dramatically — an excellent illustration of the so-called “Luddite fallacy.” This is the idea — generally accepted by economists — that technological progress will never lead to significant rates of long-term unemployment.
The reasoning is roughly as follows: As labor-saving technologies improve, some workers lose their jobs in the short run, but production becomes more efficient. That leads to lower prices for the goods and services produced, which in turn leaves consumers with more money to spend on other things, boosting demand — and employment — across nearly all industries.
The problem today is that we are not talking about rapid automation of a single economic sector like agriculture. When agriculture became mechanized, there were other labor-intensive sectors that could absorb millions of workers. There is little evidence to suggest a similar outcome this time around.
As more workers are automated out of more employment sectors, there must come a “tipping point,” beyond which the overall economy is simply not sufficiently labor-intensive to continue absorbing workers who lose their jobs because of automation (or globalization). Beyond this point, businesses will be able to ramp up production primarily by employing machines and software. Structural unemployment will become inevitable.
However, if automation is relentless, the basic mechanism for putting purchasing power into the hands of consumers will break down. Imagine a fully automated economy. Virtually no one would have a job or an income; machines would do everything. Long before we reached that point, mass-market business models would become unsustainable. Where would consumption come from? And, if it is still a market economy, rather than a planned economy, why would production continue if there were no viable consumers to purchase the output?
In developed countries, the most disruptive impact to the job market would come from substantial automation of the service sector, which now employs the majority of workers. In developing countries, the impact will be greatest in manufacturing and factories there already are rapidly putting in place labor-saving technology. For example, Taiwan-based Foxconn, a major electronics producer and employer in China, recently announced plans to introduce huge numbers of sophisticated manufacturing robots.
Unemployment resulting from automation in the Chinese manufacturing sector could ultimately complicate China’s efforts to rebalance its economy toward increased domestic consumption — an objective that most economists agree is critical for the country’s long-term prosperity. If consumers see only an economy in which jobs are relentlessly automated away and if it appears that additional education or training provides little protection, they will adjust their discretionary spending accordingly. Given their concerns about long-term income continuity, traditional policies like stimulus spending or tax cuts would be ineffective.
So, are we approaching the “tipping point” where automation fuels structural unemployment?
Most economists object that the very assumption that such a point exists is speculative. However, when one considers today’s advanced-country malaise — years of stagnating or declining wages for average workers, growing income inequality, increasing productivity and consumption supported by debt rather than income — there certainly seems to be ample reason to speculate.
Let us hope that a rigorous analysis of historical economic data does not arrive after the tipping point has been reached.
Martin Ford is the author of The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future.
Copyright: Project Syndicate
Unless Hollywood movies like Greenland, Deep Impact, and Armageddon have predictive powers and a rogue space rock is heading our way, stopping Chinese Communist Party expansionism is likely to prove the single most challenging and dangerous problem of our lifetimes. How can the United States, Taiwan, and other liberal democracies prepare for and prevent attacks from China? How can Washington bolster Taipei’s confidence when it doesn’t recognize Taiwan as a real country and, so far, lacks the political will to make major adjustments to its ossified China policy and Taiwan policy? How can Taiwan make itself heard on the world stage when
Hypersonic weapons are defined as armaments capable of traveling at speeds faster than Mach 5 and can be broadly classified into two types: hypersonic glide vehicles (HGV) and hypersonic cruise missiles. The former are launched into the upper atmosphere by ballistic missiles. The vehicle is then separated from the booster to maneuver, or glide, toward its target. The latter can be launched from a jet plane or rocket to reach supersonic speed before igniting a scramjet engine to achieve hypersonic speeds. As the US engages in a great-power competition with China and Russia, all three countries are racing to field hypersonic
The number of people emigrating from Hong Kong has been rapidly increasing, Hong Kong Census and Statistics Department data show, with the territory’s population dropping by 110,000 people from 2019 to this year. China’s imposition of a National Security Law has clearly triggered a massive population outflow. However, not only people but also foreign businesses are leaving Hong Kong. For example, Vanguard Group, the world’s second-largest asset management company, VF Corp and Sony Interactive Entertainment have moved their top regional management from Hong Kong to Singapore. LVMH Moet Hennessy Louis Vuitton, the world’s largest luxury goods company, has also relocated staff
Double Ten Day, Oct. 10 every year, is an important day for Taiwan, as it marks the Republic of China’s (ROC) National Day. Major holidays are usually a time for celebration and commemorative activities, but among all the clamor and excitement, Double Ten reflects one essential fact: that Taiwan is still not a normalized society. As usual, there was a large parade in front of the Presidential Office Building, displaying to the world Taiwan’s social diversity and its soft and hard power, and President Tsai Ing-wen (蔡英文) gave an address, relaying her message to the nation and to the world, while the