When Robots Eat Jobs

Comments on correspondence, via Dave Farber's IP list, about jobs.

In correspondence entitled "Stop Saying Robots Are Destroying Jobs—They Aren't", Robert Atkinson (president of the Information Technology & Innovation Foundation, a think tank based in Washington, D.C.) asserts that Erik Brynjolfsson and Andrew Macafee are in error in seeing economic disruption from computers. Brynjolfsson and Macafee see the erosion of employment accelerating as a consequence of Moore''s law - computers are becoming more powerful, more rapidly and thus more able to take over the functions previously reserved for humans in gainful employ.

But Atkinson sees this as in error because "when a machine replaces a worker, there is a second order effect: the organization using the machine saves money and that money it flows back into to the economy either through lower prices, higher wages for the remaining workers, or higher profits. In all three cases that money gets spent which stimulates demand that other companies respond to by hiring more workers."

There is so much to discuss here, and it's certainly good to see thoughtful commentary on this vital topic.

However, let's consider three points that Mr. Atkinson seems to ignore - the time it takes for economies to correct, the increasing concentration of employment, and what actually IS happening to profits and wealth.

Time

One aspect that Mr. Atkinson appears to be setting aside is that the corrective behaviors, a move toward economic equilibrium, expressed by his three cases would take time - and can take decades, even many decades. For an historic example, the economic disruptions caused by the first Industrial Revolution, first in Britain, resulted in widespread poverty, unemployment, underemployment, concentration of wealth, destruction of the environment, etc., as central England became the site of "satanic mills". The corrections in the economy included large-scale creation of adequate housing, and broadening of educational opportunity. But some of these adjustments took place over a century after the initial disruptions. Considering that that the economy will via these forces self-correct while very many thousands of semi-skilled workers will be unemployed or underemployed for longer periods because of these forces is inadequate in so many ways.

Lower prices, higher profits.

Also missing from Mr. Atkinson's analysis is consideration of the increasing concentration of employment. Today, nearly everyone on earth knows and has access to the same electronic brands, websites, .. .and increasingly clothing and so on. And increasingly, we all buy from the same shrinking pool of products. The pursuit of economies of scale and the benefits of the experience curve will mean that manufacture and distribution will likely continue to be concentrated in fewer firms. These firms will, of course, be employing fewer people per unit of output and often won't be employing much outside the geographic domains of their focus. Examples abound: Samsung's drive to be a $ trillion dollar company, the rise of Walmart, HonHai's 1.4 million employees, InBev's command of over 300 brands of beer, Amazon's rise in retail, ... It's unclear how the amassing of clout in these giant firms will result in overall higher wages, given the increasing asymmetry in supply of and demand for work.

Higher profits ... and more money circulating.

All economic analyses of the past decades show increasing fractions of GDP amassing in corporations and less going to individuals. And, the years since the 2007 - 2008 collapse have seen stagnation of real wages but resurgence of profits for large firms. As has been well noted elsewhere, an increasing part of accumulated corporate profit is being held as cash (and equivalents) and is NOT being spent, the money is actually not circulating - banks aren't lending, the consolidation of wealth in a smaller percentage of the world's population also restricts money flow, and employers aren't hiring at rates in any way sufficient to change this dynamic, and when they *do* hire, they are less and less inclined to hire "here".

Thus, it's not only that IT, computers, automation, robots are eating jobs. It's that these are not the only enormous factors eroding employment. It is time, as Dennis Paull noted, to be thinking about the social factors underlying our assumptions about work: people don't need jobs - they need income (aka purchasing power) in order to prosper in society.

There are indeed real reasons to be concerned about growing economic disparity, inadequate opportunity for future generations - and governments that can seem at once impotent to aid in these challenges while heavy-handed on the 'security' challenges.