Why can't we create jobs the way we used to? Despite nearly a trillion dollars' worth of tax breaks and investments in a stimulus package, interest rates as low as they can go, auto bailouts, bank bailouts, "quantitative easing," and public and private sector leaders' calls for optimism, the official unemployment rate is still flirting with nine percent two years into an economic recovery. Many experts estimate the real unemployment figure to be nearly twice that if we count the people who have either stopped looking or have taken part-time jobs far below the skill and pay levels of the full-time jobs they lost.
There are many phantom causes for slow job creation bandied about Washington these days. The left contends greedy individuals and corporations are hoarding all that wealth that has been disproportionately shifted to them over the last generation. The right points the finger at the uncertainty created by President Obama's supposed schemes to add to the tax and regulatory burden of America's job creators.
One of the new entrants in the faulty explanation sweepstakes is technology: It is man v. machine, and guess which is winning? Robots have already supposedly idled factory workers, telephone operators and bank tellers. Now, a new generation of supercomputers is threatening the livelihoods of middle-income, more skilled workers. Legal researchers, designers, even sportscasters better look out. Their obsolescence is imminent.
The frightening specter of the dawn of some kind of Terminator Age is conjured up in the title an e-book by Erik Brynjolfsson and Andrew McAfee, both professors at MIT, Race Against The Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy. For them, workers are, "losing the race against the machine, a fact reflected in today's employment statistics." They go on to argue that, "there's good reason to believe that ever-more powerful computers have for some time now been substituting for human skills and workers and slowing median incomes and job growth in the United States. As we head deeper into the second half of the chessboard--into the period where continuing exponential increases in computing power yield astonishing results--we expect that economic disruptions will only grow as well."
The book has drawn lavish praise and gotten too many Washington pundits convinced that, at last, we have figured out why median incomes are no longer rising, why so few people can find work and why society is becoming so unequal. Even President Obama alluded to the dark side of technology back in June when he said on NBC's Today Show, in essence, that consumers are not only observers but also contributors to the problem every time they go to an ATM instead of a live bank teller or check in for a flight using an electronic kiosk. If machines are the new threat to the American middle class, then we should rein them in, right?
Wrong! The Race Against the Machine and books like it might be good sellers (Who, after all, wants to buy a book that says "machines are making our lives better and creating jobs?). However, they are fundamentally wrong and, in fact, dangerous. The worries of machines overtaking humans are as old as machines themselves and economic disparities have many causes but technology is not the main culprit. Pitting man against machine only stokes antipathy toward technology and could have a chilling effect on the innovation and adoption of technology essential to grow our economy. This is the last thing our economy and most workers need. The reality is that, far from being doomed by an excess of technology, we are actually at risk of being held back from too little technology. America's sluggish adaption of many technologies, worn out infrastructure and antiquated factories have left us in catch-up mode with other countries and contributed to the erosion of our manufacturing base and economic health - not to mention making us the source of derision for global air travelers .
Let's be clear. Productivity-enhancing technology does vastly more good than harm. Take ATM's and other self-service machines. The Information Technology and Innovation Foundation estimates that if self-service technology was widely-deployed, the U.S. economy would be $130 billion larger, providing an additional $1,100 to each household
Boosting technology-driven productivity is in fact the single most important economic goal any nation can pursue. But productivity's standing as a force of good has taken a bit of a hit in recent years as average people and policymakers alike have come to believe that we are able to produce more with fewer workers. The Great Recession, as all recessions, has only exacerbated this fear of productivity. However, reports of the deaths of jobs from productivity have been vastly exaggerated.
In fact, there's no relationship between productivity and unemployment rates. In the 1960s, productivity grew 3.1 percent per year while unemployment averaged 4.9 percent. However, during the 1980s productivity growth was an unimpressive 1.5 percent but unemployment rates averaged 7.3 percent. Yes, but critics will respond, today's machines are smarter and more powerful than those of a generation ago. Yet amid the rapid and dazzling innovations in information and communications technology we have seen in the last ten years, we saw relatively low rates of unemployment. As recently as 2007, before the housing bubble burst, the unemployment rate was under five percent. And in the 2000-2007 period productivity was growing at a healthy 2.7 percent per year. But from 2007 to 2011, productivity growth was only 1.8 percent yet unemployment increased.
Therefore, it is hard to argue that robust productivity is a job killer. In fact, it's just the opposite. As the OECD states in a definitive review of the studies on productivity and employment, "Historically, the income generating effects of new technologies have proved more powerful than the labor-displacing effects: technological progress has been accompanied not only by higher output and productivity, but also by higher overall employment."
In fact, we need more machines and more productivity, not less. One reason is we need to meet the growing demographic challenge. Right now, there are roughly five workers for every retiree in the United States. As early as 2030, there will be only three workers for every retiree. That means those who are working will have to be ever more productive if we want to avoid having either future workers or retirees worse off than they are now. Another reason we need to maintain high productivity growth is that it is tied to our international competitiveness. The failure to maintain our innovation-based competitiveness, especially in manufacturing, is a major reason for our economic woes. If we want to expand exports and create the direct and indirect jobs that come from it we need to expand productivity, and this means more and better machines. If we are looking to regain a competitive advantage over China, we should nurture productivity and embrace the technologies to help us in this effort. Finally, if we want to address the fiscal challenge facing Washington, economic growth is the best path The CBO estimates that an increase of just 0.1 percent in the GDP growth rate could reduce the budget deficit by as much as $310 billion cumulatively over the next decade. For example, an increase in the real rate of GDP growth from the CBO projection of 2.8 percent over the next decade to 4 percent -- the U.S. growth rate from 1993 to 2000 -- would, all else equal, cut the cumulative budget deficit in half, or by $6.8 trillion, over the next decade. And you can't get there without more and better "machines."
To be sure, economist Joseph Schumpeter's "creative destruction" is at work in technology and has been throughout history. Before electronically controlled elevators, tens of thousands of Americans spent their work days moving elevators up and down buildings. But they and we are better off with "self-service" elevators and no one wants to go back. Likewise, does anyone want to go back to a world before ATM machines? But as these examples show there are both winners and losers in the process of innovation and transformation, at least in the short run. But remember, we are all winners in the long run. The former elevator operators went on to get better jobs. Today's technology Cassandras are too focused on destruction and not enough on the creation. They ignore basic economics (higher productivity lowers prices which gives consumers more to spend which in turns creates new jobs and more economic output) or assume it somehow no longer applies to age of intelligent machines. In fact, a growing, dynamic economy benefits all workers. In this process, many in middle-income jobs will acquire new skills and retain their jobs but do them differently, and better. Some will lose their jobs. But many will migrate to higher-wage, higher-skill jobs -- jobs that do not even exist yet -- and increase economic growth. In turn, some of those in the lower third of wage earners will migrate into better jobs in the middle tier.
Those who think this time is different and that today's machines will mean the end of work opportunities need only look to history to see how fear was dispatched by innovation and growth. As we struggled to break free the Great Depression in the late 1930s Congress debated legislation to require the Secretary of Labor to create a list of all labor-saving devices and estimate how many people could be employed if these devices were eliminated. In the midst of the 1961 recession, President Kennedy created an Office of Automation and Manpower in the Department of Labor in 1961, identifying, "the major domestic challenge of the Sixties -- to maintain full employment at a time when automation, of course, is replacing men." From farm to factory to information technology and beyond, humans have shown a remarkable capacity to adapt, find new things to create, make and share.
We should be worried about job creation but recognize that technology and machines are the solution, not the cause of our stubbornly-high unemployment rate. For that we can blame a tax code that does not encourage innovation and long-term investment, the lack of a national innovation and competitiveness strategy, passivity in the face of unfair or illegal trade practices, and a failure to invest in the talents of our workers and in new technologies. It was a lack of visionary policy making that caused a too-slow response by U.S. employers to new competitive challenges and an obsession with short-term profit reports that impeded adoption of the technologies we needed -- the very technologies that might, unfortunately, be shunned if too many people see them as job killers.
Rather than rail against the machine, pundits and policy makers would do better to embrace technology-led productivity, while at the same time do much more to help workers adjust to changes, including investing more to create a 21st century skills system and shoring up a unemployment safety net that is full of holes. Fundamentally, the machines are our friends.
Rob Atkinson, is the president and founder of the Information Technology and Innovation Foundation, an economic and technology think tank based in Washington.
Follow Robert D. Atkinson, Ph.D. on Twitter: www.twitter.com/Robatkinsonitif
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Productivity enhances jobs and used to increase wages. increased wages increase demand, demand creates jobs when the furits of increased productivity are not translating into increased wages then demand is weak
but the elepgant in the room continues to be offhsoring - as long as jobs continue to be offshored as fast as they are created unemplouyment will remain stubbornbly high
That is how we ended up with a job crisis and the huge income inequality gaps we have now.
