Debate: The End of Jobs

Here at Yet, Freedom!, we warned years ago that robots and artificial intelligence pose grave threats to human jobs. Now Alex Tabarrok, our old classmate, and Tyler Cowen, our old professor, have filmed a lively debate on the subject.

Alex says that labor saving technologies in the past did not cause a net reduction of jobs, because they opened opportunities for new areas of employment that did not previously exist.

The jobs of today were unheard of even ten years ago. Think about all of the people writing apps for those smart phones that we have. Those jobs were unheard of before. There will be new jobs in the future that you and I can’t even imagine today.

What Alex says has always been true. For more than 200 years, machinery and automation have generally been beneficial to labor by increasing wages and improving working conditions. Two hundred years ago, about 90 percent of people were farmers; now only 2 percent are. The disappearance of those farming jobs did not leave people with nothing to do, because new jobs were created that people centuries ago could never have imagined.

The problem is that, while Alex’s argument is correct about the past, it’s not necessarily true about the future. For the first time, things are different. Instead of merely replacing manual labor, machines now are threatening even highly intellectual jobs like being a lawyer or an anesthesiologist.

As Tyler points out, labor market data suggest that, this time, things are different. Labor force participation is falling, and wages are stagnant. Alex, however, dismisses this evidence.

Alex and Tyler posted this debate about six months ago, but a new study published just last month supports Tyler’s position. Daron Acemoglu of M.I.T. and Pascual Restrepo of Boston University found, somewhat to their surprise, that industrial robots depress both employment and wages.

The paper is all the more significant because the researchers, whose work is highly regarded in their field, had been more sanguine about the effect of technology on jobs. In a paper last year, they said it was likely that increased automation would create new, better jobs, so employment and wages would eventually return to their previous levels. Just as cranes replaced dockworkers but created related jobs for engineers and financiers, the theory goes, new technology has created new jobs for software developers and data analysts.

But that paper was a conceptual exercise. The new one uses real-world data — and suggests a more pessimistic future. The researchers said they were surprised to see very little employment increase in other occupations to offset the job losses in manufacturing. That increase could still happen, they said, but for now there are large numbers of people out of work, with no clear path forward — especially blue-collar men without college degrees.

The economists looked at the effect of robots on local economies and also more broadly. In an isolated area, each robot per thousand workers decreased employment by 6.2 workers and wages by 0.7 percent. But nationally, the effects were smaller… each robot per thousand workers decreased employment by three workers and wages by 0.25 percent.

So each robot eliminates three jobs. And keep in mind those are net jobs in the overall economy, not just jobs at the plant where the robot is introduced. The net effect on jobs takes into account those new jobs, as Alex points out, made possible by the robots. New jobs are needed to make and service the robots, but moreover, the robots create jobs by decreasing costs. By lowering costs, the robots leave people with more money to spend on other goods, which can expand employment in other industries. But even after accounting for new jobs, Acemoglu and Restrepo still found a net loss of three jobs for each robot.

Alex’s view of the effects of technology is the optimistic one, and I hope he is right. His argument has always been correct in the past. The latest evidence, however, suggests that the past might not serve as a useful guide to the future.

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