Human beings, robots, and demand for goods and services

Employment to Population Ratio, not seasonally adjusted. Image by author. Data from Bureau of Labor Statistics, public domain.

Fig. 1. Employment to Population Ratio, not seasonally adjusted. Data from Bureau of Labor Statistics.

Note: The graphs in this posting are drawn directly from my research wiki and will be updated automatically as I (somewhat sporadically) update the data in that wiki. My spreadsheet, and information on my data collection and methods are all available here.

Paul Krugman thinks that economic growth since the late 1970s, specifically the time of Douglas Adams’s 1979 novel The Hitchhiker’s Guide to the Galaxy, fails to support a view that technological improvements will lead to anything more than mediocre expansion in the future. Forecasting the future is a dangerous game, and Krugman acknowledges that.[1] It’s dangerous for me, too: I remember thinking that computer networking would never amount to much because telephone lines would forever remain too expensive and never gain much capacity.

But Krugman’s column is interesting to me more for what it leaves out than what it includes. For one thing, he hardly talks about employment (figure 1). And though he mentions the 1970s as the beginning of a technological revolution[2] (indeed, the first personal computers were just beginning to appear), Krugman fails to mention the adoption of neoliberal policy, which strongly favored the rich in just about every way imaginable, as Keynesian policy appeared to have failed to remedy what wasn’t just low growth, but high unemployment and high inflation—a combination known as stagflation.[3]

Krugman mentions the dot-com boom of the late 1990s, a period that also shows dramatic improvement in employment (figure 1), but considers the possibility that it may be a one-off event. “So what do I think is going on with technology?” Krugman asks. “The answer is that I don’t know — but neither does anyone else.”[4] The downside risk is hardly trivial. If technology develops as some Oxford University researchers predict, lots more folks could find themselves out of work,[5] something we’re already beginning to see with the development of self-driving automobiles and trucks.

Neoliberalism seems to have delivered low inflation, but with a widening gap between rich and poor, low labor market participation that isn’t explained by retirement, poorly-compensated employment and, on the whole, less than spectacular growth.[6] Poverty and near-poverty have become a mainstream phenomenon.[7] And the labor market participation rate (figure 2), currently at levels not seen since the late 1970s, and the employment-to-population ratio, still in a range last seen in the 1980s, seem to me to signal a real despair among people whom I’m guessing would work if they thought they could find decent jobs.

Labor Market Participation Rate, not seasonally adjusted. Illustration by author. Data from Bureau of Labor Statistics, public domain.

Fig. 2. Labor Market Participation Rate, not seasonally adjusted. Illustration by author. Data from Bureau of Labor Statistics.

Krugman has, in the past, written a lot about unemployment, even offering an understanding of Luddites as folks who fear their skills may be devalued by technology.[8] He has also harshly and repeatedly criticized austerity, specifically for its neglect of the unemployed.[9] That’s missing here too and to me it seems that unless you’re rich, we really haven’t solved the economic problems of the 1970s.

This is all bad enough if we posit that the economy should serve people, rather than the other way around. But if technology indeed has its way, and lots more people really are put out of work, then all those out-of work people won’t be good consumers: They’ll buy lots less, and that would, at the very least, permanently limit demand, hence limiting production, hence limiting real (non-financial sector) growth. And it’s hard to see how robots would make up for that lost demand. Which is to say that all this is bad even if we value the economy over people.

Addendum, May 27, 2015: Despite the title of his essay, “Don’t fear the robot economy,” Gerald Huff actually does a good job taking down arguments that technology always produces more jobs than it destroys.[10] But more fundamentally, and Huff doesn’t really get to this, there is an unwarranted assumption that as yet unknown jobs will magically appear as technology changes the skills that are needed. This has sometimes been true in the past: computer programmers, for example, could not be needed before there were computers. But that does not support an assumption that it will be true in the future. Huff thinks all this will work out in the end. He believes

this technological progress can be an amazing achievement for humanity, if we adjust our mindset appropriately. With machines doing most of the work we will need a new social contract, new mechanisms like a basic income guarantee, and new conceptions of a meaningful life. I believe we should embrace a future where humans can be liberated to follow their passions, reach their full potential, and contribute to their communities.[11]

And he’s right, as far as he goes. But a guaranteed basic income doesn’t seem to be on the political agenda for either major political party; getting it passed may be a larger challenge than its advocates assume.

