A recent article in Bloomberg Businessweek (Global Economics, “Did That Robot Take My Job?”, Jan. 9th issue) highlights how automation today continues to enhance productivity gains throughout business. The article points out how the U.S. today produces nearly 25% more goods and services than it did in 1999. It’s the equivalent of adding $2.5 trillion worth of ‘stuff’ – about the equivalent of the entire U.S. economy circa 1958.
There are, of course, costs to these gains. While robots on the plant floor and PCs and software in the office have replaced a lot of workers, the good news is that while technology can destroy jobs, it inevitably creates more. The fact that half a million jobs have been added since Labor Day is encouraging, but the grim fact remains that nearly 20 million Americans remain jobless or underemployed.
The speed and scale at which this is happening is noteworthy, according to Erik Brynjolfsson, director of the MIT Center for Digital Business, who argues that the economy today is in the early stages of a “Great Restructuring.” On the other hand, James Hamilton of the Univ. of California at San Diego couldn’t disagree more. Hamilton says there’s nothing new about machines replacing people, and points out that a century ago, 41% of Americans worked on farms. Today, thanks to machines and other labor-saving factors, it’s about 2%. Yet ex-farm workers found jobs.
And as manufacturing grows leaner today, a century later, factory workers, or their children, have migrated to other, newer fields in health care, finance, computers and other growing industries.
It’s simple productivity. Even five years ago, the average U.S. worker could produce what it would have taken two people to do in 1970, and what four people would have done in 1940, and what six would have done in 1910. The result of all this displacement and technological progress was, in fact, “rising real wages” according to Hamilton.
The conclusion: productivity gains lead to more wealth, not poverty. It’s just not always a straight line, and there are always casualties along the way.
You can read the full text of the article here, which has a lot more to say on the topic. In our next post, we’ll look some more at jobs and the factory floor, as seen by the Wall Street Journal.