Q: Will the explosion in computer/robot/machine ability result in mass unemployment this time, even though previous technological revolutions haven’t?
A: Past revolutions in technology–steam, industrial and agricultural machines, electricity–haven’t resulted in mass unemployment, but the key question is why. Essentially, what happened was metal stamping machines eliminated the jobs of blacksmiths, but workers were still needed to run, maintain, and attend to the metal stamping machines. We simply kept building more and more metal stamping machines, and other machines, until we soaked up all of the unemployed workers. And since the new machines produced so much more, there was a big incentive to keep making more of them until you started running out of workers to man them, and wages got driven up too high, even given the great new production that could come from the machine/man partnership. As a result, wages, particularly for the unskilled, eventually rose to unprecedented levels.
So you might say: That will happen today too! Advanced robots and computers will take a large percentage of current jobs, but we will just keep producing more and more robots and computers, and so we will need more and more human workers to attend to, maintain, and work with them! The key problem this time is there’s a serious bottleneck. You simply cannot produce more computers and robots, and do high-tech production with them, without skilled humans — and a far higher proportion of skilled-to-unskilled workers than in past production processes. You need engineers to set up and coordinate the factory, MBAs and CPAs to manage the business functions, computer programmers to program and monitor the computers, and so on, before you can build another factory, store, or facility that will employ some more of the unskilled to do attendant functions: janitorial, moving and maneuvering supplies, etc. So, if you want to soak up the billions of unskilled and low skilled laborers in the world, you need an unprecedentedly large number of skilled workers, otherwise the unskilled are only able to do primitive production, and with little or no wealth for needed raw materials and primitive facilities and tools. And on top of this, the functions of unskilled humans that are complimentary and necessary to computers, robots, machines, and the skilled — basically the ability to sense, maneuver, and communicate freely and well — are finally being mastered by robots. These robot abilities will likely explode into the realm of science fiction in the next decade or two. During past technological revolutions the United States made unprecedented public investments in education, but today, after a generation of dominant anti-government ideology, we move backward right when we need to leap forward. The first Nobel Prize winner in economics, Jan Tinbergen, famously said that inequality was a “race between education and technology”. So unless we invest dramatically in education and mental development, starting prenatal, it will be different this time. There will be massive numbers of low-skilled people unnecessary for the new high-tech production. There will thus be no work for them to do other than primitive production methods, but now with no facilities or skilled workers provided to aid them, and little raw materials, as these resources will all go to the new high-tech production, unless the low-tech workers accept wages that can compete with robots and computers that can produce for less than minimum wage, even pennies per hour. The result will be subsistence market wages, or less, for most of the low-skilled — and that’s most of the current American and world populations. For more on this, I have a guest post at the blog of Berkeley economics PhD student Carola Binder.
—Richard H. Serlin is an adjunct professor at the University of Arizona where he teaches one of the largest personal finance courses in the country. He is president and co-founder of National Personal Finance Education and has been known to garner shout-outs from the likes of Paul Krugman and Ezra Klein.