Economic evolution is decreasing the need for human labor, with potentially dire consequences

I was reading Bob Lord’s post What Paula Pennypacker knew and it reminded me of my own experiences as a midwesterner.

I stood arm-in-arm with family and neighbors to block the bankers from taking possession of their family farms because they could not meet their loan payments during the savings and loan crisis of the 1980’s — a crisis created by banking deregulation. It was a temporary victory.

The bankers eventually came with the sheriff, who apologized for having to enforce a court order. Those family farms no longer exist today. They have been bought up by big agri-business for corporate farming.

ghost-townEven before then, I recall the abandoned grain silos,  outbuildings, feed stores and hardware stores, that dotted the midwest farm belt landscape. These were once small centers of commerce and community when America was still largely agrarian. But people left the land for the cities and towns for better paying factory jobs.

But even in the small city where my family members worked for the breweries, and meat packing plants, and auto plants, those factories were already beginning to disappear in the 1960’s.

America’s industrial era was evolving into the post-industrial era with corporate consolidation, modernization, and globalization. The bigger and more powerful corporations became, the more they moved their factories in pursuit of cheaper labor in emerging foreign markets.

By the 1990’s, the small city that had provided my family members a living was an economically depressed area  with crumbling abandoned factory buildings, a population that had left, and unemployment for those who stayed.

This was repeated in small cities and towns all across the midwest and “rust belt.” When the town’s corporate employer(s) closed to pursue cheaper labor in emerging foreign markets, the next impact was on Main Street. The family owned small business shops and grocery stores found themselves in competition with a new economic threat: the big box store, i.e, Wal-Mart.

Wal-Mart promised economically depressed communities new retail jobs, but always at low wages, always. People were desperate for any job, and towns were desperate for the tax revenue. The family owned small business shops and grocery stores could not compete with Wal-Mart’s predatory pricing. These family owned small business shops and grocery stores eventually went out of business as well. If the town could not adapt and find new employers, the Wal-Mart eventually closed as well. These are the hollowed-out towns of the midwest and “rust belt.”

This economic evolution is what The Pretenders sang about in “My City Was Gone” (1984):

I went back to Ohio
But my pretty countryside
Had been paved down the middle
By a government that had no pride
The farms of Ohio
Had been replaced by shopping malls
And Muzak filled the air
From Seneca to Cuyahoga falls
Said, a, o, oh way to go Ohio

This process of economic evolution from agrarian, to industrial, to post-industrial, has now been sped up by computerization, mechanization and robotics in the high-tech era. The next  advancement is artificial intelligence (AI).

The problem with the high-tech era and AI is that it is designed to eliminate the human factor in labor. It is not limited to blue collar jobs, e.g., truck drivers replaced by self-driving vehicles, but extends to white collar jobs as well, e.g., bank tellers replaced by online banking, and travel agents replaced by online reservation systems, for example.

Online legal research and writing has even reduced employment for lawyers, and now AI threatens to replace them. AI Lawyer “Ross” Has Been Hired By Its First Official Law Firm.

Those who have a job in computer programming, mechanization, robotics and AI will do well, but they are an elite few, and they are eliminating the human factor from labor for hundreds of thousands of other people not as educated and skilled as they are.

Derek Thompson wrote about this at The Atlantic in 2015. A World Without Work:

The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977.

[A]s manufacturing shifted abroad after World War II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression.

youngstown

I traveled to Ohio to consider what would happen if technology permanently replaced a great deal of human work. I wasn’t seeking a tour of our automated future. I went because Youngstown has become a national metaphor for the decline of labor, a place where the middle class of the 20th century has become a museum exhibit.

“Youngstown’s story is America’s story, because it shows that when jobs go away, the cultural cohesion of a place is destroyed,” says John Russo, a professor of labor studies at Youngstown State University. “The cultural breakdown matters even more than the economic breakdown.”

