The future of work.
This Freakonomics episode is a great compliment to my post about job retraining, where I talked a bit about the challenges of transitioning people out of depleting industries being taken over by automation to the ones in high demand. This episode explores whether transitioning jobs that has happened in the past will continue to happen.
To do that, the episode starts with the past by talking about the shift in households needing a piano and knowing someone to play it, in order to have access to music. When the phonograph came along, people were now able to get access to music throughout the radio. Pianos were removed as necessities in a family- 30k acoustic pianos are made now, 8% of what they made at their peak in 1905. However, this meant an increase in other industries such as recording, TV and radio, motion picture, electronic repair. And this is the idea of creative destruction- whereby new industries and jobs replace the old ones.
The same idea is happening with automation, but there are concerns if this time, new industries and jobs will appear. It is assumed that an increase in productivity leads to a decline in employment, however, this isn’t necessarily true–Increased productivity can mean a reduction employment in industries such as in agriculture, but an increase such as in medicine. It can also produce side effects, such as the automobile allowing growth in construction or additional time to leisure with fewer time spent in transportation. The speaker makes 3 points to his argument of the benefits of automation that it’s also not simply a matter that workers get replaced: 1) the people who are leftover are more productive and can do more, which will raise earnings 2) lowers prices, so you can increase demand (air travel) 3) complimentary activities (tourism, video games, cooking) as a result of rising wealth. So in theory, automation replaces jobs but should also provides new work.
This has been happening to some extent; the jobs that can be replaced by automation are ones that are routine work- production workers, clerical support, information processing tasks- that don’t need flexibility, critical thinking, and problem solving. Meanwhile, there has been growth in personal service jobs. These people are doing tasks that are hard to automate but don’t require high levels of education.
The issue arises when we talk about the future of automation. Will new jobs continue to pop up like it has? There are two takes on this.
David Autor, a professor from MIT, is an optimist. He previously thought that at some point there just wouldnt be enough new work to keep up with automation, but has seen the changes in automobiles and other industries where people seem to keep finding ways to occupy themselves.
John Komlos, a professor from the University of Munich, argues that creative destruction this time around isn’t the same as before. Previously, the people who were employed in a dying industry could easily find a new job because the new industries are still labor intensive and doesn’t require skills you cannot learn on the job. So Komlos takes a more pessimist view that the people displaced by technologies just cannot find new jobs.
I personally agree with Komlos’ view, at least for the near future. I don’t think it’s if new jobs will arise, but a matter of what those jobs are. Personal service jobs are increasing, but are these the jobs we want people to have? Because who the labor market deems has value is still changing, and we can point to growing inequality as evidence. Sure, there are pushes for increases in minimum wage, but these have been an argument of human rights instead of actual human capital. If you look at wage growth in CEOs, their wage gap has expanded greatly in the last few decades. So at some point, automation would render a skills gap that people cannot overcome, and even those personal service jobs will be gone. Secondly, the proliferation of this “us versus them” mentality in politics shows that this case is different. Automation is playing a role in expanding the difference between those who are educated and skilled versus those who are not. People who aren’t skilled are simply not unable to easily transition to these highly skilled jobs. And they feel threatened and want their jobs back.
I love how this also intersects with my post about how America capitalizes on its human potential, as so many of these things are intertwined. Because my view here speaks to how important it is to get an education. Autor’s optimism applied when transitioning between jobs was easy, but when the market value is in human capital, not so much. The irony, as we saw in that individual case, shows that America’s educational system especially for low income communities is lacking. It would also be interesting to look more at the data of economic mobility here. But if we as a country can’t offer better opportunities for human capital, we will further contribute to this divide.
Will automation and robots one day get smart enough to even replace highly skilled workers? Possibly. Where, then, does the future hold for us? What skills will the market value? Autor claims that people who can communicate, tell a story, analyze and articulate, are fundamental skills and valuable. At the moment, we are just lucky in the sense that we are not culturally ready for robots taking over.