Things cannot continue as they are. Yet change is speeding up. Manufacturing employment is shrinking around the world. Among other countries, China is moving even faster towards industrial robotics, an area in which German and Japanese manufacturers dominate. Last year Foxconn, the Shenzhen-based assembler for Apple, Nokia and others, said it was buying 1m robots in the next three years to substitute for workers performing repetitive manual tasks. At the other end of the spectrum, a restaurant in Harbin, northern China, last year became the first to be entirely waited on by robots. Last month, China opened the world’s first museum of 3D printing.The Siren Song of the Robot (Peak Prosperity):
The potential is huge. But in the developed world, the distribution of the benefits is unsustainable. The bulk of US jobs growth since mid-2009 has been in low-skilled areas, such as food preparation and domestic aides. In the second place is jobs growth in high-end services. Middle income jobs have cratered. According to the National Employment Law Project, low wage jobs (that pay between $7.69 and $13.83 an hour) formed 22 per cent of job losses in the recession but 58 per cent of recovery jobs since then – a mirror image of the picture for middle income jobs ($13.84 to $21.18).
Unsurprisingly, people are reverting to borrowing to stay in the game. Last week, Hero Wallet, a financial advisory firm, showed that one in four US workers were dipping into their retirement funds to meet current spending needs – in spite of the penalties that accrue. This usually involves taking out loans against their retirement accounts. The median income is almost 9 per cent lower today than when Mr Obama took office. It is unclear what he can do to prevent it from falling further, even if the US returns to a higher rate of economic growth.
The effects of technology are only just beginning to be felt in education and healthcare – the two most labour-intensive areas of the US economy that both suffer from productivity stagnation. Online education is beginning to spread. It is also meeting resistance. “The reactionaries in the faculties will eventually be grandfathered out,” says Tyler Cowen, co-founder of the Marginal Revolution University, which has pioneered free online learning in economics and other subjects. “We’ll still need Harvard as a dating service,” he jokes. “But the mid-level private universities do not know what is about to hit them.”
Even in healthcare, which reliably added jobs when every other sector was shedding them, technology is starting to look labour-saving. Last week, the Food and Drug Administration issued a patent to RP-Vita, the first “human interacting autonomous robot” for hospitals. Forget downloading diagnostic apps. At some point we will be boring Watson with our symptoms. For many of us there will be big gains. The most innovative teachers will be able to outsource lessons to the internet and focus on each child’s specific problems. The best doctors will be freed from basic diagnostics to do the same.
But the spread of the robots will leave a large and growing chunk of the US labour force in the lurch. In their excellent primer, Race Against The Machine , Erik Brynjolfsson and Andrew McAfee point out that in the contest between changing technology and education, the former is winning. Too few Americans are prepared. Some, such as Mr Cowen, fear many never will be. He believes the federal government should pay a basic guaranteed income to all Americans – a despairing view that accepts there will be permanent losers.
Mr Obama is more optimistic. In his first term, he set a target that the US should graduate every American by 2020. Even if that were possible, it may not be a panacea. Incomes for those with only a college degree have also stagnated since 2000 (and fallen for men). Yet a healthy economy cannot for long be upheld by a minority of its workforce.
At some point, policy makers will be forced to grapple with what is intuitively obvious – that sustained growth is inconsistent with declining middle class incomes. In their book, Brynjolfsson and McAfee cite a meeting between Henry Ford and Walter Reuther, the union leader. Pointing at his new robots, Mr Ford says, “How will you get union dues from them?” Mr Reuther replied: “How will you get them to buy your cars?”
During the past 30 years, Americans have been treated to a flood of cheap goods and outright deflation in most foreign manufactured items. Did this make us wealthier? Because that is the standard position of many economists.Raging (Again) Against the Robots (New York Times). Stuart Staniford comments: "Catherine Rampell is sceptical about the ability of robots/algorithms to displace people long-term. However, I didn't think the piece was very insightful and in particular doesn't take on the strongest arguments for why this time is different."
The developed world has learned over the past decade that a steady supply of cheaper, foreign-made goods does not guarantee prosperity. What impact will (perhaps only moderately) cheaper goods have if coupled with reduced employment as human labor is displaced by machines? If we are unable to find a higher use for the displaced human labor, we are actually worse off.
