Thursday, April 24, 2014
“Well, here’s another nice mess you’ve gotten me into.”
– Oliver Hardy
Driverless cars, Watson the unbeatable “Jeopardy” champion and the nearly unavoidable retail self-checkout line have spawned a spate of new scare stories about the job-destroying effects of technology.
Driving, manufacturing, waiting on tables, stocking shelves, answering phones: All, we are told, will soon no longer require human beings.
The old faith in creative destruction – the belief that as technology raises productivity in some sectors, causing job loss (think agriculture), it simultaneously creates new products in other sectors where new workers are needed (think manufacturing) – is misplaced today.
Advances in information technology, our pessimist futurists argue, affect not just one or two sectors, but virtually all sectors.
When asked what job he thought would not be threatened by a robot within the next decade, Rice University professor Moshe Vardi, an expert in information technology and artificial intelligence, could think of only one – salespeople making cold calls to convince people to buy something they did not already want.
This fear that, apart from designing robots and making cold calls, the “job” is becoming obsolete because of the seemingly inhumane and mindless advance of technology, has been heightened by the increasingly depressing nature of each month’s report on the labor market.
The economy isn’t creating enough new jobs to cover the rate of population growth, but the unemployment rate still declines because so many potential workers just give up and stop looking for work.
The participation rate (the share of the population either employed or looking for work) is at its lowest level in over 35 years.
And the share of the population receiving retirement, disability, medical, unemployment and other social assistance benefits is also at all-time highs.
These facts coupled with record corporate profits and ratios of income inequality not seen since the Roaring Twenties lead many to think the middle class is doomed, that the forces of technological advance are driving us toward a “have and have-not” economy inevitably destined for social collapse.
Such a collapse may well prove to be our destiny.
But if so, the cause, I believe, will not be the inevitable, irresistible advance of technology, but the short-sighted and selfish failure to address the public policies that have put us in the mess where we now find ourselves.
Today, we look back at the economic policy-makers of the early 1930s and the early 2000s and say, “What were they thinking?”
Future historians will look back at our current employment and entitlement debates and ask the same question.
Each month, after another disappointing jobs report from the Department of Labor, we wring our hands and wonder why there aren’t more jobs.
Yet simultaneously we enact more policies that make hiring more difficult and more expensive. We raise the minimum wage, we increase payroll taxes and, in a fit of self-defeating pig-headedness, we maintain the obsolete artifact of World War II price controls that tie health insurance to employment.
Then, having increased the straight wage cost of hiring a new worker by 30 to 50 percent, we add the plethora of regulatory requirements that creates the need for “human resource” departments just to keep track of them and avoid further penalties.
The old adage that earned Maine workers a reputation among military bases as “the gold standard” – an honest day’s work for an honest day’s pay – is increasingly irrelevant because employers evaluate workers not in terms of an honest day’s work but in terms of a career investment.
Hiring is less an operational expense than a capital investment, an investment in human capital. The decision-making criterion for hiring a new worker is not the honest day’s pay, but the return on investment over a career.
To encourage investment in physical capital – more robots – we have policies for accelerated depreciation, investment tax credits and separate tax calculations for capital gains.
But for investment in human capital, we continue to add taxes, fees, regulations, penalties and the full – though completely disguised – costs of our social safety net.
Such policies, to quote again from Oliver Hardy, are “too farfetched not to be the truth.”
Professor Vardi was correct to say that no robot will ever be as effective at cold calling as a talented and motivated salesperson. The same might be said of playfully instructing young children or compassionately talking with those struggling with dementia.
Any job whose fundamental requirement is creatively interacting with another human being will never be replaced entirely by a robot. And human beings will never cease to create demand for such jobs.
The greatest threat to their continued creation is not the forward pull of technological progress but the backward inertia of social policies.
Charles Lawton is chief economist for Planning Decisions, Inc. He can be reached at: