Will Robots Create Economic Utopia?Chris Farrell
The robots are coming! Every day it seems we hear another story blaming robots and automation for the disappearance of not only menial jobs, but middle-class ones as well—the kind of work that pays enough to fund a pension, a health-care plan, and a home mortgage. The deepening gloom over jobs runs deeper than robots. The rapidly spreading digital economy has reached critical mass, transforming industries and replacing workers of all kinds. Think high-speed trading on Wall Street. The lightning-quick trades account for most of the volume on the major stock exchanges, yet the action is driven by computers and software communicating with other computers and software, supervised and monitored by at most a relative handful of highly compensated workers. (As a Wharton School report put it, “In the time it takes to read this sentence, tens of thousands of high-speed, computer-automated transactions can occur.”)
Forget these jeremiads. Yes, it’s easy to imagine a dystopian future defined by technological unemployment and underemployment for the mass of workers. Yet the rise of an automated, digitized economy is wonderful news. The potential efficiency gains and productivity improvements are mind-boggling. We’re at an inflection point comparable to the First Industrial Revolution in the 18th century and the Second Industrial Revolution a century later. The opportunities offered by the wealth-generating capacity of machines, bits and bytes, algorisms, and artificial intelligence will fundamentally shift our societal concerns from “how best to generate growth” to “how best to distribute wealth.” “The productive part of the economy will be in great shape, but the distribution of it will be the main problem,” says W. Brian Arthur, visiting scholar at the Palo Alto Research Center’s Intelligent Systems Laboratory. “The big problem from 2010 on is distributing all the wealth, getting it into human hands.”
Boilerplate talking points in Washington, D.C., about cutting taxes or hiking spending seem beside the point. Notions of simply redistributing the wealth miss the fact that the returns on work aren’t just measured in wages. The workplace is a major institution in society. Work is a social environment, with birthday celebrations and coffee klatches, purpose and (hopefully) meaning. People who work are less lonely on average than people who don’t. People with jobs feel connected to their wider community. Jobs can be and should be mentally stimulating and emotionally engaging. “For most people, work is a community,” says Meir Statman, a finance professor at Santa Clara University.
Will there be jobs? The safe forecast is yes. For one thing, the history of technology suggests optimism is the right default assumption. The march of technological innovation has destroyed and created jobs. The Hilton Cincinnati Netherland Plaza opened in downtown Cincinnati in 1931, a premier example of French art deco in America. In one corner of the lobby are striking photographs from the early years. One shows a long line of women handling a bank of hotel phones, while another picture has a group of working men in the basement running a printing press for the hotel’s daily newsletter and menus. These jobs are long gone, replaced by e-mail and desktop publishing. But the job of a webmaster didn’t exist until the 1990s, and an app developer for smartphones until the 2000s. “There will be jobs we can’t imagine right now,” says Mark Thoma, an economist at the University of Oregon.
For another, it isn’t hard to see where at least some job growth will occur in coming years. The massive Baby Boom generation is aging, with demographers estimating that more than 19 percent of the population will be 65 and over in 2030, up from 13 percent in 2010. They’re going to need a lot of care, and much of it will be located in the home.
Problem is, home health care is an occupation that has one of the highest concentrations of low-paid jobs set to grow by 2020, according to calculations by the Economic Policy Institute. At least 45 percent of all employees working in farming, personal care, building and grounds maintenance, and health-care support earn at or below poverty wages. These jobs often come without retirement and health-care benefits.
Redistributing wealth created by the robotic and digital economy should focus on ways to expand the number of jobs while also boosting worker compensation. Economists have done a lot of work on using tax credits, wage subsidies, and similar incentives to encourage employers to add to their payroll.
Boosting the pay rewards to work at the same time is critical. One possible approach to this is expanding the Earned Income Tax Credit (EITC), the U.S.’s major antipoverty program. Families that include children and earn an annual income less than about $36,900 to $50,300 (depending on marital status and number of dependent children) are eligible for the federal EITC. University of Arizona sociologist Lane Kenworthy has proposed pushing the EITC higher up into the middle class. Instead of phasing out at a certain income level, it would simply become a flat benefit indexed to average compensation. “It’s insurance against the risk of wages falling so far behind,” says Kenworthy. “It’s a concept of social insurance with work at its core.”
For the past 300 years or so, the way the economy has distributed wealth is through jobs, with pay supplemented by union pressure, child labor laws, pensions, and other share-the-wealth strategies. The traditional method has been breaking down over the past few decades. Inequality has soared, and the Great American Job Machine has sputtered. We now have an opportunity to reverse the trend by expropriating the robots, computers, and algorithms. The challenge of our high-tech economy is how to take a hefty slice of wealth from the machines and offer ordinary people the reality of jobs with decent wages and compensation. That would be progress.