Tuesday, November 3, 2015

"Technological Unemployment and the Future of Work"

From Irving Wladawsky-Berger:
Few topics are as important, - and as challenging to anticipate, - than the future of work given our justifiable fears of rising technological unemployment.  How are job markets likely to evolve in our 21st century digital economy?  This question has been widely discussed for years, but, - at the end of the day, - we don’t really have good answers.

One such discussion took place this past September at the The World Summit on Technological Unemployment in New York.  Its agenda featured top experts on the subject, including Larry Summers, Robert Reich and Joseph Stiglitz.  I moderated a panel on Technology and the Future of Work, where MIT economist David Autor and NY Times reporter John Markoff talked about their most recent work.  The Summit explored many good ideas, but there were no definitive answers.
Autor’s most recent paper on the subject, Why Are There Still So Many Jobs? The History and Future of Workplace Automation, frames the topic through a number of important questions, including:
  • Why hasn’t automation already wiped out a majority of jobs?;
  • Will mid-skill, mid-pay jobs continue to decline?; and
  • What’s the impact of AI, robotics and other advanced technologies?
Substitution versus Complementarities Nothing illustrates the impact of technology on jobs like the dramatic decline in the US workforce employed in agriculture - from 41% percent in 1900 to 2% in 2000.  Big declines also occurred in a number of other occupations.  Automobiles reduced the demand for blacksmiths and stable hands; machines replaced many manual jobs in construction and factories; and computers displaced a large number of record keeping and office positions.  Given that technologies have been automating human work for the past couple of centuries, - why are there still so many jobs left? 

The answer isn’t very complicated, although frequently overlooked.  As Autor succinctly puts it: “tasks that cannot be substituted by automation are generally complemented by it.”  Automation does indeed substitute for labor.  However, automation also complements labor, raising economic outputs in ways that often lead to higher demand for workers.  “[J]ournalists and even expert commentators tend to overstate the extent of machine substitution for human labor and ignore the strong complementarities between automation and labor that increase productivity, raise earnings, and augment demand for labor.”    

Most jobs involve a number of tasks or processes.  Some of these tasks are more routine in nature, while others require judgement, social skills and other human capabilities.  The more routine, rules-based the task, the more amenable it is to automation.  But just because some of the tasks have been automated, does not imply that the whole job has disappeared.  To the contrary, automating the more routine parts of a job will often increase the productivity and quality of workers, by complementing their skills with machines and computers, as well as enabling them to focus on those aspect of the job that most need their attention.

The advent of automated teller machines (ATMs) in the 1970s is a case in point.  By 2010, there were approximately 400,000 ATMs in the US.  But, not only were bank tellers not eliminated in that interval, but their numbers actually rose modestly from 500,000 in 1980 to 550,000 in 2010, driven by two major forces.  First, as a result of the reduced costs of operating a bank branch, - plus bank deregulation changes, - the number of bank branches rose significantly.  Second, by reducing the routine cash-handling responsibilities of their personnel, bank branches became more involved in providing relationship-based services to customers, including credit cards, loans, and investment options. 

Polarization in the US Labor Market 
Over the past two decades, Professor Autor has published a number of papers on the impact of technology on US jobs.  In The Polarization of Job Opportunities in the US Labor Market, he examined the changing dynamics of the US labor market by looking at 3 different segments...MUCH MORE