In the past few years, even as the United States has pulled itself partway out of the jobs hole created by the Great Recession, some economists and technologists have warned that the economy is near a tipping point. When they peer deeply into labor-market data, they see troubling signs, masked for now by a cyclical recovery. And when they look up from their spreadsheets, they see automation high and low—robots in the operating room and behind the fast-food counter. They imagine self-driving cars snaking through the streets and Amazon drones dotting the sky, replacing millions of drivers, warehouse stockers, and retail workers. They observe that the capabilities of machines—already formidable—continue to expand exponentially, while our own remain the same. And they wonder: Is any job truly safe?

* * *

[T]he widespread disappearance of work would usher in a social transformation unlike any we’ve seen. If John Russo is right, then saving work is more important than saving any particular job. Industriousness has served as America’s unofficial religion since its founding. The sanctity and preeminence of work lie at the heart of the country’s politics, economics, and social interactions. What might happen if work goes away?

There are economists who are researching and writing about this troubling future. I occasionally post about it.

But do you know who is not talking about it? The media and politicians.

There was a time that the media employed an economics correspondent to report on economics in the news. Irving R. Levine of NBC News is a good example. These reporters were eliminated in favor of the 10 second spot on “what the stock markets did today.” Now even that is no longer a staple of the evening news coverage.

What the stock market did is not economics news. It does nothing to inform the public about the transformative economic evolution shaping their lives and making them uneasy.

We just had an 18 month campaign for president. There was a lot of talk about trade agreements and bringing jobs back to America, which is bullshit. None of this addresses the economic evolution of work that is occurring and the impact of high-tech computerization, mechanization and robotics, and advancements in AI, all of which are designed to eliminate the human factor in labor. I know of few politicians who can even address this issue in any coherent manner.

The media and politicians are content to talk about the “creative destruction” of capitalism that leads to new and cheaper products, and greater profits for the corporation that makes it. They hype Google’s driverless cars, and Amazon’s delivery drones, and the latest phone app that has the consequence of eliminating gainful employment for thousands of people.

They don’t talk about the destruction of the human spirit when one does not have gainful employment and no opportunity to find it, and lives in a city or town that has been decimated by the “creative destruction” of capitalism moving on to the future.

This is what is occurring in Appalachia where 20th Century “king coal” first replaced jobs with mechanization and robotics, and now is eliminating remaining jobs as coal becomes a relic of the past, replaced by emerging clean energy technologies. Coal is like the whip & buggy companies of the 19th Century that were replaced by the emerging technology of the automobile. Those coal mining jobs are never coming back.

The world’s population is increasing at the same time economic evolution driven by high-tech innovation is decreasing the need for human labor. This is a volatile combination with potentially dire consequences, and no one has an answer what to do.

18 responses to “Economic evolution is decreasing the need for human labor, with potentially dire consequences

  1. John Huppenthal

    Endless stream of mythology to explain why we haven’t been creating jobs in this country as fast as we use to be creating them.

    Is it because of technology, people aging out? Are the Luddites correct, tech does destroy jobs? People won’t work after turning 65?

    Or, is it record tax burdens, record regulatory burdens and record welfare payments?

    Quick empirical analysis: France, the highest tax and highest welfare state of the OECD, hasn’t created a single hour of work since 1980 while the US created over 50 million. Over the last 40 years, the consistent low tax states created jobs at twice the pace as the consistent high tax states.

    • “France, the highest tax and highest welfare state of the OECD, hasn’t created a single hour of work since 1980 while the US created over 50 million.”

      I’m not convinced that this isn’t just because the French have decided to invest their time in leisure and reducing work hours, whereas workers in the US, for whatever reason, feel compelled to work longer hours (because real wages are declining, costs of rent/healthcare are rising, or because we just value goods more than leisure).

      At the very least, it needs to be pointing out that French culture is very different than US culture, and they may have chosen not to pursue maximal growth policies because the population doesn’t wish to work as much.

  2. Is the irony of this post lost on everyone? The point of technological advances is to make life better for everyone, not worse. Yet the post contemplates “dire consequences.”