Will Robots Create Economic Utopia? (Bloomberg Businessweek):
Boosting the pay rewards to work at the same time is critical. One possible approach to this is expanding the Earned Income Tax Credit (EITC), the U.S.’s major antipoverty program. Families that include children and earn an annual income less than about $36,900 to $50,300 (depending on marital status and number of dependent children) are eligible for the federal EITC. University of Arizona sociologist Lane Kenworthy has proposed pushing the EITC higher up into the middle class. Instead of phasing out at a certain income level, it would simply become a flat benefit indexed to average compensation. “It’s insurance against the risk of wages falling so far behind,” says Kenworthy. “It’s a concept of social insurance with work at its core.”One graph that says much about America, and our future: the growth in jobs vs. food stamp use (Fabius Maximus)
For the past 300 years or so, the way the economy has distributed wealth is through jobs, with pay supplemented by union pressure, child labor laws, pensions, and other share-the-wealth strategies. The traditional method has been breaking down over the past few decades. Inequality has soared, and the Great American Job Machine has sputtered. We now have an opportunity to reverse the trend by expropriating the robots, computers, and algorithms. The challenge of our high-tech economy is how to take a hefty slice of wealth from the machines and offer ordinary people the reality of jobs with decent wages and compensation. That would be progress.
Health Care Aside, Fewer Jobs Than in 2000 (New York Times) Kinda contradicts her own article about how automation is nothing to worry about, above.
A World Without Work (Ross Douthat, New York Times)
IMAGINE, as 19th-century utopians often did, a society rich enough that fewer and fewer people need to work — a society where leisure becomes universally accessible, where part-time jobs replace the regimented workweek, and where living standards keep rising even though more people have left the work force altogether.How The Internet Is Making Us Poor (Business Insider)
If such a utopia were possible, one might expect that it would be achieved first among the upper classes, and then gradually spread down the social ladder. First the wealthy would work shorter hours, then the middle class, and finally even high school dropouts would be able to sleep late and take four-day weekends and choose their own adventures — “to hunt in the morning,” as Karl Marx once prophesied, “fish in the afternoon, rear cattle in the evening, criticize after dinner ...”
Yet the decline of work isn’t actually some wild Marxist scenario. It’s a basic reality of 21st-century American life, one that predates the financial crash and promises to continue apace even as normal economic growth returns. This decline isn’t unemployment in the usual sense, where people look for work and can’t find it. It’s a kind of post-employment, in which people drop out of the work force and find ways to live, more or less permanently, without a steady job. So instead of spreading from the top down, leisure time — wanted or unwanted — is expanding from the bottom up. Long hours are increasingly the province of the rich.
Of course, nobody is hailing this trend as the sign of civilizational progress. Instead, the decline in blue-collar work is often portrayed in near-apocalyptic terms — on the left as the economy’s failure to supply good-paying jobs, and on the right as a depressing sign that government dependency is killing the American work ethic.
But it’s worth linking today’s trends to the older dream of a post-work utopia, because there are ways in which the decline in work-force participation is actually being made possible by material progress.
That progress can be hard to appreciate at the moment, but America’s immense wealth is still our era’s most important economic fact. “When a nation is as rich as ours,” Scott Winship points out in an essay for Breakthrough Journal, “it can realize larger absolute gains than it did in the past ... even if it has lower growth rates.” Our economy may look stagnant compared to the acceleration after World War II, but even disappointing growth rates are likely to leave the America of 2050 much richer than today.
Everyone knows the story of how robots replaced humans on the factory floor. But in the broader sweep of automation versus labor, a trend with far greater significance for the middle class—in rich countries, at any rate—has been relatively overlooked: the replacement of knowledge workers with software.Andrew McAfee: Are Droids Taking Our Jobs? (TED Talk). Please pay special attention to his talk after the 7:00 mark. McAfee asks rhetorically "what have been the most important developments in human history?" McAfee throws out a number of possible answers - religions, empires, plagues, the opening up of the New World, intellectual achievements like advanced mathematics, and the flourishing of the arts and sciences during the Renaissance. He charts these developments on a timeline, and then overlays the global population and the human development index. His extraordinary conclusion: none of these things have mattered very much! He then says, "there has been one story, one development in human that bent the curve; bent it just about ninety degrees, and it is a technology story." He cites the technologies of the industrial revolution as the game-changer and quotes Ian Morris that they made " a mockery of all that had come before."
One reason for the neglect is that this trend is at most thirty years old, and has become apparent in economic data only in perhaps the past ten years. The first all-in-one commercial microprocessor went on sale in 1971, and like all inventions, it took decades for it to become an ecosystem of technologies pervasive and powerful enough to have a measurable impact on the way we work.
Sixty percent of the jobs in the US are information-processing jobs, notes Erik Brynjolfsson, co-author of a recent book about this disruption, Race Against the Machine. It’s safe to assume that almost all of these jobs are aided by machines that perform routine tasks. These machines make some workers more productive. They make others less essential.
His statement and his chart prove something else, though. Take a close look at his chart (at 8:55). What really bent that curve 90 degrees? Fossil fuels, that's what! And McAfee totally misses the boat here. I went to look for a copy of that graph, because it seems like the best one picture proof of the power of fossil fuels ever assembled. I could not find it, but I did find Andrew McAfee's blog.He makes a lot of the same arguments that I make here.
UPDATE: a screen capture of the slide: