Home > Uncategorized > Blame the policies, not the robots

Blame the policies, not the robots

from Jared Bernstein and Dean Baker

The claim that automation is responsible for massive job losses has been made in almost every one of the Democratic debates. In the last debate, technology entrepreneur Andrew Yang told of automation closing stores on Main Street and of self-driving trucks that would shortly displace “3.5 million truckers or the 7 million Americans who work in truck stops, motels, and diners” that serve them. Rep. Tulsi Gabbard (Hawaii) suggested that the “automation revolution” was at “the heart of the fear that is well-founded.”

When Sen. Elizabeth Warren (Mass.) argued that trade was a bigger culprit than automation, the fact-checker at the Associated Press claimed she was “off” and that “economists mostly blame those job losses on automation and robots, not trade deals.”

In fact, such claims about the impact of automation are seriously at odds with the standard data that we economists rely on in our work. And because the data so clearly contradict the narrative, the automation view misrepresents our actual current challenges and distracts from effective solutions.

Output-per-hour, or productivity, is one of those key data points. If a firm applies a technology that increases its output without adding additional workers, its productivity goes up, making it a critical diagnostic in this space.

Contrary to the claim that automation has led to massive job displacement, data from the Bureau of Labor Statistics (BLS) show that productivity is growing at a historically slow pace. Since 2005, it has been increasing at just over a 1 percent annual rate. That compares with a rate of almost 3 percent annually in the decade from 1995 to 2005.

This productivity slowdown has occurred across advanced economies. If the robots are hiding from the people compiling the productivity data at BLS, they are also managing to hide from the statistical agencies in other countries.

Furthermore, the idea that jobs are disappearing is directly contradicted by the fact that we have the lowest unemployment rate in 50 years. The recovery that began in June 2009 is the longest on record. To be clear, many of those jobs are of poor quality, and there are people and places that have been left behind, often where factories have closed. But this, as Warren correctly claimed, was more about trade than technology.

Consider, for example, the “China shock” of the 2000s, when sharply rising imports from countries with much lower-paid labor than ours drove up the U.S. trade deficit by 2.4 percentage points of GDP (almost $520 billion in today’s economy). From 2000 to 2007 (before the Great Recession), the country lost 3.4 million manufacturing jobs, or 20 percent of the total.

Addressing that loss, Susan Houseman, an economist who has done exhaustive, evidence-based analysis debunking the automation explanation, argues that “intuitively and quite simply, there doesn’t seem to have been a technology shock that could have caused a 20 to 30 percent decline in manufacturing employment in the space of a decade.” What really happened in those years was that policymakers sat by while millions of U.S. factory workers and their communities were exposed to global competition with no plan for transition or adjustment to the shock, decimating parts of Ohio, Michigan and Pennsylvania. That was the fault of the policymakers, not the robots.

Before the China shock, from 1970 to 2000, the number (not the share) of manufacturing jobs held remarkably steady at around 17 million. Conversely, since 2010 and post-China shock, the trade deficit has stabilized and manufacturing has been adding jobs at a modest pace. (Most recently, the trade war has significantly dented the sector and worsened the trade deficit.) Over these periods, productivity, automation and robotics all grew apace.

In other words, automation isn’t the problem. We need to look elsewhere to craft a progressive jobs agenda that focuses on the real needs of working people.

First and foremost, the low unemployment rate — which wouldn’t prevail if the automation story were true — is giving workers at the middle and the bottom a bit more of the bargaining power they require to achieve real wage gains. The median weekly wage has risen at an annual average rate, after adjusting for inflation, of 1.5 percent over the past four years. For workers at the bottom end of the wage ladder (the 10th percentile), it has risen 2.8 percent annually, boosted also by minimum wage increases in many states and cities.

To be clear, these are not outsize wage gains, and they certainly are not sufficient to reverse four decades of wage stagnation and rising inequality. But they are evidence that current technologies are not preventing us from running hotter-for-longer labor markets with the capacity to generate more broadly shared prosperity.

