As production in the United States evolves to include more machines, programming, and robots, will that have a negative long-term impact on unemployment? Economist Greg Clark says yes, and recent evidence suggests that it may already be happening.
From Economist Gregory Clark's op-ed in the Washington Post:
No, the economic problems of the future will not be about growth but about something more nettlesome: the ineluctable increase in the number of people with no marketable skills, and technology's role not as the antidote to social conflict, but as its instigator....
For much of the past 200 years, unskilled workers benefited greatly from capitalism. Before the Industrial Revolution, for example, skilled construction workers earned 50 to 100 percent more than unskilled laborers; today, that premium has fallen to 33 percent in the United States. The era of the two world wars, 1914 to 1945, was one of particularly sharp gains for the wages of unskilled workers, relative to the rest. Why have the unskilled fared so well? After all, machines -- whether steam engines, internal combustion engines or electric motors -- have replaced people as deliverers of brute force...
But in more recent decades, when average U.S. incomes roughly doubled, there has been little gain in the real earnings of the unskilled. And, more darkly, computer advances suggest these redoubts of human skill will sooner or later fall to machines. We may have already reached the historical peak in the earning power of low-skilled workers, and may look back on the mid-20th century as the great era of the common man.
A couple of things.
Let's start this off with a quote from one of my favorite movies, the film-essay documentary Los Angeles Plays Itself. It's a movie about cinema and representations of urban spaces that is made entirely of clips of movies set in Los Angeles with a narration over it describing how those movies both represent and inform our visions of Los Angeles and the larger country. During the scenes where the narrator discusses the movie Blade Runner (1982) and the sexy killer human-impersonating robot played by Daryl Hannah, he makes this important point:
Perhaps [Blade Runner] expresses a nostalgia for a dystopian vision of the future that has become outdated. This vision offered some consolation, because it was at least sublime. Now the future looks brighter, hotter and blander. Buffalo will become Miami, and Los Angeles will become Death Valley at least until the rising ocean tides wipe it away. Computers will get faster, and we will get slower. There will be plenty of progress, but few of us will be any better off or happier for it. Robots won't be sexy or dangerous, they'll be dull and efficient and they'll take our jobs.
I like the point that our imagination of a robot dystopia being either sexy-dangerous and/or thrilling protects us from a currently unfolding reality. Perhaps we want to think of robots as shapeshifting liquid-metal assassins who travel through time to kill us while we are still rebellious teenagers, or blonde bombshells in red dresses who want to seduce us to steal the military codes so they can nuke the colonies, precisely because that vision is more comforting than the reality that machines are fairly boring bits of code that will generally replace our jobs, depress our wages, and bleed our 401(k)s in ways that are largely invisible to us.
The issue of a future in which there are large parts of the economy that are underemployed, unemployed, or unemployable is a serious issue. And the data already suggests this:
(source) Notice how after the last recession in 2001 the number shifted upwards. The boom year of 2006 have an additional 5% long-term unemployed than the boom years of 1998. If you go back even further in that graph, to the 1960s, you see an even larger structural shifts upwards. Here's University of Chicago Economist Kevin Murphy thinking through this issue.
It's difficult to look at, for example, the very low unemployment rates we saw in the early 2000s and say that represented an economy in which everyone was working. Unemployment rates were at roughly the same level that they were in the late 1960s, but if you look at prime-age males, the fraction actually working who were, say, 30 to 40 years old was quite a bit lower in 2001 because there was a big increase in the number who were out of the labor force in that age category...It was primarily low-skilled workers who had withdrawn from the labor market...the opportunities in the labor market for low-skilled workers had deteriorated quite a bit with the rise in demand for skill and fall in demand for low-skilled workers...What that meant was, from a pure labor market perspective, the unemployment rate really wasn't indicative of what the economy was like. Unemployment in an economic sense wasn't as low as unemployment in a measured sense.
The blogosphere is taking note: Add Kevin Drum and Reihan Salam to people who are also concerned about the growing rate of the perpetually unemployed in our economy. The unskilled are slowly disappearing from the labor force, and it isn't clear why or how this is happening. Is it the result of the computerization of the economy, as Gregory Clark suggests? Is it the result of the criminalization of a large part of the poor through specific projections of state power, particularly the War on Drugs and Broken Windows? Is it a more general trend towards higher skills as well as forms of (disability) insurance as Kevin Murphy argues?
What is actually going on here, and if it will get worse before it (ever) gets better, should be a focus of research for those looking at our labor markets.
Maybe this will all just be fine. The increased presences of computers and robots in creating automation and decreasing the need for labor will increase the need for new types of labor. In particular, the labor necessary for the creation, maintenance, and deployment of said machines. But this work is highly skilled, and there is good reason to believe that it will employ fewer people post machines than before.
Transformation of the skill level of that much labor is going to have large destabilizing effects. The last time we had such a transition of the skilling of labor we'd have to look at the Industrial Revolution in Europe. There we had a transformation from an artisan class into a deskilled, more productive class. This, from an economists point-of-view (but certainly not everyone's), was a huge win for unskilled labor. This new change in the skilling of labor is not what is happening now. Now the economy is taking the labor of an unskilled class and replacing it with machines. In order for someone to take advantage of the new employment opportunities opening up it will requires a peculiar new type of skilling - the ability to create and maintain the new efficiency machines.
It isn't clear what happens here. We could assume that markets will hand-wave these problems away, that wages and incentives and laws will find everyone optimal work, or we can learn from History that these radical changes have massive changes in our lives and begin to prepare accordingly. I'm rooting that we go the second route.