Capitalism

The Robots are Coming! Will the American Economy Produce Enough Jobs?

 

Look at the picture. What do you see?

 

A manufacturing process, with no workers in sight.

 

We humans have been replaced by robotic arms and artificial intelligence.

 

 

Think of an Amazon distribution center. Most of the ordered books and goods are picked up by robotic arms and assembled near a packaging station. A particular order may include two different books, a dress shirt, and a Bosch radio. All of these will be found and assembled and brought to one point without involving a human being. The human being is needed now to efficiently pack the items in a box. Soon some robotic company will build a robot that can figure out how to do this task, too.

 

Many blue collar jobs in factories and distribution centers already have been lost to automation. The displaced workers will hopefully find jobs elsewhere in not-yet-invaded businesses such as much of retailing. But they won’t get the pay at McDonald’s that they earned when they worked in factories and large distribution centers. They enjoyed a middle class lifestyle in the past. Now they will shift down to the working class lifestyle and pay. (Martin Ford, Rise of the Robots: Technology and the Threat of a Jobless Future, New York City, Basic Books, 2015. Also read his earlier book, The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future, Acculent Publishing, 2000.)

 

This development is scary enough to drive our employees to pick up axes and destroy the robots. Known as the Luddite backlash, it happened in the U.K. two centuries ago, but it didn’t get far. It is not likely to get far now because the whole legal system is designed to protect the rights of private property owners.

 

The counterargument is that automation creates jobs as well as destroys them. Someone had to design the robots, produce them, market them, install them, and run them. What is hard to answer is whether more jobs are being created than are being destroyed. Our economy needs to create about a million jobs a year just to keep up with growth in the size of the workforce.

 

In past episodes of major industry declines – such as when mechanization killed many agriculture jobs – many new industries and jobs came into being. The advent of the automobile industry killed the horse-and-buggy industry but brought in many new workplaces and jobs: parts manufacturing, auto parts stores, gas stations, auto mechanic shops, car assembly factories, among them.

 

As productivity increased, so did living standards. But since the 1970s, the link between productivity increases and rising living standards may have been severed. The digital revolution has created many new jobs but they don’t tend to be labor intensive. Facebook can run its global multi-billion dollar company with relatively few employees.

 

And automation is spreading beyond factories and distribution centers. While automation reduced the amount of physical labor needed, there was much mental labor still needed. But artificial intelligence is all about replacing “white collar” mental labor and “knowledge workers.” Artificial intelligence has already replaced many human jobs in music, advertising, journalism, teaching, research and more. Paralegals are being replaced by search engines. Soon doctors will have fewer patients as artificial intelligence helps people figure out what they should take for their common cold or other ailments. Once we make electric driverless trucks to transport our goods, where will the drivers go?

 

It raises another question. Which industries and jobs will be most vulnerable to automation and artificial intelligence? And which industries and jobs will be the least vulnerable. In the latter category, we expect jobs in retailing, health care, education, construction, plumbing, and automobile and machine repair to be less vulnerable than jobs in other categories. But even in retailing, will robots and other forms of machine automation someday threaten these jobs?

 

Will there be a tipping point where automation and artificial intelligence make human jobs no longer necessary to produce the fruits of a sophisticated economy? It raises the question of how unemployed people are to earn an income without finding a job.

 

It raises yet another question: How are young people to know what career to pursue when they won’t know if their hard earned skill set will be replaced by a robot or artificial intelligence? Will a college education be a good bet on the chances to get and keep a real job?

 

The assault on human jobs in America comes from many other sources as well. Consider how many American companies have moved their production overseas. Foreign labor is cheaper and there is no law preventing an American company from moving its production abroad and outsourcing. Nor is it likely that our Congress will pass any law stopping the free movement of global capital. Property owners have their rights.

 

At one time many workers belonged to unions. The unions would protect their rights. The union would negotiate with the company to find a resolution that would keep jobs here and let the company earn a decent return. But the workers today have no champion to defend their interests. The unions are dying.

 

Can’t We Expand the Amount of Work Needed in a Nation?

 

There is an implicit assumption that there is only a finite amount of work that markets deem worthy of paying to get done. If the supply of workers exceeds this finite amount of needed work, unemployment is the result. But the fact is that there is a great deal of work to do beyond what can be paid for. Look around and you will see dirty streets, broken sidewalks, homes needing repairs, infrastructure needing repairs or replacement, fields needing plantings, and so on. The amount of work needed is infinite, not finite. We just need to find ways to deem more work that is worth paying for.

