Robots did not overtake the world. But what about artificial intelligence?

Labor markets have been upended over the centuries by technological change.  Only John Henry could compete with the steam-powered drill, and he paid dearly.  In the not too distant past, there have been concerns about the impact of software and robots on wages and employment.  Now the big worry is artificial intelligence.

Stanford economics PhD student Michael Webb has developed a framework that can evaluate the impact of new technologies on different occupations by matching words between patents and job descriptions.  Looking at data between 1980 and 2010, he found wages and employment declined the most in jobs that were most exposed to competition from software (broadcast equipment operators) and robots (forklift drivers).  These are jobs that do not require a college degree.

Based upon patents related to AI, Webb finds that the occupations most likely to be endangered include clinical laboratory technicians, chemical engineers, and optometrists.  All of these jobs require post-secondary education.  Overall, the risk of displacement from AI is greatest for those with college and graduate degrees.

Technical change and globalization have resulted in the loss of a number of middle class jobs.  AI could be coming after the upper income brackets.

How to compete with China

MIT President L. Rafael Reif wrote an NYT op-ed two weeks ago about trade with China and the risk of losing American technological supremacy.  Reif does not condone Chinese trade practices that dictate technology transfers and often involve actual theft of intellectual property.  He cautions that China has become a research powerhouse in its own right, especially in fields such as quantum computing, 5G networks, and mobile software.  His main concern:

Unless America responds urgently and deliberately to the scale and intensity of this challenge, we should expect that, in fields from personal communications to business, health and security, China is likely to become the world's most advanced technological nation and the source of the most cutting-edge technological products in not much more than a decade.  

To maintain America's leadership position, Reid recommends the following: (1) a multiyear strategy to increase funding in key areas and to coordinate the efforts of multiple agencies, (2) revive industry-government-university partnerships, (3) invest more in STEM education, and (4) an immigration policy that attracts the best and the brightest.   

Are we facing "Robocalypse Now?"

For ages there have been concerns about workers being displaced by machines.  remember Ned Ludd?  John Henry?  With the growth of machine learning and artificial intelligence, those concerns have become heightened recently.

Basic economics says that the introduction of a new advanced technology will have two effects on the labor market: (1) there will be some displacement of workers whose skills are no longer in demand (e.g., blacksmiths and the automobile, bookkeepers and the computer) and (2) the extra wealth created by more efficient production methods will lead to increased demand for a wide range of products.

MIT economist David Autor has taken a look at the historical evidence on productivity enhancements and displacement.  Exploring 19 countries over 35+ years, he finds that the displacement definitely happens and is sizable within the affected industries.  However, employment actually ends up growing overall.

The downside is that some skilled workers are displaced and lack attractive options.  This means we face a challenge creating new opportunities for the unskilled and medium-skilled workers who are most likely to be affected.  The full report can be found here.

Race against the machines

Over the Christmas holidays I read Erik Brynjolfsson and Andrew McAfee's "The Second Machine Age," an ultimately optimistic view of where IT is taking us.  I say ultimately because as the machines get smarter and more productive, there is going to be significant displacement of labor.

Traditionally economists have viewed technological change as an essential element of economic growth.  Although there are plenty of examples of workers being displaced (ask John Henry the steel-driving man), the economy has historically been able to absorb and reallocate them fast enough to avoid mass unemployment.

Now Brynjolfsson is not so sure that mass unemployment can be avoided, as reported in a recent WSJ piece.  Although self-driving cars are years away from U.S. interstates, an Australian mining company is already using self-driving trucks and automated trains.  Some experts think that between a third and a half of today's jobs will become obsolete by mid-century.  MIT economist David Autor fears that those that will be left will be either very high skill or very low skill.

The good news -- breakthroughs in health care and education, new jobs that we cannot yet imagine, opportunities for more free time as machines do more work for us.  Maybe even folding laundry?

Technological change and labor market opportunities

An age-old question in labor economics has been how technological change impacts the labor market.  The standard answer has always been that change has mixed effects, eliminating the mrket for some tasks but creating new market opportunities.  For instance computers have been deadly for typewriter repair people but have created great opportunities for software engineers. 

This week MIT economist David Autor has a NYT think piece with the misleading title "How Technology Wrecks the Middle Class."  Autor deflates what the economists call the "lump of labor" fallacy, which maintains there is only so much work to be done and any technological change reduces job opportunities.

Labor-saving technological change necessarily displaces workers performing certain tasks — that’s where the gains in productivity come from — but over the long run, it generates new products and services that raise national income and increase the overall demand for labor. In 1900, no one could foresee that a century later, health care, finance, information technology, consumer electronics, hospitality, leisure and entertainment would employ far more workers than agriculture.

But with computing costs steadily falling, will this time be different?  Autor argues that this is unlikely for the most and least skilled workers.  Computers are not ready to take over most abstract, problem-solving tasks, nor are they ready to do most service work.  Autor is worried about some middle class jobs that are routine and could be outsourced or taken over by software. But he still sees opportunity:

Middle-skill jobs that survive will combine routine technical tasks with abstract and manual tasks in which workers have a comparative advantage — interpersonal interaction, adaptability and problem-solving. Along with medical paraprofessionals, this category includes numerous jobs for people in the skilled trades and repair: plumbers; builders; electricians; heating, ventilation and air-conditioning installers; automotive technicians; customer-service representatives; and even clerical workers who are required to do more than type and file.