    It’s not hard to figure out the direction in which we need to move. The work week has been stuck at 40 hours for decades now. Why? In the past, technological advances allowed us to reduce the work week. If you lower the overtime threshold, what do you think that will do to the number of jobs? Bill Clinton went along with Republicans to condition safety net benefits on work. Maybe we need to rethink that. Should the wealthiest country in the world guarantee a basic income to all its citizens? To ask that question is to answer it.

    The bottom line is this: Those technological advances are creating more wealth and more income than the population has ever had. The only challenge is designing how to spread that income and wealth more equitably. The technology, however, is a good thing, The consequences should be anything but “dire.”

    • I think you are overlooking the reason why people see dire consequenses of this technological change. No labor change in history has been without birthing pangs. You are talking about a sweeping change in the way we handle labor and that is not going to arrive genially and with shaking hands and smiles all around. There are going to be rough times getting us towards a shorter work week (which I think is a good idea) much less a guaranteed minimum wage (which I think may be a necessity in the future). It is just human nature to resist change, especially a paradigm shift like you are discussing.

      I am concerned about a minimum guaranteed wage because that is only a partial answer. Simply giving people money to live on is a dead end, as welfare has demonstrated. People need a reason for their existence. They need to feel as if they are doing something worth doing. Leaving them with just money leads to all sorts of trouble. Idle hands and all that.

    • “The only challenge is designing how to spread that income and wealth more equitably.”

      Precisely.

  3. “This is a volatile combination with potentially dire consequences, and no one has an answer what to do.”

    Perhaps no one has an answer to it because the most basic answer – a large population decrease – is so unthinkable. The kind of pressures you are talking about, AzBM, are not the types that can be solved with legislation. People who are out of work and idle generally get themselves in trouble. If enough are in that situation, the trouble can be big. Politicians are stupid in many ways, but they always seem to recognize that finding an external enemy is an easy to direct people’s anger outward. A war puts people to work, gives them a direction in their lives and gets rid of a lot of people. If many countries have the same problem, we could find the world in a state of perpetual warfare. No other of man’s predilictions are quite so easy to effect nor as efficient at tiring out an entire population and making them docile…at least for a while. Perhaps that is mankinds inevitable fate…our destruction based on our success.

    You may yet see that revolution you discussed, but on a scale you never imagined.

  4. John Huppenthal

    Pure mythology. Since 1980, capitalism in America has created over 50 million jobs.

    Walmart didn’t promise rural America jobs, it promised them brand name goods at prices that were the lowest anywhere. Sam Walton was a man on a mission. He wanted every price on every item to be the lowest price available. All he was able to achieve was the lowest price on a basket of goods. The typical shopper at a rural Walmart has driven over 20 miles.

    Walmart has singehandedly allowed rural lifestyles to grow and prosper since 1990.

    Since they provide so many jobs for the poor, jobs with health insurance and enable to poor to live as well as the rich, they are hated by all the fake liberals in the world.

    The nations that follow your policy recommendations create very jobs by comparison and don’t have close to the lifestyle provided by Walmart.

    Now they are under pressure, Amazon doesn’t even need stores. But, Sayes law is still alive and well. We will have plenty of job creation if the federal government can quit taxing and regulating us to death.

    • So much wrong with that, as with everything you usually parrot. I’ll just consider it as thoughtful as the rest of your drivel.

    • The vast majority of jobs created since 1980 have been service sector jobs. There has been a decline in manufacturing jobs.

      Wal-mart provided “jobs with health insurance and enabled to poor to live as well as the rich”? In what world do you live? I do employment law. Several years ago I did some research for a case. I went to the Wal-mart employment center and applied for a job. It is an online form, and as I recall something like 17 of the first 20 questions were about various government assistance programs that the applicant may be receiving. In other words, Wal-mart wanted to know how much government assistance programs would be subsidizing their low wages. I asked about benefits and was told that after a probationary period I would have to work 32 hours a week, but this job was only 24-28 hours a week. I asked what the wage was for this supervisor position, and was told that it was a little over $9 per hour (others earned less). 30 hours a week at $9 an hour is only $270 a week before taxes. No one can live on that (hence the government subsidizing Wal-mart wages).

