Automation and Employment
This post has been viewed 2,473 times.
The question I consider is whether automation, technical progress, outsourcing, and the increasing complexity of products and services—all closely related phenomena—are reducing demand for workers, especially but not only those who do not have a high IQ.
There is a long history of exaggerated concern, rightly derided by economists, with the replacement and hence displacement of workers by machines. The idea at its simplest is that labor-saving devices whether in home or factory production, or in services, displace labor, leaving workers unemployed. The logic is simple. Over the course of my lifetime I have seen an enormous improvement in the quality of razor blades. A razor blade used to be good for one only shave; now it lasts weeks, even months. So fewer razor blades are made and therefore fewer workers are required in order to make them. The result is a worker surplus—but the logic that predicts this result is flawed. Workers made superfluous by technical advances constitute a pool of labor available to producers of new products and providers of new services. The existence of the pool places a lid on the price of labor, and therefore on the prices of the new products and services (since labor is an input into those products and services). Low prices stimulate buyer demand, which results in greater production, increasing the demand for labor. For centuries incomes have been rising in tandem with technological progress.
There has long been concern that automation of manufacturing was eliminating high-paying factory jobs, propelling the factory workers no longer needed into lower-paying service jobs. But this concern, too, is exaggerated. It overlooks the fact that higher pay for factory work is compensation for the fact that such work tends to be strenuous, monotonous, dirty or unhealthful, and dangerous. Compensation for disamenities is not a component of real income but an offset to a cost. It is the obverse of long vacations, which are an amenity of teaching and therefore a component of teachers’ real income.
Read original articleTags: factory workers, labor, razor blades
