If the Robots Are Putting People Out of Work, Why Doesn't It Show Up in the Data?

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Monday, 15 July 2013 04:43

A lot of people are making their living these days telling us that we aren't going to have any jobs because robots are going to do all the work. In this great country of ours, many are also making a very good living telling us that we are doomed by demographics, because we will not have enough children to support a growing population of retirees. And then we have those like Robert Samuelson who get paid to do both.

Here he is presenting the argument from Erik Brynjolfsson and Andrew McAfee, two M.I.T. professors who are the main promulgators of the robots will make us all unemployed story. He quotes from an M.I.T. journal:

"The MIT academics foresee dismal prospects for many types of jobs as these powerful new technologies are increasingly adopted not only in manufacturing, clerical and retail work but in professions such as law, financial services, education and medicine,"

He then tells us how this is playing itself out now:

"The digital revolution could stymie job growth.

"Unfortunately, the Great Recession abetted this protective psychology. This keeps unemployment up. Companies didn’t just fire workers; they also went on a hiring strike."

Okay, we have an easy way of testing whether protective psychology is discouraging firms from hiring. Increasing hours and hiring more workers are alternative ways to meet labor demand. If psychology is discouraging firms from hiring workers in contexts where they otherwise would, then they must be increasing hours.

But they aren't. The average workweek was 34.5 hours in June, a hair less than the pre-recession average. So much for the psychology.

Then we get this great line about how the economy is getting less dynamic with slower productivity growth.

"Haltiwanger [University of Maryland economist, John Haltiwanger] sees the economy becoming less dynamic. Young firms less than five years old create a huge number of new jobs, but the rate of business start-ups has declined — and with it, new jobs. In the late 1980s, start-ups’ share of net job creation was nearly half; now, it’s just below 40 percent. The causes of the slump in start-up firms are unclear. Some candidates: an aging society, government regulations, more risk-aversion."

So there you have it, digital technologies are going to replace all the workers at the same time that an aging society will make the economy less dynamic. Now that is a serious set of problems.