The Economic Consequences of Automation

Sep 18, 2019 Robert Skidelsky

Economic theory does not provide a clear answer regarding the overall impact of technological progress on jobs. And even if automation has traditionally been beneficial in the long run, policymakers should never ignore its disruptive short-term effects on workers.

LONDON – While Brexit captures the headlines in the United Kingdom and elsewhere, the silent march of automation continues. Most economists view this trend favorably: technology, they say, may destroy jobs in the short run, but it creates new and better jobs in the longer term.

The destruction of jobs is clear and direct: a firm automates a conveyor belt, supermarket checkout, or delivery system, keeps one-tenth of the workforce as supervisors, and fires the rest. But what happens after that is far less obvious.

The standard economic argument is that workers affected by automation will initially lose their jobs, but the population as a whole will subsequently be compensated. For example, the Nobel laureate economist Christopher Pissarides and Jacques Bughin of the McKinsey Global Institute argue that higher productivity resulting from automation “implies faster economic growth, more consumer spending, increased labor demand, and thus greater job creation.”

But this theory of compensation is far too abstract. For starters, we need to distinguish between “labor-saving” and “labor-augmenting” innovation. Product innovation, such as the introduction of the automobile or mobile phone, is labor-augmenting. By contrast, process innovation, or the introduction of an improved production method, is labor-saving, because it enables firms to produce the same quantity of an existing good or service with fewer workers.

read more here:

https://www.project-syndicate.org/commentary/automation-impact-jobs-unemployment-by-robert-skidelsky-2019-09

Robert Skidelsky

Robert Skidelsky, a member of the British House of Lords, is Professor Emeritus of Political Economy at Warwick University. The author of a three-volume biography of John Maynard Keynes, he began his political career in the Labour party, became the Conservative Party’s spokesman for Treasury affairs in the House of Lords, and was eventually forced out of the Conservative Party for his opposition to NATO’s intervention in Kosovo in 1999.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.