Robocalypse Now? Technology, Productivity and Employment
Is the Robocalypse upon us? asked MIT economist David Autor in his presentation at a recent Forum of European central bankers. His presentation was based on a paper co-written with Utrecht University economist Anna Salomons. “Is productivity growth inimical to employment?,” they asked in the paper’s abstract. “Canonical economic theory says no, but much recent economic theory says maybe - that is, rapid advances in machine capabilities may curtail aggregate labor demand as technology increasingly encroaches on human job tasks.”
Fears that machines will put humans out of work are not new. Throughout the Industrial Revolution there were periodic panics about the impact of automation on jobs, going back to the Luddites, - textile workers who in the 1810s smashed the new machines that were threatening their jobs. But, “In the end, the fears of the Luddites that machinery would impoverish workers were not realized, and the main reason is well understood,” noted a 2015 article on the history of technological anxiety.
“The mechanization of the early 19th century could only replace a limited number of human activities. At the same time, technological change increased the demand for other types of labor that were complementary to the capital goods embodied in the new technologies. This increased demand for labor included such obvious jobs as mechanics to fix the new machines, but it extended to jobs for supervisors to oversee the new factory system and accountants to manage enterprises operating on an unprecedented scale. More importantly, technological progress also took the form of product innovation, and thus created entirely new sectors for the economy, a development that was essentially missed in the discussions of economists of this time.”
Automation fears have understandbly accelerated in recent years, as our increasingly smart machines are now being applied to activities requiring intelligence and cognitive capabilities that not long ago were viewed as the exclusive domain of humans. “Previous technological innovation has always delivered more long-run employment, not less. But things can change,” said a 2014 Economist article. “Nowadays, the majority of economists confidently wave such worries away… Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently.”
To shed light on these automation fears, Autor and Salomons explored the relationship between productivity growth and employment by analyzing country- and industry-level data collected from 1970 to 2007 The data comes from 19 rich countries including the US, UK, Japan, Germany and France; and from 28 industries, which they combined into five mutually exclusive sectors: manufacturing; mining, utilities and construction; education and health services; capital intensive high-tech services; and labor intensive low-tech services.
Their paper addressed three major questions: Has productivity growth threatened employment, especially in advanced economies? What’s the impact of productivity growth on employment at the industry level? And, are there productivity implications for labor demand by skill group? Details of their analysis can be found in the paper and presentation. Let me attempt to summarize their key findings.
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Originally published at blog.irvingwb.com on July 17, 2017