Human vs. Digital Labor: Will The Results This Time Be Different?

Since the industrial revolution in England in the 19th century, many policy makers and the public at large have been concerned about the effects of automation on jobs.  For example in 1961, Time magazine published a provocative article entitled “The Automation Jobless,” which posited that efficient machines and productivity improvement would eliminate many low and semi-skilled jobs. As the figure below illustrates, private employment paralleled the growth in labor productivity (in the US) until the turn of the century/ millennium.

r1506d_mcafee_whenworkersfallbehind

Is this time different?  Has the age of technological unemployment arrived?  In their first book on this topic, Race Against the Machine (RAM 2011), Erik Brynjolfsson & Andrew McAfee (B & M) argue that until the 1980s, as shown above, technological improvement and workers’ incomes grew together .  In RAM, they opine we can again bring these two paths together; however, we must equip our labor force with skills to use these technological developments as we have done in the past.

In a second book (2MA, 2014), The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, B & M offer a more nuanced view. They argue that we should be grateful for the improvements brought forth by technology; however, we need serious policy changes, both short term and long term, to avoid further polarization of the labor force and an increased widening of the distribution of incomes.  They argue as follows:

Technological progress is going to leave behind some people, perhaps even a lot of people, as it races ahead.  As we’ll demonstrate, there’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value.  However, there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.”

For a short version of 2MA, read “The Great Decoupling: An Interview with Erik Brynjolfsson and Andrew McAfee” in the Harvard Business Review (June 2015) or watch and listen to Andrew McAfee’s talk on 2MA.

They are very optimistic about the future. Not everyone shares their optimism.  For example, see the debate posted here about whether secular stagnation has set in.  MIT economist David Autor, who has written extensively about polarization in the distribution of income and opportunities in the labor market, is also an optimist.  Listen to his TEDx talk based on “Why Are There Still So Many Jobs?  The History and Future of Workplace Automation” (Journal of Economic Perspectives Summer 2015.)

B & M argue that the good news is that androids (digital labor of various sorts) have freed laborers from much drudgery and toil.  In the words of Freeman Dyson (page 1 of 2MA)

Technology is a gift of God.  After the gift of life it is perhaps the greatest of God’s gifts.  It is the mother of civilizations, of arts and of sciences.”

The bad news is that much of this drudgery and toil enabled blue collar and some white collar workers to lead a comfortable middle income existence from which they could purchase and enjoy the fruits of this technology.  In addition, digital labor enables work to be placed where adding value is cheapest; thus, without changes in both policy and practice, technology and globalization will “conspire” to undermine the livelihoods of many households who do not possess the requisite skills to take advantage of these rapid improvements in technology.

To address this increased spread of incomes (in the West in general and in the US in particular), B & M argue that policy should not attempt to constrain technological improvements.  Of course, to not “kill the golden goose” of improved technology, both short term and long term policy changes are essential to ensure economic and social stability.  Some argue that the most recent Presidential election’s results were directly related to the increased spread in income distribution or, alternatively, that the workers in the middle of the wage scale have seen both their opportunities and wages decline and hope that changes in policy can reclaim these past opportunities (“back to the future?”). B & M encourage a more forward looking set of policies.

B & M stress that the “standard economic playbook” can help in the short run but that we need to be much more imaginative in our thinking about the long run.  In the near term, they suggest six objectives for public policy; all relate to generating economic growth that improves the prospects for workers and prospective workers.

  1. “Teach the Children Well” – use technology and incentives to better educate our children and better prepare them to contribute to the economy. Reducing the knowledge gap is essential to sustainably reducing the income gap cited above.
  2. “Restart Startups” – young companies tend to be the job generators. Some of these new businesses fill gaps in the supply chains for more mature companies.
  3. “Make More Matches” – reduce the search costs of frictional and structural unemployment to enable firms and prospective workers to more easily find each other.
  4. “Support Our Scientists” – governmental policy should encourage the development of general purpose technologies since the positive spillovers can’t be easily captured by individual private firms
  5. “Upgrade Infrastructure” – positive externalities of building and maintaining roads, bridges, ports, dams, airports, and air traffic control suggest a role for governments at various levels.
  6. “Since We Must Tax, Tax Wisely” – economists have reached a consensus regarding taxing negative spillovers (e.g., carbon taxes) and economic rents (e.g., incomes generated because of very limited or inelastic supply inhibit competition)

In a chapter that addresses long run concerns, B & M explore options such as a guaranteed basic income (including a negative income tax) as well as ways to encourage innovation and the development of wild ideas.  With regard to a guaranteed income policy, they warn us not to forget Voltaire’s observation that “Work saves a man from three great evils: boredom, vice, and need.”  They conclude this chapter with the following forward-looking vision for the developed world:

In the coming decade, we will have the good fortune to witness a wave of astonishing technologies unleased. They will require changes in our economic institutions and intuitions. By maximizing the flexibility of our systems and mental models, we will be in the best position to identify and implement these changes. A willingness to learn from others’ ideas and adapt our practices – to have open minds and open systems – will be the hallmarks of success.”

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