  1. [1]Paul Krugman, “The Big Meh,” New York Times, May 25, 2015, http://www.nytimes.com/2015/05/25/opinion/paul-krugman-the-big-meh.html
  2. [2]Paul Krugman, “The Big Meh,” New York Times, May 25, 2015, http://www.nytimes.com/2015/05/25/opinion/paul-krugman-the-big-meh.html
  3. [3]Mark Blyth, Austerity: The History of a Dangerous Idea (Oxford, UK: Oxford University, 2013); Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class (New York: Simon and Schuster, 2010); Daniel Stedman Jones, Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics (Princeton, NJ: Princeton University, 2012).
  4. [4]Paul Krugman, “The Big Meh,” New York Times, May 25, 2015, http://www.nytimes.com/2015/05/25/opinion/paul-krugman-the-big-meh.html
  5. [5]Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerisation?” Oxford University, September 17, 2013, http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf
  6. [6]Mark Blyth, Austerity: The History of a Dangerous Idea (Oxford, UK: Oxford University, 2013); Gary Burtless and Barry P. Bosworth, “Impact of the Great Recession on Retirement Trends in Industrialized Countries,” Brookings, November 5, 2013, http://www.brookings.edu/~/media/research/files/papers/2013/12/16%20impact%20great%20recession%20retirement%20trends%20bosworth%20burtless/16%20impact%20great%20recession%20retirement%20trends%20bosworth%20burtless; Patricia Cohen, “Jobs Data Show Steady Gains, but Stagnant Wages Temper Optimism,” New York Times, November 7, 2014, http://www.nytimes.com/2014/11/08/business/jobs-numbers-for-october-2014-reported-by-labor-department.html; Richard Florida, “Are Baby Boomers Really Keeping Millennials From Finding Jobs?” CityLab, June 18, 2014, http://www.citylab.com/work/2014/06/are-baby-boomers-really-keeping-millennials-from-finding-jobs/372652/; Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class (New York: Simon and Schuster, 2010); Kevin G. Hall, “Economists: Long-term joblessness is national emergency,” McClatchy, April 24, 2013, http://www.mcclatchydc.com/2013/04/24/189574/economists-long-term-joblessness.html; Kevin G. Hall, “While Wall Street soars, jobs market still scarred,” McClatchy, May 9, 2013, http://www.mcclatchydc.com/2013/05/09/190840/while-wall-street-soars-jobs-market.html (; Daniel Stedman Jones, Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics (Princeton, NJ: Princeton University, 2012); Robert Kahn, “The Shrinking U.S. Labor Force and Fed Policy,” Council on Foreign Relations, May 8, 2013, http://blogs.cfr.org/kahn/2013/05/08/the-shrinking-us-labor-force-and-fed-policy/; Paul Krugman, “The Big Meh,” New York Times, May 25, 2015, http://www.nytimes.com/2015/05/25/opinion/paul-krugman-the-big-meh.html; Danielle Kurtzleben, “Why have so many people left the labor force?” Vox, June 17, 2014, http://www.vox.com/2014/6/17/5818074/the-us-has-a-uniquely-bad-labor-force-participation-problem; Christopher Matthews, “How the Great Recession Really Affected Early Retirement,” Time, December 17, 2013, http://business.time.com/2013/12/17/how-the-great-recession-really-affected-early-retirement/; Edward McClelland, “The ‘middle class’ myth: Here’s why wages are really so low today,” Salon, December 30, 2013, http://www.salon.com/2013/12/30/the_middle_class_myth_heres_why_wages_are_really_so_low_today/; Lucia Mutikani, “America’s hidden unemployed: too discouraged to count,” Reuters, September 23, 2012, http://www.reuters.com/article/2012/09/23/us-usa-economy-labor-idUSBRE88M07D20120923; Wolf Richter, “This Chart Is A True Representation Of The Employment Crisis In This Country,” Testosterone Pit, January 8, 2014, http://www.testosteronepit.com/home/2014/1/8/this-chart-is-a-true-representation-of-the-employment-crisis.html; Scott Sernau, Worlds Apart: Social Inequalities in a Global Economy, 2nd ed. (Thousand Oaks, CA: Pine Forge, 2006); Matthew Yglesias, “Why the White House thinks people aren’t looking for work,” Vox, July 17, 2014, http://www.vox.com/2014/7/17/5912239/why-the-white-house-thinks-people-arent-looking-for-work
  7. [7]Associated Press, “80 percent of U.S. adults face near-poverty, unemployment, survey finds,” CBS News, July 28, 2013, http://www.cbsnews.com/8301-201_162-57595861/80-percent-of-u.s-adults-face-near-poverty-unemployment-survey-finds/; Mark R. Rank, “Poverty in America Is Mainstream,” New York Times, November 2, 2013, http://opinionator.blogs.nytimes.com/2013/11/02/poverty-in-america-is-mainstream/
  8. [8]Paul Krugman, “Sympathy for the Luddites,” New York Times, June 13, 2013, http://www.nytimes.com/2013/06/14/opinion/krugman-sympathy-for-the-luddites.html
  9. [9]Just two examples: Paul Krugman, “The Forgotten Millions,” New York Times, December 6, 2012, http://www.nytimes.com/2012/12/07/opinion/krugman-the-forgotten-millions.html; Paul Krugman, “Years Of Tragic Waste,” New York Times, September 5, 2013, http://www.nytimes.com/2013/09/06/opinion/krugman-years-of-tragic-waste.html
  10. [10]Gerald Huff, “Don’t fear the robot economy,” Daily Dot, May 27, 2015, http://www.dailydot.com/opinion/technological-unemployment-robot-future-jobs/
  11. [11]Gerald Huff, “Don’t fear the robot economy,” Daily Dot, May 27, 2015, http://www.dailydot.com/opinion/technological-unemployment-robot-future-jobs/

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