Rise of the Machines: Technology Cuts Some Jobs but Creates Others

Technology has created new jobs in some sectors but cut jobs in others, increasing inequality

Rise of the Machines: Technology Cuts Some Jobs but Creates Others
Image: Pixabay
February 08, 2017

Jobs played a large role in the November election. Many of those who voted for Donald Trump did so based on his promises to bring jobs back to middle and rural America, where certain industries crucial to the local economy have been on the decline for years. The cause?

Among other factors, technology.

Author and columnist Thomas Friedman argues that a revolution—largely technological but also influenced by globalization and climate change—started in 2007. According to Friedman, that year saw the introduction, or at least the conception of, among other things:

  • The first iPhone, which started the smartphone revolution that may one day put an internet-connected handheld computer in the hands of every person on Earth
  • Facebook (actually in late 2006)
  • Twitter
  • The cloud
  • The Kindle, which began the e-book revolution
  • The Android operating system
  • IBM's Watson computer, the first computer that can now understand almost every paper ever written about cancer and can make highly accurate diagnosis and treatment suggestions
  • Airbnb
  • Change.org
  • GitHub, which is now the biggest open-source software sharing library in the world
  • Intel's first microchip transistors containing non-Silicon materials, which continue to fuel the ever-increasing growth of computer power

But if so much progress was made in 2007, how have so many people lost their jobs? Friedman's answer: 2008.

"In the best of times social technologies have a hard time keeping up with physical technologies," he writes, "but with the Great Recession of 2008 and the political paralysis it engendered, this gap turned into a chasm. A lot of people got dislocated in the process."

Friedman defines "social technologies" as "all of the rules, regulations, institutions and social tools people needed to get the most out of this technological acceleration and cushion the worst." He argues that the ways in which companies produce their products and manage their businesses—including their employees—could not adapt quickly enough to the new advances in technology. This inability to keep up, combined with the recession, resulted in many workers falling through the chasm.

The technology that has probably resulted in the most job loss is automation, which has been a concern for workers for several decades. The Economistwrites: "As computers began to appear in offices and robots on factory floors, President John F. Kennedy declared that the major domestic challenge of the 1960s was to 'maintain full employment at a time when automation…is replacing men.'"

Yet historically, automation has actually created more jobs than it has destroyed. "Automating a particular task, so that it can be done more quickly or cheaply, increases the demand for human workers to do the other tasks around it that have not been automated," the magazine argues.

It cites two industries in which this has been the case: weaving and banking. The Industrial Revolution automated more and more tasks in the weaving process, which led workers to focus on tasks that could not be done by machine, such as operating one of the machines and managing many machines at once so they would continue to run smoothly. The result was that output grew tremendously: the amount of coarse cloth that one weaver could produce in one hour in 1800s America rose by a factor of 50, while the amount of work required per yard of cloth to produce it fell by 98 percent. As a result, cloth became cheaper, which led to increased demand for it, which led to more jobs for weavers, whose numbers quadrupled between 1830 and 1900.

"In other words," writes The Economist, "technology gradually changed the nature of the weaver's job, and the skills required to do it, rather than replacing it altogether."

And in banking, automated teller machines (ATMs) could have been expected to make human tellers obsolete by taking over some of their routine, everyday tasks. According to James Bessen, an economist at the Boston University School of Law, the average number of tellers per branch in the U.S. did fall from 20 in 1988 to 13 in 2004. However, this reduced the cost of running a branch, which then allowed banks to open additional branches as a result of customer demand. From 1988 to 2004, the number of urban bank branches increased by 43 percent, ultimately increasing the total number of employees. ATMs changed employees' work routines in a way that, in the end, enabled banks to hire more people.

According to The Guardian, other economists have reached the same conclusion. Ian Stewart, Debapratim De, and Alex Cole, who work for consultancy Deloitte, carried out a study analyzing census data from England and Wales all the way back to 1871. They found that, "rather than destroying jobs, technology has been a 'great job-creating machine.'"

"The dominant trend is of contracting employment in agriculture and manufacturing being more than offset by rapid growth in the caring, creative, technology and business services sectors," they write. "Machines will take on more repetitive and laborious tasks, but seem no closer to eliminating the need for human labour than at any time in the last 150 years."

Meanwhile, Bessen analyzed the U.S. workforce between 1982 and 2012 and discovered that employment increased significantly more quickly in occupations that used computers more, such as graphic design. As automation finished one aspect of a job more quickly, workers were able to do a better job at the other tasks. The result "was that more computer-intensive jobs within an industry displaced less computer-intensive ones," concluded The Economist. "Computers thus reallocate rather than displace jobs, requiring workers to learn new skills."

Massachusetts Institute of Technology economist David Autor has reached the same conclusions, according to the Washington Center for Equitable Growth (WCEG). He argues that new technologies requiring higher levels of skill raise the demand for workers with those skills. "At the same time, this change reduces the demand for workers with skills that are made redundant by technology," writes WCEG. "These workers don't end up unemployed, but rather move to a different occupation."

While it can be tempting to think that these facts completely refute the idea that technology is bad for workers, the Center points out an unintentional effect of the gap in demand for workers with different skill levels: "Such job polarization contributes to increased economic inequality."

Just as jobs require different levels of skill, they also pay different amounts in wages. Even if a worker is successful in finding work in another industry, there is no guarantee that he or she will continue to earn the same income as before. Indeed, if the pace of technological change continues to move faster than companies and workers can adapt to it, the demand for low-skill work will decrease, and the supply of low-skill workers will rise accordingly, creating a surplus. If this happens, it seems likely that these workers will either have to take lower-paying work or look for training or education in another occupation—possibly both—in order to make a living.

So what is there to do? According to Friedman, instead of focusing on jobs, lawmakers and companies need to look at the bigger picture and start focusing on workers themselves.

"You need to protect workers, not jobs, because every worker today will most likely have to transition multiple times to multiple jobs as the pace of change accelerates," he writes in a separate article. "So the best way you help workers is by ensuring that they are flexible — that they have the skills, safety nets, health care and lifelong learning opportunities to make those leaps and that they live in cities open to innovation, entrepreneurship and high-I.Q. risk-takers.

The societal units protecting workers best are our healthy communities — where local businesses, philanthropies, the public school system and universities, and local government come together to support a permanent education-to-work-to-life-long-skill-building pipeline."