National minimum wage hikes will further boost incomes at the bottom. Stronger labor unions will help ensure that workers get a fairer share of productivity gains. Still, many toiling in low-wage jobs, even with recent gains, will still be hard-pressed to afford child care, health care, college tuition and adequate housing without significant government subsidies.

Contrary to those hawking the automation story, faster productivity growth — by boosting growth and pretax national income — would make it easier to meet these challenges. The problem isn’t and never was automation. Working with better technology to produce more efficiently, not to mention more sustainably, is something we should obviously welcome.

The thing to fear isn’t productivity growth. It’s false narratives and bad economic policy.

See article on original site

  1. October 26, 2019 at 4:31 pm

    I have some problems with this analysis. In my province the workforce at a GM plant declined from 26000 employees to half that and then half again. But if the same number (or value) in vehicles is produced, productivity would show little or no gain because production would be more or less constant. It should show an increase if tied to # of employees. So I am confused here.

    • Scott Baker
      October 28, 2019 at 1:15 pm

      How many of the parts for those vehicles are now produced abroad – like in Mexico or Canada? GM may claim that its vehicles are produced in America – particularly if there are tariffs for not doing so – but look under the hood.

      • October 31, 2019 at 7:16 pm

        The issue is the assembly of those parts and some are fabricated here by a local business Magna.

  2. lobdillj
    October 26, 2019 at 4:44 pm

    What evidence is there that the economic considerations that have been driving automation have included costs of retraining the displaced workers and creation of new jobs to keep them employed? What kind of new jobs are envisioned? When GDP is invoked in these analyses is that computed by including the income of the rentier sector, or are we talking about the real economy only?

  3. Ed Zimmer
    October 26, 2019 at 5:15 pm

    That automation has not affected the job market (& will not) is a falsehood based on economists’ mismeasurement of productivity and misinterpretation of unemployment data. While off-shoring did cause job market shrinkage, so did automation – but importantly, looking forward, automation will continue to be the MAIN cause. That argument is as follows:

    Human intelligence as a combination of memory, deductive reasoning and inductive reasoning. Computers have proven to be superior to humans in memory and deductive reasoning. They are currently incapable of performing inductive reasoning and, to date, I’ve seen no credible approach to endowing them with that. Such a breakthrough MAY come from current neural research, but so far it hasn’t — not even the beginnings of an understanding of inductive reasoning in the human brain. That’s not to say that the current efforts in machine learning will not have revolutionary impact on society. Most paid work requires little inductive reasoning — and what little is required can be provided by one human in cooperation with multiple robotic entities. So it’s virtually certain we’re facing an irreversibly shrinking job market. A counter-argument is that the technology will produce new kinds of paid work (as it has in the past) — but in that case, the basic kinds of such work should be describable — and, most importantly, an explanation offered as to why this new work isn’t as susceptible to automation as was the old work. And to date, I’ve seen no one attempt that.

    • Jeff
      October 28, 2019 at 2:51 pm

      I agree with the beginning.

      “They are currently incapable of performing inductive reasoning and, to date, I’ve seen no credible approach to endowing them with that.”

      The Lee Sedol – AlphaGo matchup was the shot heard around the world. Many in the AI community were predicting that computers would beat the top go player in the world by around 2040 or 2050. AlphaGo did it by using a “Self-Taught” algorithm in which it played itself a large number of times over a very short clock time and built up it’s own rule set and opening library (as part of its own integrated understanding of the game – not in the form of separately-created lookup tables).

  4. Ahmed Fares
    October 26, 2019 at 9:50 pm

    Actually, you can have job displacement by robots without increasing productivity. Here is a quote from Marginal Revolution’s Alex Tabarrok from an article tilted: “Beware the Mediocre Robots!”

