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Automation and Technology Increase Living Standards (and unemployment does not necessarily result)
By James Sherk and Lindsey Burke of The Heritage Foundation.
"Abstract
Many Americans worry that automation will significantly reduce the need for human employees. This is highly unlikely to happen. Automation reduces the need for humans in particular tasks, but employees have historically moved to new or different sectors of the economy as a result. Little evidence suggests this time is different. Technological advances have reduced the demand for employees in routine jobs and increased the demand for employees in non-routine jobs. They have not reduced the need for human labor overall. Further, the rate of automation has slowed over the past decade."
"Lump of Labor Fallacy
Fears of mass technological unemployment are predicated on a “lump of
labor” model of the economy—the belief the economy needs a roughly
fixed amount of work performed.[4]
In this economic model, machines automating work formerly done by
people reduce the total amount of work remaining for humans, reducing
total employment. Keynes forecast an impending crisis of unwanted
leisure. He suggested future societies would establish three-hour
workdays to give everyone enough work to avoid boredom.[5]
Almost all economists reject this model today. Economists have found
that an almost unlimited amount of potential work exists in the economy
because people’s material desires continue to expand. Virtually all
Americans today enjoy material living standards vastly better than the
wealthy of 1900. Nonetheless, most Americans today would purchase
additional goods and services if they received a raise or bonus.
Automation does reduce the human labor needed to produce particular
goods and services, but it also reduces production costs. Competition
forces firms to pass these savings on to their customers through lower
prices. These lower prices lead consumers to buy more of the now
less-expensive product and leave them with more money to spend
elsewhere, increasing the demand for labor in those sectors of the
economy. The amount of work in the economy expands to use the available
labor supply.
Economists strongly agree on this point. The University of Chicago
recently asked a panel of prominent economists whether they agree that
“advancing automation has not historically reduced employment in the
United States.” Over three-fourths expressly agreed with that statement,
and only one of the economists disagreed.[6]
America’s economic history illustrates how technology reallocates—but
does not eliminate—human labor. In 1910, approximately one-third of all
Americans worked on farms,[7]
food was expensive, and the typical family spent almost half its budget
on food. By 1960, technological advances such as the tractor had
reduced the proportion of Americans working on farms to well under
one-tenth.[8]
This transition did not lead to mass unemployment. Instead, former
farmhands began working in offices and factories. They enjoyed less
expensive food and newly available manufactured goods.[9]"
"Productivity data show that the pace of automation has actually slowed
in recent years. Over the past generation the earnings of less-skilled
Americans have risen faster than the economy-wide average.
Slow Productivity Growth. Businesses do not appear to
be automating human tasks at a faster rate than before. If they were,
this would increase measured labor productivity growth."
"computers have great difficulty performing non-routine tasks.
Although more fluid algorithms that take into account computer
“learning” possibilities are being refined, computers still do what
their program tells them to—and nothing else. Computer programmers must
specify in detail every contingency that the machine might encounter.
What often looks like computers adapting to their surroundings is in
fact them following very detailed operating instructions.[18]
Consequently, computers cannot handle many non-routine activities
that most people find straightforward. They are simply too complex for
their programs to account for every possibility. For example, Autor
points out that Amazon.com and other online retailers use human
“pickers” to identify, retrieve, and pack the goods that they ship their
customers."
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