Automation is not killing jobs
Despite doomsday scenarios of robot replacements, employment opportunities are being created for humans
he recovery from the crisis of 2008 has been one of the weakest on record, but never in post-war history has so little growth created so many jobs. The unemployment rate in the developed world is down to 5.5 per cent and approaching a 40-year low.
This flies in the face of all the dire warnings about a “jobless future”.
There are jobs, jobs everywhere. Unemployment in Germany is now lower than at any point since the country reunified in 1990. It is hitting lows last seen in 1975 in Britain and 1994 in Japan. The US jobs report Friday showed a slip in job creation, a result of the devastation of the recent hurricanes, but unemployment dropped yet again, to just 4.2 per cent from 4.4 per cent, both lows rarely seen in the past half-century.
How is it that the aftermath of 2008 could do so much damage to the economy, yet lead to such a low unemployment rate? One answer is demographics: The world is ageing, and the number of people entering the workforce every year is slowing sharply. A striking example is Japan, which has one of the oldest and most rapidly ageing populations in the world; the economy is barely growing, but the jobs market is booming, and unemployment is now under 3 per cent.
The other basic answer is churn. The popular angst about jobs focuses on shuttered stores along Main Street and factories in the Rust Belt but overlooks the new openings. Many of those new jobs are in fields that require creativity, language or motor skills not possessed by robots, like gardening, nursing, teaching and software programming.
The pessimist’s basic mistake is to focus too much on what is lost to competition and technology, and too little on what is gained.
Over the past 25 years, as McKinsey & Co. has pointed out, about a third of the new jobs created in the US were types that did not exist or barely existed 25 years ago.
In the natural world, matter is neither created nor destroyed, but things are transformed. The same is true in the economic world. When new technology destroys, it leaves behind a layer of ash in which new jobs grow.
In New York City the car replaced the horse carriage within the first 15 years of the 20th century, killing off the carriage trade and giving birth to the taxi trade — as well as to highly paid auto mechanics. Uber threatens the taxi trade, and the self-driving car threatens the Uber driver.
But it has also brought multimillion dollar signing bonuses for self-driving-car engineers and created new opportunities for mechanics. People tend to find a way to work with and profit from new technology.
Doomsayers argue that Uber epitomises the problem: Yes it creates new jobs, but they are mainly low-wage, part-time and without much in the way of benefits. Even the better jobs, like self-driving-auto engineer, are so few that they only widen the gap between the haves and have-nots.
Wage hikes
No doubt, the boom in jobs has not yet been accompanied by a meaningful increase in wages for most workers. But one reason goes back to demographics: More highly paid older workers are retiring, holding down the average wage.
Another is the opening of China, which flooded the global market with new workers — but that one-time impact is receding. Janet L. Yellen, chairwoman of the Federal Reserve and a labour economist, has been sceptical about signs of improving wage growth. But she noted in late September that by some measures, wages “have clearly picked up”.
The percentage of companies that report difficulty finding qualified workers is back to levels last hit before the Great Recession, and many have responded with plans to increase wages and signing bonuses. The latest US jobs report confirmed her optimism, with hourly wages rising 2.9 per cent from last year, the fastest rate yet recorded in this recovery.
The dire view taken by economic populists and writers denouncing the rise of the robots is no longer the view of most American households. The share of workers who are in part-time jobs has actually been falling since 2010, and the number of reluctant part-time workers — those who would prefer full-time work — has fallen to 5 million from around 9 million.
The number of discouraged workers — people who have given up looking — has fallen back to levels last seen before the 2008 recession.
At the same time, the share of households who say “jobs are plentiful” is at the highest level in nearly two decades. A new Pew Research survey shows that most Americans do not think automation threatens their own jobs. And over the past 20 years, at least some of the industries that have created the most jobs are also quite well paid, including professional services, management consulting and computer systems design.
US consumer confidence, which often reflects trends in the job market, is at a peak surpassed only a few times since the early 1960s.
There are still reasonable questions about whether many jobs of the future will be well paid. But there is no evidence to support forecasts of a nearly jobless future.
If robots threatened human labour, human joblessness would be growing. But it’s not. In fact, since 2008, job growth has been strongest in countries like Germany and Japan, which deploy the most robots.
The pain being felt right now is a symptom of rapid churn, as old industries retreat and new ones emerge. It is no accident that dystopian visions of a jobless future are often reported from Rust Belt cities or rural towns, where manufacturing is indeed dying and good jobs are far from plentiful.
But at least some of the workers laid off by shuttered Main Street stores have been hired by Amazon warehouses, which can pay higher wages — all because they work with robots that make them much more productive.
Today, many politicians and editorial writers frame every policy proposal, from cutting taxes to raising trade barriers, in terms of the number of jobs it will create. But they should recognise that while the world faces many problems, from rising inequality to angry economic populism, job creation is not one of them.