    [quote]
    It’s often thought that what we have to fear from automation and AI is super-robots. Acemoglu and Restrepo make the useful point that what we actually should fear is mediocre robots, robots only slightly better than humans. Think about robots replacing labor in various tasks. A super-robot replaces labor but has an immense productivity advantage which generates wealth and increases the demand for labor elsewhere. A mediocre-robot replaces the same labor but doesn’t have a huge productivity advantage. As a result, the mediocre robot is the true jobs killer because it replaces labor without greatly increasing wealth. Think about automated phone systems or chat bots.

    In an empirical breakdown, Acemoglu and Restrepo suggest that what has happened in the 1990s and especially since 2000 is mediocre-robots. As a result, there has been a net decline in labor demand with no big wealth increase. Thus, Acemoglu is more negative than many economists on automation, at least as it has occurred recently.

    More generally, Acemoglu and Restrepo create a new type of production function and use that to reformulate how we think about production and how we measure what is happening in the economy with automation and AI. This is one of the most important new pieces on automation and the economy.
    [end quote]

    • Jeff
      October 28, 2019 at 2:45 pm

      “A super-robot replaces labor but has an immense productivity advantage which generates wealth and increases the demand for labor elsewhere.”

      “A super-robot replaces labor but has an immense productivity advantage which generates wealth, but doesn’t increase the demand for labor elsewhere unless this wealth is widely disseminated.”

      I think the second version would have been better and more accurate. The former version is yet another of those neoliberal assumptions that doesn’t hold up to scrutiny.

      “More generally, Acemoglu and Restrepo create a new type of production function and use that to reformulate how we think about production and how we measure what is happening in the economy.”

      That part sounds interesting. Is that a funny way of saying what I said below? That creation of automation, even if it is an extreme local productivity increase, represents a global productivity decrease if that local activity serves to concentrate wealth?

  5. Jeff
    October 27, 2019 at 2:47 am

    “Contrary to the claim that automation has led to massive job displacement, data from the Bureau of Labor Statistics (BLS) show that productivity is growing at a historically slow pace”

    100% wrong. The literal expectation for losing jobs to automation is for productivity to go down across the overall economy. It is so disappointing when people that are bad at math quote this relationship the other way.

    Remember. Production refers to goods ***sold***, not goods that could be theoretically produce-able if someone on Mars (or outside of our closed economy) chips in to buy all of our excess produce-able goods.

  6. Ikonoclast
    October 27, 2019 at 5:51 am

    Putting forth the idea that “faster productivity growth” will help us meet our challenges is another variant of impossible endless-growthism, pure and simple. As we reach the limits to growth, including the limits to the climate’s resistance to CO2 induced forcing, we will find further growth impossible. The economy needs de-growth. Instead of going to energy intensive sporting extravaganzas and off overseas on energy consuming holidays, people should stay home, read a book, knit a jumper, grow vegetables, play chess or cards with a neighbor and so on.

  7. Craig
    October 28, 2019 at 3:59 pm

    Blame the present monetary paradigm of Debt Only and resolve individual and commercial monetary scarcity, the systemic problem of chronic inflation and create a bottom up foray of affordable consumer green products as well as a top down funding of the mega projects needed to combat climate change with the new paradigm of Direct and Reciprocal Monetary Gifting and its aligned policies, regulations and structural changes.

    “It’s the monetary paradigm stupid.”

  8. Ken Zimmerman
    October 30, 2019 at 8:17 am

    Dean, you quote Susan Houseman, “…that “intuitively and quite simply, there doesn’t seem to have been a technology shock that could have caused a 20 to 30 percent decline in manufacturing employment in the space of a decade.” What really happened in those years, you write was that policymakers sat by while millions of U.S. factory workers and their communities were exposed to global competition with no plan for transition or adjustment to the shock, decimating parts of Ohio, Michigan and Pennsylvania. That was the fault of the policymakers, not the robots.

    The fault of policymakers! Don’t think so. It was the fault of economists who insisted these policymakers follow this path, and no other.

    • October 31, 2019 at 10:33 pm

      The economists and the policy makers take checks from the same people.

      • Ken Zimmerman
        November 1, 2019 at 10:06 am

        jeff1089, question is, how can this be changed?

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