Uncommon Common Sense – November 2016

Uncommon Common Sense

By Bill Frayer

The Future of Employment


Bill Frayer 2010There has been a lot of talk about the number of jobs in the United States and Canada which have been lost to cheaper labor markets overseas. The issue is a complicated one, and although many jobs are lost, new markets can also be created.  Nevertheless, it is a popular notion that trade agreements like NAFTA have hurt workers in the US and that the proposed Trans-Pacific Partnership agreement would do the same.  I’m sure there is some truth in this, but I think we face a far greater threat to employment.  We will be losing many more jobs to various forms of automation in the coming years. 

For years economists have been trying to figure out how many jobs could be lost to automation. Many of these are obvious: bank tellers, department store cashiers, heavy manufacturing jobs, and the like.  I think most people believe the old saw that technology will create more jobs to replace jobs lost to automation.   After all, that has been supported by the historical record.  We see many jobs today that simply did not exist a few years ago. 

However, the new threat from automation is different.  Instead of just robots, we now have the emergence of big data and sophisticated algorithms.  Many middle-class jobs which have produced good incomes will likely be eliminated in the next few years: accountants and bookkeepers, medical data and insurance claim processors, educators and corporate trainers, telemarketers, middle management data analysts in business and finance, legal aides, and the list goes on.  Many jobs which require evaluation of non-standard data, which used to require human intelligence, will soon be relegated to computer algorithms and software. 

A 2014 study published in The Economist suggested that nearly half of the jobs in the US could be eliminated by 2034.  That may be an overestimate, but the trend is clear.  We are already seeing trends which indicate that productivity is becoming decoupled from employment.  In other words, corporations are increasing their productivity while continuing to reduce employment.  I suspect that the recovery from the 2008 recession, which many people expect to return employment to pre-recession levels, will not occur.  When these jobs are lost they are gone permanently. Of course, new jobs are created, but not that many because of the tremendous increase in productivity created by technology. 

So where does this leave us?  As an op-ed in the New York Times asked in September, can we have “good lives without good jobs”?  Good lives have always been associated with steady, lucrative employment.  We may be entering a quasi post-employment economy, where many people will be unemployed or only able to find part-time jobs.  We are already seeing many men with low education dropping out of the workforce while women are supporting families. 

We will need to transition into an economy which accommodates this new reality.  Obviously, government will have to play a role in this transition, whether  expansion of the earned income tax credit or other income redistribution mechanisms.  Something will have to take up the slack from the loss of employment opportunities.  Sweden recently proposed, and rejected a guaranteed annual income policy.  Daniel Patrick Moynihan proposed such a scheme in the Nixon Administration, claiming it would eliminate the need for so many welfare programs.  Nixon tentatively liked the program but could not get it passed the Republicans in Congress.  Is it time to re-examine some form of income guarantee today?  It doesn’t seem likely, but we will have to do something as jobs continue to disappear!

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