We were sold out! And they continue to sell us out every day, until they are stopped.
Stop the sell off of America!!!
Whether our technology and patents are sold or kept, it makes no difference to the workers here technology is replacing unskilled, repetitive and routine tasks. Either it directly replies you here, or it increases productivity overseas, which leads to more efficiencies which, in turn, lead to lower prices and results in our companies going out of business. The result to labor is the same.
Agriculture already went through this labor-replacing process: in 1800, 80% of our population was in Agriculture, in 1900 it was about 40%, now it is about 1.7%. The same is happening to manufacturing…and rightly so.
Note to self: Get a degree in a subject employers want, learn skills that are not emulated and provide you with a competitive advantage. Do not drop out of school, knock-up the neighbor, get arrested for doing drugs and then expect to get a job at the Ford plant for life.
Kai
Last summer we lost 3 highly automated solar cell companies due to energy cost!
You can't have manufacturing of energy intensive products subjected to limitation of energy sources and added pollution controls and compete against nations that don't have the same limitations!
Am I in favor of pollution? Of course not!
I'm not in favor of the smog in China either. What percentage of something as simple as smog from China makes its way into California today! Pollution today is a planet wide issue with Global consequences!
The only workable solution is environmental tariffs or taxes based on their environmental impact of manufacturing, transportation, sustainability, and disposal of products sold.
A little hint comes with the "Ph.D." tacked on after his name. Does Paul Krugman or Simon Johnson feel the need to add their degree status? Those little letters invite us to conclude that Mr. Atkinson is An Authority. Don't question! Like Bill Murray in Ghostbusters, "Back off, man! I'm a scientist!" Except that Mr. Atkinson, while a Ph.D., shows not even the vaguest understanding of economics, not even a right-wing know-nothing Gregory Mankiw delusion.
be more creative (e.g., invent more technology),
help our kids with homework, so they would be smarter,
have more leisure time to exercise in order to be healthier,
and give us more time at the mall or internet, so we can spend money to keep the economy active.
It is a proven fact that people are not as productive when working long hours (more than 6). Almost all industrial nations have acknowledged the items above by implementing work years that are 60-110 hours less than the US. Gosh, that also lessens the unemployment rate by about 2% almost immediately if those hours are filled by hiring new employees.
BTW CNBC did a poll about this and 62% of the respondents, said they would take a slight decrease in pay to lessen their work hours. I believe that we should all (i.e., individuals, corporations, and government) join together to implement working less hours per year.
Why won't Obama or anyone else get real and discuss this. About the only one who acknowledges this concept is the incredible businessman, Richard Branson. No wonder most of his businesses are successful. He gets more time off to be creative.
And the countries and the people in those countries are ultimately worse off for it with lower standards of living disguised in part by borrowing future growth forward in order to pad the economy…unfortunately that bill is coming do. You show me a high-paying job and I will show that it takes more than a 6-hour day, whether that is a doctor, lawyer, banker, etc.
It does not lessen unemployment and the high double-digit unemployment that is structural in Europe demonstrates that. Even Germany, which is benefitting from the Euro that keeps its products artificially cheap relative to competitor nations, has a 7% unemployment rate, the best in almost 4 decades of double-digit growth. There is something wrong when even with billions in stimulus, direct devaluation of your work product, and access to a large regional trade black, the best you can do is 7%, usually it is 11%.
Reducing work hours does not increase employment, it lowers a countries productivity and, ultimately, what employers pay.
Kai
It is rather egotistical to think that we are at such an epitome of advanced technology! Baloney!
We have only scratched the surface. And there have been many other advanced civilizations before us, both here on this planet and others, and there will be many more to come after us too.
Just like the automobile overtook the horse & buggy, progress continues. The "high technology" of today will look like child's play in years to come, if we don't devolve first.
Just stop letting the executives sell us out to foreigners for their own selfish profits!
Technology is not the enemy of the workers of America. It is the executives who sold us all out.
Normally, the workforce keeps up with the technology as civilization evolves, however some scoundrels, in positions of power, profited by selling our industries and technology work to foreigners.
American workers are now facing the consequences of these horrible decisions of questionable patriotic value.
In our society today, we are blocking many adaptations to technological change via a legal, regulatory bureaucratic system which is adapted to everything that is existing but is unable to accommodate innovation which don't fit into the existing check boxes.
