Jacob Barnard, MJLST Staffer
In the 1970’s, hundreds of millions of people starved to death – 65 million of them Americans. In the 1980’s, world oil production peaked and it was soon followed by the depletion of all available sources of lead, zinc, tin gold, and silver in 1990. To make matters worse, all computers stopped working on January 1, 2000. Fortunately, we were all put out of our misery when the world ended on December 21, 2012.
But now, after all of that, we must face a new threat. This one comes in the form of (killer)robots. That is correct; now, in addition to immigrants and other countries, robots are stealing our jobs.
Of course, this is not an entirely new threat. The industrial revolution threatened farmers through advancements in agricultural productivity, as well as increasing worker productivity in general. Yet, as economist Walter Williams explains, this was never actually a problem. In the United States, farmers were 90% of the labor force in 1790, but this decreased to 41% in 1900 (and is down to under 3% currently). All this means, however, is that increases in productivity allowed individuals who would have otherwise been farmers to seek employment in other fields (no pun intended).
Say’s law, commonly misunderstood as “supply creates its own demand,” can be more correctly understood through the insight of W.H. Hutt: “All power to demand is derived from production and supply. . . . The process of supplying—i.e., the production and appropriate pricing of services or assets for replacement or growth—keeps the flow of demands flowing steadily or expanding.” As each person becomes more productive, therefore, they are able to demand more in return for their increased production, which allows others to maintain their employment as well.
Empirical studies on the current effects of automation support this view of the situation as well. A 2017 study by Greggory, Salomons, and Zierahn with the Mannheim Centre for European Economic Research found that routine-replacing technological change accounted for a net increase in labor demand of about 11.6 million jobs across 27 EU countries from 1999-2010 (in comparison to a total growth of 23 million jobs over the same period). In 2015, Graetz and Michaels, working with the Centre for Economic Performance, found “the increased use of robots raised countries’ average growth rates by about 0.37 percentage points. We also find that robots increased both wages and total factor productivity. While robots had no significant effect on total hours worked, there is some evidence that they reduced the hours of both low-skilled and middle-skilled workers.”
This last point is what may create an actual problem. Automation is unlikely to eliminate employment as we know it, but it will likely require a shift away from low-skilled labor. Like the farmers of the 18th and 19th centuries, many low-skilled workers may find their specific jobs being eliminated in favor of more technical employment. If people are given incentive to avoid this shift, it may result in unnecessary hardship for low-skilled workers.
Predictably, this has led some to advocate exactly that. A universal basic income, as suggested by Elon Musk and others fearing a robot takeover, would only give low-skilled workers greater incentive to avoid investing in their educations, slowing the increase in human capital that would maintain high levels of employment as automation becomes more prevalent.
A more reasonable policy recommendation would be to amend the tax code to reduce the disincentive to enter new fields of employment. Currently, education expenses for entering a new trade or business are not deductible. In addition, expenses incurred seeking employment in fields other than an employee’s current trade or business are not deductible because they are not “carrying on” the trade or business when they incur the expense. Simply allowing these two deductions would make it easier for workers to adapt to the changing demands of an evolving economy.
Even if these changes are not enough and the Luddites are correct about robots stealing all of our jobs, there still would not be a problem because there will be plenty of lucrative work available as robot-smashers.