      Now it is true that in 2015, Wal-mart broke with its “reputation for treating employee pay as a cost to be minimized.” It experimented with “paying workers more, training them better and offering better opportunities for advancement.”http://www.nytimes.com/2016/10/16/upshot/how-did-walmart-get-cleaner-stores-and-higher-sales-it-paid-its-people-more.html?_r=0

      ““Efficiency wages” is the term that economists — who excel at giving complex names to obvious ideas — use for the notion that employers who pay workers more than the going rate will get more loyal, harder-working, more productive employees in return.

      Walmart’s experiment holds some surprising lessons for the American economy as a whole. Productivity gains have been slow for years; could fatter paychecks reverse that?

      * * *

      The results are promising. By early 2016, the proportion of stores hitting their targeted customer-service ratings had rebounded to 75 percent. Sales are rising again.

      That said, the immediate impact on earnings and the company’s stock price have been less rosy.

      The question for Walmart is ultimately whether that short-run hit makes the company a stronger competitor in the long run. Will the investments turn out to be the beginning of a change in how Walmart and other giant companies think about their workers, or just a one-off experiment to be reversed when the next recession rolls around?

      The future health of the United States economy, and the well-being of its workers, may well depend on the answer.”

      • John Huppenthal

        Just look at the census data on how many poor people live in homes with air conditioning, refrigerators and tvs today as compared to 1990. This may seem minimal now, but poor people didn’t have these things prior to the Walmart revolution.

        Economists figure that a whole percentage point of annual productivity gain from 1990 to 2000 is the “Walmart” effect. Not only Walmart directly but their competitors responding to their competitive threat. Their enormous computerization, their absolutely low cost structure.

        Also, you are not being honest about the degree of healthcare offered by Walmart. It is enormous when you consider the number of employees.

        Just look at the number of heart transplants they pay for.

        Also, Sam Walton doesn’t fit into your “robber baron” narrative. His desk was a piece of plywood on two by fours. And, he passed every penny of savings along to his customers, the poor of America. The people he enabled to live like the rich.

        • You are wasting your time trying to explain Wal-mart to them, John. Wal-mart is the Anti-Christ in the liberal playbook and nothing done by Sam Walton will EVER be considered a good thing by them. They can’t allow themselves to acknowledge the good Wal-mart has done because it would topple the theoretical economic house of cards they have built over time. It puts the lie to their vision of how you build Utopia.

  5. “The world’s population is increasing at the same time economic evolution driven by high-tech innovation is decreasing the need for human labor.”

    There has never been a shortage of work that must be done by humans. What is lacking is the ability to allocate resources where they are needed. Also, transitioning humans from a dying occupation to one where they can make a living is also difficult, but not impossible. Other humans simply make it difficult.

    I just asked Google how many people in the world lack clean water. This is the answer, “85% of the world population lives in the driest half of the planet. 783 million people do not have access to clean water and almost 2.5 billion do not have access to adequate sanitation.”

    How many people would find work if we decided to provide clean water to those who don’t have it? Or provide food and sanitary living spaces? Or rebuild Syria? Or rebuild Haiti? Or rebuild Iraq? Or rebuild Gaza? Or provide healthcare just to all Americans? Or build high speed rail systems right here in the US? Or repair and replace failing infrastructure right here in the US? Or fix the roads right here in Tucson? Or build and maintain more parks and modern libraries right here in the US?

    We could go on forever. There is no shortage of work for humans and I suspect there never will be.

    • I agree, there is no shortage of things humans could do to stay employed. The central problem is all those good ideas require money…LOTS of money. Where do we get that from?

  6. You know, I was thinking a little further out on the election, and I don’t think it over yet. I am certain Hillary and her friends are working feverishly behind the scenes to turn some electors to vote for her. She may yet winf up the President. It has happened before where the electors went opposite the way they were supposed to vote…I could see it happening again. Hiallary wants this BAD!!

    If that does happen, the results may be interesting. More interesting than any of us want.