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The Age Old Question of Technology and Job Loss

The Information Technology and Innovation Foundation hosted a debate this morning on whether technological advancement has led to persistent job losses in the economy. The Foundation’s President, Robert Atkinson, faced off against Andrew McAfee, the author of a recent book on the topic and a researcher at MIT’s Sloan School of Management.

McAfee began the debate by running through a number of economic trends that could be linked to technological change. He explained that over the past 30 years, only college graduates have seen growth in wages, while everyone has seen their wages stagnate. At the same time, corporate profits have skyrocketed while labor’s share of income is at all time lows. The top 0.1%’s share of income has increased substantially over the past half-century as well.

These trends, McAfee argued, demonstrate the decoupling of productivity from wage and job growth. In particularly the disruptive advancements in information and technology, most notably with the advent of the personal computer, is a major driver of this decoupling. As productivity has continued to grow, wages have stagnated and the rate of job growth has decreased.

Atkinson pushed back on a number of these points.

“There is zero relationship logically between job growth and productivity,” he said. McAfee presented a correlation between those economic indicators, but had not proven causation. Atkinson joked that it was as if saying that job growth was strong during the 1990s when the New York Yankees consistently won the World Series, but fell off afterwards when the Yankees were no longer winning. But no one would argue that the Yankees recent struggles are the cause of poor job growth. It’s just a coincidence.

Atkinson noted that many people believe technological growth is to blame for poor job growth, because it is an appealing explanation. But these theories only look at first-order effects.

“The reason why we see productivity leading to more jobs is second-order effects,” he said. These second-order effects include such things as new industries that pop up from technological growth or the lower prices that consumers see around the economy, leading to more consumption and stronger job growth in other sectors.

This debate comes up every time job growth falls off, Atkinson said, with each generation thinking that its technological advancement is a new phenomenon wreaking havoc on the labor market.

“We always think our own era of technological progress is the best,” he said. “In fact, it is not the best.”

This was a major point of contention between the participants. McAfee argued that we are rapidly heading for a world where robots replace a large portion of the jobs in the American economy, even for such hard-to-automate positions as airline pilots or doctors. Atkinson could not imagine such a world where airline pilots didn’t exist. They will always have to be on airplanes in case something goes wrong, he said.

But even more than this, Atkinson argued, is that looking at specific industries ignores the effect on technology on the entire labor market.

“You can’t look at individual sectors and extrapolate to the whole economy,” he said.

McAfee emphasized that his analysis was not focused on individual industries, but on the labor market as a whole. Atkinson may be unable to imagine a world with robot airplane pilots, but McAfee would not rule anything out.

“The only thing I’ve learned about technological progress after studying it for a while is never say never,” he said.

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Categories: Economic Policy, Economy
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