business news in context, analysis with attitude

The Wall Street Journal has a story about how, while there is much concern in the culture that automation and robotics will have a broadly negative impact on employment trends and economy, exactly the opposite may be true.

“The brick-and-mortar retail swoon has been accompanied by a less headline-grabbing e-commerce boom that has created more jobs in the U.S. than traditional stores have cut,” the Journal writes. “Those jobs, in turn, pay better, because its workers are so much more productive.

“This demonstrates something routinely overlooked in the anxiety about the job-destroying potential of robots, artificial intelligence and other forms of automation. Throughout history, automation commonly creates more, and better-paying, jobs than it destroys. The reason: Companies don’t use automation simply to produce the same thing more cheaply. Instead, they find ways to offer entirely new, improved products. As customers flock to these new offerings, companies have to hire more people.”

The fear of technology is hardly a new thing; the story points out that “in 1589 Queen Elizabeth I refused to grant the inventor of a mechanical knitting machine a patent for fear of putting manual knitters out of work.” And it notes that one of the tenets of Keynesian economics is that technology warned of how it “can create unemployment because tech advancements outpace the creation of new opportunities.

But, the fears often are “baseless. James Bessen, an economist at Boston University School of Law, has found in numerous episodes when technology was supposed to annihilate jobs, the opposite occurred. After the first automated tellers were installed in the 1970s, an executive at Wells, Fargo & Co. predicted ATMs would lead to fewer branches with even fewer staff. And indeed, the average branch used one-third fewer workers in 2004 than in 1988. But, Mr. Bessen found, ATMs made it much cheaper to operate a branch so banks opened more: Total branches rose 43% over that time.”

That’s not to suggest that the process is painless: “The people thrown out of work by automation are seldom the same people employed in the new industries that automation makes possible. But over time, the net effect is consistently positive.”
KC's View:
And, what we get is progress.

There is reason to be concerned about the impact of technology, but I fervently believe that the Bessen conclusion is accurate - that in the long run, new jobs, careers and opportunities will be created. Now, like Willie Sutton, you have to be willing to go where the money is … it probably doesn’t make sense to simply wait for progress to come meet you on your own terms.