The End of Employment? Yeah, Just Like “The End of History”

Brad DeLong sends us to another hush warning about mass disemployment and future inequality, this time from the excellent Jim Tankersley. As frequent readers know, I don’t think we’re in for some techno-dystopian future and, while I fall on the right (ish) side of Marc Andreeson’s dichotomy – “The spread of computers and the Internet will put jobs in two categories: People who tell computers what to do, and people who are told by computers what to do.” – I think there’s a lot of cognitive dissonance in this conversation.

Let’s be clear. It is theoretically possible – yet improbable – to have either a fall in median standard of living or natural rate of employment. It is, in every way, impossible to have both. Understanding why isn’t all too complicated, and requires only a simple knowledge of supply and demand. Let’s think of the future utopian society operating within a three-class system: unemployed masses, educated technocrats, and the rich capital owners.

Tankersley points to work from Frank Levy and Richard Murnane suggesting that America isn’t in a great position to educate people in the would-be “unemployed masses” to the “technocrats”. That’s a red herring. While in the realistic framework from which they argue – the medium term – more education of the poor is exactly what we need, in the long-run the demand for technocrats is likely to be low.

But let’s take a moment to think what a fall in the standard of living means? Forget my dollar income, for a minute. A stereotypically middle class American derives his high quality of life from free public education, good shelter, incredible consumer choice, copious quantities of food, and access to cheap but effective consumer durables. Americans also enjoy excellent public services like parks, free roads, cheap energy from other institutional arrangements.

Americans own these goods and services  because – by and large – Americans are involved in the production and distribution of these goods and services. (No, not the direct assembly, but most everything else). But let’s say we enter a robot future. (Interlude: have you seen the Tesla factory?) Let’s say minimum wage workers in McDonalds are replaced with wage-free robots and truckers are replaced with automated engines.

The Neo-Luddites tell us that all these middle class workers will overtime be disemployed and hence observe a crash in their standard of living. Notwithstanding the fact that redistribution mechanisms solve this problem (which does not make it theoretically impossible, per se) – this cannot happen. If robots replace workers who are in the service of providing mass market goods – toys, teaching, everything we listed above – that means those goods are being produced, and hence exist. Of course, we get the Keynesian problem of overproduction if for a time period there is excess supply. But if robots keep producing these goods there is no way they will not find their way into the hands of American masses.

Okay, you say, “what if robots don’t keep producing these goods”. When Kevin Drum linked my previous article on Mother Jones, I found all kinds of liberals (a group with which I otherwise identify) telling me that I’m naive for not knowing that the bad capitalists will hog all the robots, that they won’t share their wealth, that political redistribution is impossible, and such. That means the goods aren’t being produced. But let’s say there’s a town – Detroit? – of the “mass unemployed”. If robots supposedly “replace” their jobs and somehow they don’t get the rewards, two agents aren’t just going to sit and go “oh. shit. I’m unemployed. Too bad”.

No. It’s not like the demand for consumer goods vanished. The mass unemployed will create their own economy. That means since I don’t have a car – because of, you know, “robots” – and you don’t have a microwave, I’ll specialize in microwave production and sell you microwaves and trade you for a car. And before you know it, unemployment solves itself, because demand for goods creates a demand for labor creates employment.

Of course, this situation is highly unlikely to arise. There will be some disemployment, but it will not be associated with a falling standard of living. That’s impossible. This situation is unlikely to arise because:

• It’s sad. It’s like a hark back to an older economy. We should be using robots to consume more, and that should be the dream of every technologist: not the exclusive ownership by a capitalist minority.
• The first situation, where we have disemployment, but higher standards of living – indeed, “post scarcity” – is more probably. Profitable corporations need a large consumer base. The mass market is the best and, indeed, only such market. While some commenters tell me that “the rich will own the robots for their own uses”, there’s not much profit if all the one percenters create goods only for other one percenters. For one, there would be a huge excess capacity of robots, compounded by the fact that rich people like artisan work. Not crappy, mass-market Tupperware.

The former point is my philosophical belief and I hold it as axiom. The latter has good empirical foundations. The 2000s – a decade of globalization, capital-biased technical change, and rising income inequality – was actually accentuated by a fall in consumption inequality. Over the past four decades, income inequality increased 237% as much as consumption inequality. And even this is just a first derivative of my point, that is lower-quintile consumption increased far more than income. (Many also suggest we overestimate consumption inequality as it fails to capture surplus deriving from the Internet and other free goods).

I think I’ve somewhat convincingly argued (if only to myself) that both a fall in broad living standards – or even a deceleration in the rate of change thereof – is unlikely to be coincident with disemployment. But this leaves open the possibility of either happening exclusive of the other. Let’s consider the first pair, “fall in living standards, but no disemployment”. I think this is the trickiest possibility, because I can’t really see a way in which this can happen, but also can’t see a way in which it’s impossible – outside of political-democratic institutions which, quite honestly, are failing. All I can argue is that technology is definitely going to increase the consumption from the wealthy which almost certainly will translate into higher wages – if at a far, far lower rate – to the poor. A decrease, or even stagnation, then seems improbably: just a substantial disconnect between capital and labor.

The second case, “disemployment without any fall, and perhaps even increase, in living standards”. Everyone fears this. But we think about unemployment in the narrow sense of U3. But Americans are one of the most “overworked” countries in the world. We’re the richest country not only because of our incredibly high “output per hour” [productivity], but also just “hour” [work ethic]. This works well for some people. Doctors who slave it out as residents and then earn a criminally-unfair killing later in life. (Oh what I’d give to replace every damn doctor sucking money from the American middle class with a robot!)

But think of the single mother working two jobs just to have heat in the winter. Disemployment without a fall in living standards will do her well. She can spend more time with her family. In a previous iteration of this post, I wrote that we’d have a “cornucopia of thought”, or something. I still think I got the principle right, but I was fairly bashed by a bunch of readers for being an idealistic idiot. (“Not everyone has a high IQ”, etc.) Regardless, there are a plethora of studies showing engaged parents are crucial for someone’s future success, in society as well as in the economy. Today this works in advantage of the affluent (if not the ultra-rich). But in the future I do hope that a middle class worker can live very comfortably on 6 hours of work, getting more time to spend time with his family – whether reading books or at a barbecue – and sleep, relax, and ponder. Oh shit I’m getting “idealistic” again.

That’s not to say that economic mobility or condition for the poor in America today is anything great. Only that a sharp fall, or even an absence of elevation, of living standards is very, very unlikely. That is the fundamental dissonance inveighed by the anti-technologists. They assume a utopia in which robots provide everything, but at the same time a dystopia in which they provide nothing.