Technological unemployment

Technological unemployment is the loss of jobs caused by technological change. It is a key type of structural unemployment.Lawrence SummersAlex TabarrokProf. Mark MacCarthy (2014) Technological unemployment is the loss of jobs caused by technological change. It is a key type of structural unemployment. Technological change typically includes the introduction of labour-saving 'mechanical-muscle' machines or more efficient 'mechanical-mind' processes (automation). Just as horses employed as prime movers were gradually made obsolete by the automobile, humans' jobs have also been affected throughout modern history. Historical examples include artisan weavers reduced to poverty after the introduction of mechanized looms. During World War II, Alan Turing's Bombe machine compressed and decoded thousands of man-years worth of encrypted data in a matter of hours. A contemporary example of technological unemployment is the displacement of retail cashiers by self-service tills. That technological change can cause short-term job losses is widely accepted. The view that it can lead to lasting increases in unemployment has long been controversial. Participants in the technological unemployment debates can be broadly divided into optimists and pessimists. Optimists agree that innovation may be disruptive to jobs in the short term, yet hold that various compensation effects ensure there is never a long-term negative impact on jobs, whereas pessimists contend that at least in some circumstances, new technologies can lead to a lasting decline in the total number of workers in employment. The phrase 'technological unemployment' was popularised by John Maynard Keynes in the 1930s, who said it was a 'only a temporary phase of maladjustment'. Yet the issue of machines displacing human labour has been discussed since at least Aristotle's time. Prior to the 18th century both the elite and common people would generally take the pessimistic view on technological unemployment, at least in cases where the issue arose. Due to generally low unemployment in much of pre-modern history, the topic was rarely a prominent concern. In the 18th century fears over the impact of machinery on jobs intensified with the growth of mass unemployment, especially in Great Britain which was then at the forefront of the Industrial Revolution. Yet some economic thinkers began to argue against these fears, claiming that overall innovation would not have negative effects on jobs. These arguments were formalised in the early 19th century by the classical economists. During the second half of the 19th century, it became increasingly apparent that technological progress was benefiting all sections of society, including the working class. Concerns over the negative impact of innovation diminished. The term 'Luddite fallacy' was coined to describe the thinking that innovation would have lasting harmful effects on employment. The view that technology is unlikely to lead to long term unemployment has been repeatedly challenged by a minority of economists. In the early 1800s these included Ricardo himself. There were dozens of economists warning about technological unemployment during brief intensifications of the debate that spiked in the 1930s and 1960s. Especially in Europe, there were further warnings in the closing two decades of the twentieth century, as commentators noted an enduring rise in unemployment suffered by many industrialised nations since the 1970s. Yet a clear majority of both professional economists and the interested general public held the optimistic view through most of the 20th century. In the second decade of the 21st century, a number of studies have been released suggesting that technological unemployment may be increasing worldwide. Oxford Professors Carl Benedikt Frey and Michael Osborne, for example, have estimated that 47 percent of U.S. jobs are at risk of automation. However, their findings have frequently been misinterpreted, and on the PBS NewsHours they again made clear that their findings do not necessarily imply future technological unemployment. While many economists and commentators still argue such fears are unfounded, as was widely accepted for most of the previous two centuries, concern over technological unemployment is growing once again. A report in Wired in 2017 quotes knowledgeable people such as economist Gene Sperling and management professor Andrew McAfee on the idea that handling existing and impending job loss to automation is a 'significant issue'. Regarding a recent claim by Treasury Secretary Steve Mnuchin that automation is not 'going to have any kind of big effect on the economy for the next 50 or 100 years', says McAfee, 'I don't talk to anyone in the field who believes that.' Recent technological innovations have the potential to render humans obsolete with the professional, white-collar, low-skilled, creative fields, and other 'mental jobs'. The World Bank's World Development Report 2019 argues that while automation displaces workers, technological innovation creates more new industries and jobs on balance. All participants in the technological employment debates agree that temporary job losses can result from technological innovation. Similarly, there is no dispute that innovation sometimes has positive effects on workers. Disagreement focuses on whether it is possible for innovation to have a lasting negative impact on overall employment. Levels of persistent unemployment can be quantified empirically, but the causes are subject to debate. Optimists accept short term unemployment may be caused by innovation, yet claim that after a while, compensation effects will always create at least as many jobs as were originally destroyed. While this optimistic view has been continually challenged, it was dominant among mainstream economists for most of the 19th and 20th centuries. For example, labor economists Jacob Mincer and Stephan Danninger develop an empirical study using micro-data from the Panel Study of Income Dynamics, and find that although in the short run, technological progress seems to have unclear effects on aggregate unemployment, it reduces unemployment in the long run. When they include a 5-year lag, however, the evidence supporting a short-run employment effect of technology seems to disappear as well, suggesting that technological unemployment 'appears to be a myth'. The concept of structural unemployment, a lasting level of joblessness that does not disappear even at the high point of the business cycle, became popular in the 1960s. For pessimists, technological unemployment is one of the factors driving the wider phenomena of structural unemployment. Since the 1980s, even optimistic economists have increasingly accepted that structural unemployment has indeed risen in advanced economies, but they have tended to blame this on globalisation and offshoring rather than technological change. Others claim a chief cause of the lasting increase in unemployment has been the reluctance of governments to pursue expansionary policies since the displacement of Keynesianism that occurred in the 1970s and early 80s. In the 21st century, and especially since 2013, pessimists have been arguing with increasing frequency that lasting worldwide technological unemployment is a growing threat.