Category Archives: Social Policy

Will The Economy Always Create New Jobs For Humans?

Will machines proceed to take most of our jobs away from us over the next few decades?  Whenever I suggest this I tend to get two very specific counter-replies. Here’s the first:

Reply #1: If we automate burger flipping, we’ll still need people to fix the burger-flipping machines.

Reply to the reply: There’s still a large net loss of jobs. If a burger flipping machine replaces 5 human burger flippers, and a service tech can provide ongoing service for 20 machines, then there are 100 burger-flipping jobs lost for every job re-gained in the form of burger-flipping-machine-service-technicians.

Of course, we should also account for those who will manufacture the machines, sell and market the machines, and perform administrative tasks for the company that makes the machines. But the jobs lost will probably still outweigh the jobs gained by a healthy factor.

And that leads to the second counter-reply:

Reply #2: When new technology displaces workers in one area of the economy, the economy always adjusts and finds places for the displaced workers in other sectors (or new sectors) of the economy.

When farm seeding machines, harvesters, fertilizers, and pesticides came along, it reduced the agricultural sector of the economy from about 50% of workers down to about 2%. Where did all those workers go? Well, they found other jobs. They became factory workers, clerical workers, scientists, and eventually burger flippers. It might not have happened instantly, but the economy eventually created new jobs to replace the old ones.

So we’re good, right?  The economy always creates new jobs to replace old jobs.

Well, not so fast.

Reply to the reply: It all depends on gamma.  Gamma? Yes, gamma? What’s gamma? I just made it up.  Well, what is it? I’m glad you asked.

gamma = alpha/beta.

Ok, well then, what are alpha and beta?

Alpha is the rate at which the economy creates new human jobs.

Beta is the rate at which new technologies displace human jobs.

So gamma is the ratio of jobs being created to jobs being destroyed. If gamma > 1, then we’re probably in good shape (depending on how fast the labor pool itself is growing). If gamma < 1, then we’re probably in trouble.

And there are two reasons to think that gamma might turn permanently long-term negative, meaning the demand for human labor will more or less continue to fall steadily into the future (with some occasional reversals here and there).

  1. Our machines are getting closer and closer to being able to do anything we can do.
  2. The pace of innovation is increasing. (As computers have been getting more powerful and better connected, the number of things they are able to do has been growing exponentially.)

Those two facts put together suggest that we will eventually reach a point where a new human job can be replaced very soon after it is created. (Imagine that 6 months after a burger flipping machine is created, a burger-flipping-machine-repair-machine is created).

So, yes, the economy will continue to replace old jobs with new ones. But how many of those new jobs will be done by humans? Eventually, say we, almost none of them.

Do these two reasons hold water? That’s the question. Some would say that we are already seeing the effects of technology driving down the value of human labor. Wages have been stagnant for 40 years while productivity has doubled. And labor participation rates have fallen steeply over the last 10 years.

How much of that is due to automation (as opposed to, say, outsourcing, or reducing demand through trickle-down economics)? Who knows?

I don’t mean to settle the debate about machines taking our jobs here. I mean only to frame the debate by causing people to think about gamma, and to do away with two of the most common objections to the view that the machines are coming for our jobs.

Shaming the Unemployed

When there are 20 million people looking for work and 4 million job openings, it seems ignorant and cruel to blame individuals for remaining unemployed for a period of time.

You can likely tell a story of one person who worked their butt of pounding the pavement, willing to do “anything”, who found a job within a week that was well below their experience and training level, and paid a wage they would have trouble living on. You could tell that story and hold that person up as a role model to be followed.

But that’s the kind of story you would expect to hear from an oligarch looking for slave labor. And it does nothing to change the fact that there are still 20 million people trying to fill 4 million often-crummy slots.

Times like these require imagination and big picture thinking, not zoomed-in, nit-picking blame of individuals who are already down on their luck.

An Economic Parable

In a healthy forest . . .

. . . there are many large trees. There are even more shrubs growing between the trees. And there are even more small plants (ferns, tubers, grasses, flowers, moss, etc.) growing between the shrubs.The tallest trees consume many nutrients in the soil to fuel their growth, and they tend to crowd out or shade out many smaller plants and trees. But they also tend to go deep for their nutrients and shed some of their mass every year (in the form of leaves and needles), so smaller plants and smaller trees will have plenty of nutrients available at the surface.And when a big tree dies, it returns all of its mass to the soil to feed the next generation of plants.

That’s how a healthy forest works.

Imagine what would happen to the health of the forest if the tallest trees forgot where they came from, if they forgot that they too once relied on the surface nutrients provided by the plants that went before them.

Imagine what would happen if they suddenly said, “we’re tired of giving, giving, giving to all the takers at the bottom.” Imagine what would happen if they refused to shed their leaves and needles. Imagine what would happen if they refused to rot when they died.

Over time, I tell you truly, this lush forest would turn to desert.

The analogy, of course, is not perfect. But the imagery is vivid, and it drives home two points: 1) those who are currently wealthy have themselves benefited greatly from redistribution in the past, and 2) the system is more likely to be healthy when there is adequate flow at all scales.

Envy and Merit

The difference between admiration and resentment is fairness.

If someone has a better life than we do, and they deserve it more than we do, we admire them. If someone has a better life than we do, and they don’t deserve it any more than we do, then we resent them (or we resent the system, or the fates).

We can tolerate inequality when it is earned. We can even tolerate it to some degree when it is produced by luck. But when it’s produced by a system that favors some over others for no obvious merit-based reason, then we begin to seethe with the corrosive kind of envy. And we begin to dream of toppling the system.

Capitalism 3.0

I take capitalism as a given, at least for the foreseeable future. Its roots lie in the same instinct that makes one child trade her corn dog for a second orange juice, and another child trade her orange juice for a second corn dog on the playground. Our complex economy emerged out of those instincts and has grown more powerful as our transportation and communication technologies and networks have grown. The current incarnation of capitalism produces much harm, but also much good. We should try to keep the good and eliminate the harm to the best of our ability.

Capitalism can serve us well if we:

  1. regulate industry intelligently,
  2. redistribute an adequate portion of the profits, and
  3. insulate our democratic institutions from the influence of big money.

We once did a better job of carrying out those three missions. And those who were privileged to do so enjoyed the benefits of a strong middle class and realistic dreams of upward mobility. At the very least we need to get back to where we were, but bring everybody along this time. We should also strive to make further improvements.

We should develop better forms of tax and transfer. We should aim for transfer programs, like a citizen’s dividend, free universal basic health care, and free universal higher education for those who qualify on merit. Such programs don’t require the have-nots to abase themselves before the haves. And we should aim for tax policies that tax the wealthiest and not the poorest. Progressive income, consumption, inheritance, and capital gains taxes are better than sales taxes, lotteries, and flat taxes (or even corporate taxes — more on that another time).

We should be more deliberate about separating the public-protecting and market-promoting functions of our government. And we should regulate better to ensure competition, protect the environment, and protect third parties from a greater range of harms.

With these changes (and a few others) we could have a robust capitalist system where people can still get filthy rich with hard work and great ideas. But they would have to return much of their wealth to the tribe when they’re done with it. More people would have a chance to be well off. Poverty (and its symptoms, such as drug abuse, suicides, and property crime) would be dramatically reduced. The economy would grow. Small businesses would thrive. The environment would improve. Average happiness would go up. Our people would be better prepared for the future. And the government would be more responsive to the will of the people.