Robots will take all of our jobs. But who will benefit from their work?

Artificial intelligence is quickly mastering tasks like teaching, driving, writing, and medicine that were once safely the domain of humans. As this trend continues it will bring major economic changes. Technological advance could result in unemployment and misery if handled incorrectly, or unprecedented leisure and prosperity if handled well.

This is not a new dilemma, but so far, technological advance has had the biggest impact on the poor and those with low levels of education, politically powerless groups. Perhaps the best place to start the story is with the Luddites, a group of cloth-workers whose jobs were being replaced by machines during the late 1700s. Now, these were skilled workers who suddenly found their skills were no longer needed in the economy. As it turns out, the machines of the industrial revolution eventually led to rising prosperity, but the benefits were not immediate and the short term transition left thousands of workers unemployed and unable to feed their families.

There is a saying among many businesses that people are their most important resource. This used to not only be something nice to say to employees, but an economic truth. The employees of a business really were the most productive resource and investments in morale and education were crucial to running a successful business. However, as technology has changed, capital investments have become more important in many businesses, resulting in a global shift in which capital takes home a growing share of profits.

Historically, countries have used two solutions to cope with the instability caused by technological innovation: job retraining and education; and a social safety net. Our current situation challenges both of them. As tasks like writing and diagnosing illnesses are taken over by computers, there may not be jobs to be retrained for that haven’t already been taken over by computers. The safety net is also under attack as an increased concentration of wealth leads to increased political power and a backlash against government programs that combat poverty.

The root of the social problem is the disconnect between productivity and wages. While productivity has soared, average wages have risen, median wages have risen slowly, median hourly wages have inched up, and median wages for men have been stagnant. (One reason for this is industries like construction and manufacturing that are dominated by males have been hit the hardest by technological change and globalization). The Economic Policy Institute shows this break up between productivity and median wages since 1973:

EPI graph of productivity and sev wages

The picture is actually even worse if we break it down by education levels and account for the fact that many men have left the workforce altogether or been forced to work part time instead of full time. The Milken Institute finds that median wages among males with only a high school education fell by 47 percent between 1969 and 2009. Even those with college degrees had real wages fall by 12 percent once one accounts for the full male population and not only those working:

Male Earnings 1969-2009

Unfortunately, there isn’t a straightforward solution. New technology can make our lives easier and eliminate unpleasant tasks. That’s a good thing, as long as the gains are shared in a way that alleviates human misery rather than increasing it. As a practical matter, I’m not sure how to best accomplish that. We do need to maintain a strong safety net to help in the transition, but that’s a temporary solution, not a permanent one. What definitely needs to happen is an open debate about the ways in which technology is changing the economy. Consider that debate open. Leave a comment if you have ideas for how to best handle the changing economy.

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