Sunday, August 02, 2015

Automation and Technology Increase Living Standards

Automation and Technology Increase Living Standards

In particular, McAfee and Brynjolfsson worry about automation eliminating the jobs of unskilled and middle-skill employees. They agree technological progress creates opportunities for highly skilled employees who build and operate machines, but they fear that the economy will hold far fewer opportunities for less-skilled employees. As Brynjolfsson puts it:

There are lots of examples of routine, middle-skilled jobs that involve relatively structured tasks and those are the jobs that are being eliminated the fastest. Those kinds of jobs are easier for our friends in the artificial intelligence community to design robots to handle them.… [Technological advances are] always destroying jobs. But right now the pace is accelerating. It’s faster we think than ever before in history. So as a consequence, we are not creating jobs at the same pace that we need to.[15]

Labor market statistics do not support this concern. Productivity data show that the pace of automation has actually slowed in recent years. Over the past generation the earnings of less-skilled Americans have risen faster than the economy-wide average.

Slow Productivity Growth. Businesses do not appear to be automating human tasks at a faster rate than before. If they were, this would increase measured labor productivity growth. The Bureau of Labor Statistics estimates productivity by dividing U.S. economic output by the total hours worked in the economy. A substantial increase in the pace of automation would allow businesses to produce as many or more goods with fewer hours of human labor. This would appear in the labor statistics as faster productivity growth.

This has not happened. Chart 2 shows the year-over-year percent change in labor productivity for the non-farm business sector over the past four decades, as well as a four-year moving average that smooths annual fluctuations. Productivity growth increased noticeably in the late 1990s and the early 2000s. From 2003 onward, however, productivity growth trended downward. Average productivity jumped in 2009 as businesses going through layoffs tried to lay off their least productive employees. That surge immediately subsided. Since 2010, productivity has grown at an abnormally slow rate. In the most recent year of data, labor productivity actually fell 0.1 percent. Although employees are more productive now than in the past, overall productivity is increasing more slowly.

Concerns about rapidly accelerating computing power increasing productivity so much it reduces total employment are fears about a future possibility. Over the past decade, productivity growth has slowed even as computer power has increased exponentially.

The Earnings of Less-Skilled Employees Increase. Concerns about automation eliminating employment opportunities for less-skilled employees also do not show up in the data. Over the past generation their total compensation has increased rapidly.

The Congressional Budget Office measures total labor market compensation—cash wages, salaries, and non-cash benefits, such as health care and retirement contributions—for each quintile of the income distribution.[16] Chart 3 shows the percent growth in total inflation-adjusted labor compensation for non-elderly childless households between 1979 and 2011 (the most recent data available).[17]

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