 

Ultimately, we could go back to building pyramids. This created a lot of jobs. But we favor meaningful work, not make-do work. The building of magnificent churches and royal palaces was not only to feed the egos of the rich but to provide enough employment for the poor so that they wouldn’t revolt.

 

The initial response to growing unemployment might be to “share the work.” Instead of a 40 hour week, everyone works for 35 hours a week. Instead of a two week vacation, workers now take a four week vacation. The same amount of work will get done but it will involve more people having some work to do. Much of the burden will initially fall on businesses when they cut the work week to 35 hours/week and provide more vacation. But this adjustment can only go so far.

 

Another adjustments will be for many unemployed but skilled American workers to move to less developed countries where their skills are badly needed. These countries presently don’t have the means to automate their processes as quickly as this occurs in the West. American out-migration would reduce the financial burden of making guaranteed cash payments to those who remain here as unemployed.

 

What Would a Society be Like Under Full Automation?

 

Imagine reaching a point where all our goods and many of our services are supplied by machines. In 1928, the eminent British economist John Maynard Keynes speculated about such a future. He saw a time when “the discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor.”

 

He predicted that by 2028 – one hundred years later – the “standard of life” in Europe and the U.S. would be so improved that no one would need to worry about making money. It would be an “age of abundance.” (John Maynard Keynes, “Economic Possibilities for Our Grandchildren,” delivered as a lecture in a Boys School in Hampshire in the winter of 1928.)

 

If we reach a point where there are more workers than work, the jobless workers will need some means of support. The answer is straightforward: cash payments must be made to the unemployed. If the unemployed are not supported, retail purchases will decline steeply and many factories will have to close down, further jobs will be cut, and investment will be curtailed. There is no alternative than transfer payments where the government works out a schedule of guaranteed cash payments to cover the basics of food, clothing, shelter, medical treatment, transportation, and education. The cash payments will have to come from raising taxes on those who still have jobs, and charging higher taxes to those who have higher earnings and wealth.

 

This solves the economic problem but not the social problem. What are unemployed workers to do with their free time? What do fulfilling lives look like when they no longer center on work? Work was not a pleasant thing for many workers but it beat the alternatives for many people. It also defined the narrative for one’s life: he is a salesman, she is a teacher. John Maynard Keynes anticipated this question of the impact of a highly developed society where automation does all the work. “For the first time since his creation man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”

 

Keynes hoped that the freedom from work would have a better result than the idle rich and their wives exhibit who are not able to find much of value to do.

 

One hopes that the 2008 animated film WALL-E negative vision of an automated economy where most people exist only to consume and be marketed to, and they have become so obese that they can hardly move under their own power.

 

In this new society, we hope that it is more likely that people will be defined by their avocation: he is a boy scout volunteer, she is a fundraiser for medical causes. Many people have passions they want to pursue: gardening, painting, writing poems, playing sports, spiritual activities, or lifelong learning. Others will want to help by doing volunteer work in hospitals, caring for children or persons with special needs or being docents at museums. There will be less focus on the consumption of material goods and services and more focus on collaborative work and self-actualization. Yet some people will be bored, turn to drink, get into fights, or turn to crime. The hope is to run continuous education courses so that people might find new interests that give meaning to their lives.

 

Looking Forward

 

The reality of a society in which a small portion of the population produces all the products that we need will likely materialize. Unfortunately, there is little discussion of this “new society” in public forums or private discussions. It is easier to deny the vision that human labor, like horse labor, will become increasingly superfluous in the functioning of the global economy than to solve the problem. People will go on witnessing the march of automation and hope that they can be among the lucky ones who still have one of the few remaining jobs. Joblessness will be a time bomb and become the defining political and social challenge facing the nation in the coming decades.

 

What do you think? Join the debate. Tell us what you think in the comments section below.

 

Philip Kotler is the S.C. Johnson & Son Distinguished Professor of International Marketing at the Northwestern University Kellogg School of Management in Chicago. His most recent work is “Confronting Capitalism: Real Solutions for a Troubled Economic System.”

 


1 comment

 

  • IVAN

    Probably there should be a certain ‘break-even’ level of unemployment. When society reaches this level aggregate demand will fall due to the decrease in households income. So revenue and profit of producers will drop too. Other words society will be able to produce but not able to buy. That conundrum requires a new social contract.

 

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