I read a very interesting Report last week – False Alarmism: Technological Disruption and the U.S. Labor Market, 1850–2015 – published on May 8, 2017 by the Information Technology and Innovation Foundation (ITIF) and written by Robert Atkinson and John Wu. The title is indicative of the message. Somehow, contemporary commentators including many on the so-called progressive Left are stuck in the ‘robots are coming for your jobs’ narrative, which then somehow morphs into a resignation that there will never be enough jobs for all those who desire them, and then surrender, we need a basic income to keep people eating. Apparently, then human creativity will spring forth from the despair of unemployment because the pittance received from the basic income will allow people to engage their inner entrepreneurial spirit with businesses popping up all over the place, great works of art and music being pumped out and all the rest of the basic income camp’s vision of blithe happiness. Pigs might fly! Of course, if this was happening at the pace that some would have us believe then productivity growth would be booming and investment to GDP ratios high. The robots camp then say – well it is only a matter of time – business needs time to adapt to the new technologies available (for example, Artificial Intelligence and the Modern Productivity Paradox: A Clash of Expectations and Statistics). Technological change is on-going and there have been great leaps in techniques in history. But the ITIF research suggests that the current era does not signal it is one of these great leaps, and, in fact, the “US labor market is experiencing unprecedented calm” right now.



A report earlier this year (March 26, 2017) in Phys.org – Tech world debate on robots and jobs heats up – aired the view of “a tech entrepreneur” who claimed that:

… some 80 to 90 percent of jobs will be eliminated in the next 10 to 15 years.

Of course, the discussion didn’t question whether the “tech entrepreneur” had a vested commercial interest in making these radical predictions. It just repeated the claims.

The Founder and Executive Chairman of the World Economic Forum is certainly pushing the ‘robots are coming’ view, which means the so-called leaders of the world are getting it rammed down their throats along with all the fine food and wine they consume at the WEF meetings.

He (Klaus Schwab) wrote on January 14, 2016 – The Fourth Industrial Revolution: what it means, how to respond – that:

We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before … The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.

The ITIF Report – False Alarmism: Technological Disruption and the U.S. Labor Market, 1850–2015 – is motivated by claims such as the above, which it calls the recent:

… article of faith that workers in advanced industrial nations face almost unprecedented levels of labor-market disruption and insecurity.

The ITIF study notes, by way of contradiction of Schwab’s assertion that “the pace of technical change has not accelerated over the last 200 years, and little evidence exists that this will change going forward”.

They suggest each historical epoch is marked by doomsayers who believe they are living through technological changes on a scale that is unprecedented.

Their report follows earlier studies by ITIF authors which cast doubt on the popular narrative:

1. Robert D. Atkinson (2017) – In Defense of Robots – National Review, April 17, 2017.

2. Ben Miller and Robert D. Atkinson (2013) – Are Robots Taking Our Jobs, or Making Them? – September 2013.

In the current Report, the ITIF researchers attempt to redress what they call the “ahistorical” nature of the “pessimists’ grim assessments”, by examining the “the last 165 years of American history” where the “statistics show that the U.S. labor market is not experiencing particularly high levels of job churn”.

They define “job churn”:

… as new occupations being created while older occupations are destroyed.

ITIF built an interesting dataset – which collated “U.S. occupational trends from 1850 to 2015” from Census data.

They computed “changes in occupational job levels for each intervening decade and through coding each occupation (for sensitivity to technological shifts) were able ” to judge whether increases or decreases in employment in a given decade were likely due to technological progress or other factors”.

They study churn because they note that technology impacts on labour markets through occupational shifts.

First, “technology changes occupational structures … through transforming products and industries.” For example, shifts in jobs associated with phonograph production to CDs and, more recent, digital music forms.

Second, “Technology can also eliminate jobs by allowing some occupations to be more productive”. For example, human pinspotters in bowling alleys being replaced by automatic machines or the “self-service elevators” in buildings.

They note that:

… while 180,000 Americans were employed as travel agents at the turn of the millennium, with the emergence of Internet-based travel booking, just over 90,000 were employed in 2015.

The list is long.

But while occupations disappear, new occupations emerge.

All of these shifts see a particular occupation grow, reach a peak and then decline rather sharply as new occupations (that replace them) evolve.

In my blog last week – Automation and full employment – back to the 1960s – I noted the emergence of a shortage of drone pilots.

Many occupations today “didn’t exist 30 years ago” and were created because “technology made them possible”.

Some occupations grow because it is “hard to improve worker productivity” – for example, “it still takes one teacher to teach 30 students in elementary school, just as it did 40 years ago”. So as population grows, so to does employment in these areas.

