Are robots taking our jobs? By Scott Sumner

Tyler Cowen and Alex Tabarrok have a new debate on “Econ Duel“, discussing whether robots are taking our jobs.

Who’s right? I don’t think we know. Tyler argues in the affirmative, and suggests that this problem will increase over time. Larry Summers has also made this argument. At least in Tyler’s case, he’s not using one of those old “lump of labor” type arguments. He understands why fears of the effect of automation during the Great Depression later proved inaccurate, or at least premature. Instead, he argues that automation is reducing the job prospects, including the relative wage level, of certain sectors of the labor force—especially less skilled males. Alternatives such as video games are becoming more appealing. He points to the fact that labor force participation for men has been declining for quite some time. Until the past 10 or 15 years, that trend was covered up by rising participation among women. But that rising trend for women has also ended, and perhaps reversed.

Because of factors such as college education and early retirement, many people like to look at the 25-54 age demographic, which is considered a prime age to be working. If lots of people in this age group are not looking for work, then it suggests something might be wrong. Here’s the data:

After rising for decades in response to increasing numbers of women working, the ratio peaked at around 84% in the 1995-2000 period. Then it began falling, to about 81%, before edging up to 81.5% in the most recent reading. Whether you consider that 2.5% decline to be “large” is a matter of perspective. It is certainly statistically significant in a country with a labor force of around 150 million people. And the decline is larger in certain sub-categories. On the other hand it’s not so large that it couldn’t be due to a variety of factors, ranging from more men with previous prison records to more men on disability. A small portion might even reflect things like policemen retiring at age 50, which most people would not view as a social problem.

What makes this tricky is that these factors may interact. Thus robots might replace some of the jobs that ex-cons used to do. In that case, it’s the interaction of automation and incarceration.

I think it’s possible that automation plays at least a small role in the 2.5% drop—perhaps by depressing the wages of unskilled workers, and making the unskilled work still available less attractive than other options.

In this area, it’s always best to try to approach the issue as unemotionally as possible. It doesn’t help to draw sweeping conclusions, such as “it’s all about laziness, after all the Mexican immigrants can find jobs” or “it’s all about a lack of aggregate demand, after all the big drop occurred during the recession.” People are complicated and dozens of factors can interact to produce a given outcome. Look at the comment section after their debate, and you’ll see how not to think about this sort of issue.

When I think about causation, I approach it in terms of counterfactuals. Suppose we moved away from free trade? Suppose we discouraged automation. Suppose we reduced the benefits paid to middle age people not working. Each policy counterfactual might or might not have much effect, at the margin. My hunch is that reducing benefits and reducing incarceration would slightly boost the participation rate–but nothing dramatic. (Reduced incarceration may be worth doing for other reasons.) I’m agnostic on the impact of trade and automation restrictions, but if pressed I think automation is probably more important than trade. (Read my earlier post on the steel industry, where the effects of trade were vastly smaller than automation.) I simply don’t know if the negative side effects (on jobs) of those restrictions on trade and automation would more than negate any positive benefits on jobs through reduced inequality of wages.

To conclude, economics is not (yet) a powerful enough science to tell us whether automation is costing jobs. If robots are taking our jobs it’s not the direct effect, as the lump of labor argument is a fallacy. It’s not due to falling AD, as the central bank offsets that factor. It’s not due to less income going to labor—their share of national income is almost identical to the level back in 1965. Rather it would be due to increasing wage inequality, which reduces the attractiveness of work for low skilled people—especially men.

Also, even if robots have cost some jobs over the past 15 years, we have no idea whether they will continue to do so.