For example, in light of the successful automated driverless cars innovated by Google, we could radically change the entire automobile/truck fleet to a computer driven system. Doing so could decrease the current 30,000 annual fatalities and 300,000 serious injuries while reducing fuel consumption by 30% and tripling the capacity of all existing roads. http://www.ted.com/talks/sebastian_thrun_google_s_driverless_car.html
However, imagine the legal and regulatory hoops conjured up by the bureaucracy -- that gigantic elephant in the technological room. Then imagine the innovators fighting all the law suits that would arise when the system isn't perfect, even if it is still better than human drivers. Replacing and retrofitting all our automobiles would be a huge industry, an industry that will not be created in America. The technological innovation won't have caused the unemployment which other countries will explore. The bureaucrats and lawyers will.
as well as railways
could be powered by hydro and nuclear.
The New localized economy, would be based
on self supporting communities of scale.
Small electric cars and small local electric rail legs
could be powered by hydro or nuclear.
The small local electric rail legs would
deliver passengers
to the baseload backbone infrastructure
of US High Speed Rail Corridors
between the large metros.
These small clusters of localized communities
could be self sustained by local food farmers;
local hardwood-softwood lumber growers;
carpenters; plumbers;
metal welders-blacksmiths;
mechanics ...etc.
This is the perfect time to move jobs to a new energy grid.
New energy has to begin.
If you want to succeed as a person; a company; a country;
you make the difficult decisions
Putting America back to work with localized
as well as industrial
baseload backbone infrastructure manufactures.
A Nuclear Industrial Grid has to remain front and center in the green triage.
There is no alternative to give us time to get to New Breakthrough green renewable energy.
America needs THE TIME that nuclear will give us to develop into New green renewables
of electric trains; electric cars; wind; solar; tidal; hydro; alternate fuels; magnetics;
and yes localized economy of scale-Nuclear.
We are a broken people living under a loaded gun. (The Catalyst by Linkin Park)
For too long America has had gale force winds in her face.
America needs the wind at her back for once since the first Arab embargo.
This will give America time to develop many new forms of sustainable renewable energy forms.
frequency and signal patterning
will have to be created
in tangential triangulations of 3D+ / arrays
for Fuel and structural propulsion sciences ...
whether liquid, solid or gas.
This is why nuclear plants
should be built before the infrastructure is repaired.
Use the CCC and the back to work drive
to construct nuclear plants for
the bridge to the new energy technologies.
American people are irrational and hysterical about most things they don't understand.
Except the GOP. Which is what the American people need to be hysterical about.
This is because America doesn't take the initiative to be well informed.
Without talking about base load, you can't plug in your hybrid vehicles.
And your slot machines will not work either.
The backbone of the industrial grid requires enormous base load with scale of reliability.
No other green alternative offers large scale consistency for low cost.
Yes, nuclear is a green alternative
compared to all other choices currently available.
And Yes, nuclear is the only green alternative
feasible for backbone grid base load.
Localized economy of scale-Nuclear power
can offer the bridge to future inventions.
No other environmental and green
base load energy
is currently available except
localized economy of scale-nuclear.
Environmentalists need to be rational and realistic.
Environmentalists are not using good science
when they make adversarial public statements
against nuclear power.
The new energy technologies research will require breakthroughs in
electrical engineering
material science
chemical engineering
molecular physics
and nuclear physics.
Structural and fuel research will take time.
Fuels and Energy Propulsions
will require a resurgence in
University scholarships for
electrical engineering
material science
chemical engineering
molecular physics
and nuclear physics.
Spending = income and it will never be otherwise, so deficient spending leads to unemployment. The economy does not distinguish between public or private spending as it is the same currency.
There is no private sector or market based approach that will address this unemployment crisis regardless of what rhetoric the ideologues use. In it's simplest terms, there is NO demand for the private sector to respond to.
That leaves the public sector as the only one with the capacity to boost spending.
I agree that advancements in productivity should be pursued, however, that on it's own will not generate job growth or boost the amount of income going to labor vs capital that is now preventing the consumer from purchasing the output that the economy has capacity to produce. The economic growth over the last nearly 30 years had been fuelled by never before seen growth in private debt, not real wage growth.
Policy makers should be investing public monies in employment rich projects, education and skills uplift projects all in efforts to boost the economy, reduce unemployment and pursue productivity growths.