I won’t discuss the specific methodology used in the ITIF research. You can consult the Report if interested. Suffice to say they compile two different datasets (one using 1950 occupational classifications and the other using 2010 classifications).

The more recent classification overcomes criticisms that the 1950s classification “fails to capture some detailed occupational shifts (especially in the decades at the front end and back end of this data set)”.

The overall results are not particularly sensitive to which dataset is deployed. The “same general trend” is revealed.

To measures of “job churn” are computed:

1. “change in each occupation relative to overall occupational change … even if an occupation doesn’t lose jobs, if it didn’t grow as fast as the overall labor market, the delta between that growth and overall labor force growth would be calculated as churn … Absolute values were taken of negative numbers, and the sum of employment change was calculated for all occupations. This was then divided by the number of jobs at the beginning of the decade to measure the rate of churn.”

2. “a related measure. For declining occupations, it only includes a sum of occupational changes where there was an absolute loss in jobs … the churn rates using this method were lower than the first method … However, the correlation between these two measures of churn was quite robust (0.92 for 1950 occupation codes and 0.90 for 2010 occupation codes respectively) suggesting that either measure captures generally the same historical change”.

Concentrating on the first method of computing job churn, ITIF produced “Figure 7: Rate of Occupational Change by Decade (1950s Categories).

The findings are obvious:

Rather than increasing, the rate of occupational churn in the last few decades is the lowest in American history, at least since 1850 … occupational churn peaked at 50 percent in the decades between 1850 and 1870 … it was still above 25 percent for the decades from 1920 to 1980 … it fell to around 20 percent in the 1980s and 1990s, to just 14 percent in the 2000s, and 6 percent in the first half of the 2010s.

The next graph (ITIFs Figure 9) shows the calculations using the 2010 occupational classification which is consistent back to 1950.

The same story is revealed.

Their overall conclusions:

1. “Levels of occupational churn in the United States are now at historic lows”.

2. “The levels of churn in the last 20 years—a period of the dot-com crash, the financial crisis of 2007 to 2008, the subsequent Great Recession, and the emergence of new technologies that are purported to be more powerfully disruptive than anything in the past—have been just 38 percent of the levels from 1950 to 2000, and 42 percent of the levels from 1850 to 2000.”

3. “the single biggest economic challenge facing advanced economies today is not too much labor market churn, but too little, and thus too little productivity growth. Increasing productivity is the only way to improve living standards—yet productivity in the last decade has advanced at the slowest rate in 60 years.”

They also point out that when Klaus Schwab predicts that “robotic and artificial intelligence will destroy 5 millino jobs by 2020”, which sounds like a lot of jobs, in reality, “it adds up to the elimination of just 0.25 percent of jobs annually for next five years … barely a rounding error”.

They critique the 2013 Oxford study – The Future of Employment: How Susceptible are Jobs to Computerisation – that is being used by the ‘robots are coming’ camp.

They note it was never submitted to peer review and used a flawed methodology that failed to “examine all 702 U.S. occupational categories”. When more careful work is done on this basis, the Oxford figure that 47 percent of U.S. jobs will go in the next two decades, becomes more like 10 per cent.

Why does all this matter (according to ITIF)?

They say this is important because the popular narrative has led to policies that would be destructive being proposed and considered – such as Bill Gates robot tax. They say that particular policy would be like “taxing tractors in the 1920s”.

Conclusion

The message of the study is threefold:

1. The hysteria surrounding the ‘robots are coming’ narrative is just that hysteria. They advise everyone to “Take a deep breath, and calm down.”

2. The risk is “that technological change and resulting productivity growth will be too slow, not too fast”.

3. “Policymakers should do more to improve labor-market transitions for workers who lose their jobs … it doesn’t matter whether the losses stem from short-term business-cycle downturns or from trends that lead to natural labor-market churn”.

Which is where the Job Guarantee and UBI debate is centred. What do we do with workers that lose their jobs in recession and/or via churn?

The first logical question is do the workers want to keep working? That means the state needs to create jobs to shore up income losses not just rely on income transfers.

That will be the best solution for almost all workers displaced by technology who value work.

The series so far

This is a further part of a series I am writing as background to my next book with Joan Muysken analysing the Future of Work. More instalments will come as the research process unfolds.

The series so far:

1. When Austrians ate dogs.

2. Employment as a human right.

3. The rise of the “private government.

4. The evolution of full employment legislation in the US.

5. Automation and full employment – back to the 1960s.

6. Countering the march of the robots narrative.

The blogs in these series should be considered working notes rather than self-contained topics. Ultimately, they will be edited into the final manuscript of my next book due in 2018. The book will likely be published by Edward Elgar (UK).

That is enough for today!

(c) Copyright 2017 William Mitchell. All Rights Reserved..