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Technological unemployment, where unemployment arises from (with some oversimplification) workers being replaced by machines, has so far been temporary as new jobs were created that replaced the old jobs. Structural unemployment has been predicted many times in the past and the present, but has not (yet) occurred.

Historical increases in productivity have led to an increase in overall production. Physicist Timothy Garrett models the economy as a heat engine, with more details in papers linked from Garretts personal page:

In each of the past 40 years for which records are available, a continuous 7.1 Watts has been required to maintain every one thousand inflation-adjusted 2005 dollars of historically accumulated economic wealth (not yearly economic output or GDP). As of 2010, civilization was powered by about 17 trillion Watts of power which supported about 2352 trillion dollars of collective global wealth. In 1970, both quantities were less than half this. In the interim, energy consumption and wealth grew equally rapidly in the interim at an average rate of 1.9% per year.

Dr. Garrett is not an economist by training, and I don't know how his models are received by mainstream economists.

How do contemporary forecasts on technological unemployment take into account an economy that is increasingly limited not by the availability of (sufficiently skilled) labour, but rather by the availability of resources?

To illustrate it further: some speculate that in the next years and decades, self-driving cars will displace professional drivers (taxi drivers, lorry drivers, etc.). This will initially increase unemployment, but it would also lower the labour component of the price of many goods. Historically, civilization has responded to such events more with an increase in production than with an overall decrease in hours worked. However, production cannot be increased arbitrarily; resources become increasingly scarce. Therefore, those prices will go up. That means that perhaps this time around, the feedback preventing structural, technological unemployment does not apply... hence my question.

I welcome answers that do and answers that do not take into account externalized costs such as damage to natural ecosystems, pollution, and anthropogenic climate change.

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  • $\begingroup$ You have already kind of answered your own questions. Similar points were definitely raised by the people predicting technological unemployment. $\endgroup$ – Tony Feb 1 '15 at 15:29
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    $\begingroup$ @BeeDev You replaced my UK spelling by US spelling — why? $\endgroup$ – gerrit Feb 3 '17 at 21:16
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I understand that you are asking the following

Up to now, we have avoided structural unemployment because we increased production by more than what the technological efficiency gains implied (and so eventually re-employed the labor that had become initially obsolete, usually in other industries). But if finite resources put constraints on how much we can increase production, won't a time come that structural unemployment will emerge?

As @Foobar notes in a comment, technically speaking this appears to have to do with the rate of increase of efficiency in resource use compared to the rate of decrease of resources available.

But one could argue that, efficiency in resource use has its limits, and the constraint will eventually set in. In such a technological unemployment scenario (which I don't believe anyone can really put a reliable time-line on), there is one resource that won't decrease but rather increase in availability: labor. So, and if nothing truly life-changing happens (like devastation of human population, massive colonizations of other planets, or the equivalent of Amalthea's Horn of Plenty), production will tend to utilize this available resource (which we should expect to command a relatively lower reward being in high supply). Meaning, a tendency for production to grow in sectors where services delivered by humans remain central, by their nature (or by the prevailing consumer preferences). Servants, personal assistants, waiters, nurses, sex workers, trainers, teachers, baby sitters, security guards, body guards, arts and sports entertainers... even if only as a relative "luxury", rather than strictly needed in the amounts employed. And we may even see innovative ways of using labor (i.e. once more creating new sectors) -but I leave that to anyone's imagination...
Of course this labor should get paid something for its services, so those employing it should have the income/wealth needed to pay this something... which indirectly brings in the issue of wealth and income inequality, and whether it plays (or not) a part in all these.

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  • $\begingroup$ Your understanding of what I am asking is correct. $\endgroup$ – gerrit Feb 1 '15 at 3:02
  • $\begingroup$ "the constraint will eventually set in". That's a really hand-waving term. What constraint, which resource? We've had constraints kick in and adopted quite often over the past hundred years. Production goods and consumption goods have substitutes, and eventually we will replace oil with alternative energies. (to mention one of them). $\endgroup$ – FooBar Mar 5 '16 at 20:46
  • $\begingroup$ Given that you down-voted (or close-voted) another question for being "unrealistic what-if" (not verbatim), I find it irritating that you're drawing such scenarios yourself, without explaining the exact conditions that lead to them. $\endgroup$ – FooBar Mar 5 '16 at 20:47
  • $\begingroup$ @FooBar There is nothing unrealistic about the prospect of structural unemployment. And my answer contains standard economic reasoning based on the general principles of supply-and-demand as well as scarcity. I am not detailing a fully specified model here. $\endgroup$ – Alecos Papadopoulos Mar 5 '16 at 21:05
  • $\begingroup$ Structural unemployment I agree. But you're implying a world with $K=0$, and that is science fiction in my books. $\endgroup$ – FooBar Mar 7 '16 at 8:11
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I see multiple questions in this question (please avoid that in the future), and Ill do my best to answer two of them.

Resources Limiting Growth

There is no problem what-so-ever with the restriction of resources. Decreasing supply implies higher prices, s.t. technologies which manage these more efficiently will be rewarded.

If you look at environmental economics, there are many papers that look at the transition dynamics from fossil to renewable energies, and pivot taxation that optimizes the transition from one to another.

Structural Technological Unemployment

Assuming that human capital is slow to adjust to the demand, improving technologies will increase unemployment in the short run, as these workers become obsolete. However, in the long run, workers' human capital will be optimized to take new technologies into account, and they will be employable again.

Why?

Whenever machines replace some jobs because they became more productive than the human which was working there before, they also make other jobs - that depend on this one - more productive.

For example, think about writers and the press. The digital age has lead to the layoff of many workers who were working in the printing industries. However, an improvement in the printing industries has lead to a surplus, which partially has been passed over to the writers. Printing is now more affordable, hence being a writer has higher returns.

Without being able to prove this in equations, it seems to be a natural counter-force: The more effective technology is at replacing some jobs, the more it is improving the efficiency of that job, and the higher the surplus for other jobs that depend on this one.

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    $\begingroup$ Where do you see multiple questions? There's only a single question mark in my post. The question is very much about the link between the two issues. The question is whether workers' human capital will be optimized to take new technologies into account, and they will be employable again is still true when resources limit growth. I'm not sure how to rephrase for additional clarity. $\endgroup$ – gerrit Jan 31 '15 at 19:11
  • $\begingroup$ More specifically: There is no problem what-so-ever with the restriction of resources. Decreasing supply implies higher prices, s.t. technologies which manage these more efficiently will be rewarded. However, the argument why there is no structural technological unemployment relies on lower costs. That's why I wonder if the natural counter-force still works in a resource-starved economy. $\endgroup$ – gerrit Jan 31 '15 at 19:15
  • $\begingroup$ I added a paragraph to illustrate my question further, and show that your post does not address what I'm looking for (I am aware of both point you are making). $\endgroup$ – gerrit Jan 31 '15 at 19:23
  • $\begingroup$ @gerrit: My point still stands. As to the paragraph on decreasing resources, the question is to what extent efficiency increases faster than resources decreasing. I'm not aware of any studies regarding this issue. $\endgroup$ – FooBar Jan 31 '15 at 19:42

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