Concern surrounding the negative economic effects associated with technological progress is hardly confined to contemporary discourse. There is evidence dating back to the writings of Aristotle of trepidation over technological progress and the concurrent loss of labor opportunities. Aristotle warned that, “[i]f every instrument could accomplish its own work, obeying or anticipating the will of others…chief workmen would not want [human laborers].” Going forward, the First Industrial Revolution featured the rise of the “Luddites,” a group of manual laborers staunchly opposed to the proliferation of the electrically powered machines that would replace them in the workplace. The Luddites focused on the destruction of these machines while society, writ large, dismissed their platform as socially and economically regressive. Thus, their prominence was short-lived.
As technology has advanced since the 1800s, some economists have derided concern over technological effects on the marketplace as a reprise of the “Luddite Fallacy”—the irrational fear of technological development. They cite that markets have always righted themselves after temporary technologically driven disruptions. Further, they posit that even with minor market disturbances, the broad-based societal benefit derived from innovation far outweigh the negatives. For example, saddle makers lost the bulk of their work with the advent of automobiles. But what would we, as a society, prefer: keeping saddle makers employed and preventing the proliferation of the automobile or permitting cuts to the saddle making market and reaping the benefits of automobiles? Clearly, the answer is to foster advancement and allow saddle makers to seek employment elsewhere.
With the advent of paradigm-shifting automated technology (particularly, automated vehicles or “AVs”) closely upon us, there is a colorable argument to be made that this revolution may be different than those past. Policymakers and the general public should be made aware of approaching market perturbations in order to better plan to mitigate potential fallout.
The introduction of “level 4” AVs—those utilizing sensors, GPS, and specialized controls to completely remove human input into the driving process—to the marketplace is fast approaching. With the vast majority of car manufacturers (e.g., Ford, Nissan, and Toyota) and several technology companies making a concerted push for development, experts from the Institute of Electrical and Electronic Engineers (IEEE) estimate that “up to 75% of all vehicles will be fully automated by 2040.” Cementing the reality of AV development, President Obama and Transportation Secretary Foxx established a ten-year, $3.9 billion plan to “encourage faster innovation in [the industry] and develop a framework for…implementation.” Thus, the dawn of AVs is closer than most think and the potential negative effects should be widely acknowledged.
What makes the innovations in automated technology—specifically in AVs—different from past developments is the “skills gap” that will likely widen in the labor market. The distinction between the types of jobs that will be lost and those that will be created distinguishes this “revolution” from those prior. MIT Professor David Autor suggests that automation will cut into “manual non-routine” jobs (e.g., taxi drivers, truck drivers, and associated manufacturing jobs). These jobs are generally considered “low skilled” in nature (i.e., not requiring advanced training or degrees). The U.S. Bureau of Labor Statistics offers that there are nearly 6 million professionally employed drivers in the U.S. in addition to the 915,000 people employed in manufacturing support jobs. It is quite possible that the vast majority of these jobs will be eliminated with the introduction of AVs. Unlike past tech revolutions—where the saddle maker can easily transition to assembly line— this iteration will create new jobs that demand a relatively higher skill set (e.g., engineers, highly trained technicians and software developers). Thus, the “skills gap” will feature a robust supply of displaced “low skilled” workers and unable to meet market demand for newly created “high skilled” jobs. A premium will be placed on those with advanced degrees and skills while displaced workers may be forced into lower paying, “manual routine” jobs in various industries.
The backdrop in which this development may occur is similarly important. Professors Goldin and Katz posit that since 1972, the bottom fifth of U.S. society hasn’t realized any annual income growth while the top fifth’s income crows at 1.6% per year and the top 5% grows at 2%. They largely attribute the rising wage inequality to the difference between the wages of the highly educated and less educated. Since 1970, the growth of college graduates in the U.S. has slowed, thus the supply of “skilled” workers has similarly halted. Building off of these notions, if the premium for “skilled labor” is increased with new tech, and the pool of available workers is primarily “ low skilled,” inequality will worsen as workers may be forced to accept lower paying employment if they are employed at all.
So what can be done to mitigate this gap?
Some instructive recommendations emerge from the recent Trans Pacific Partnership agreement. A government-run—and private sector supported—job-retraining effort would help develop the necessary skills for displaced workers commensurate with industry demand. Furthermore, a concentrated revamping of primary, secondary, and vocational education curricula geared toward market-favored skills is needed. The increasingly popular idea of free community college would provide a valuable opportunity for individuals to garner new skills and thus soften the “job-skill polarization” problem.
A more unlikely proposition that is gaining traction in certain political and economic circles is the Universal Basic Income (UBI). In short, this policy (which can be implemented in various forms) would provide a lump sum of unconditional money to individuals on a regular basis. If the supply of available jobs is decreased by automation, and those jobs that are available can’t be filled due to a “skills gap,” unemployment rates have the potential to increase significantly. A UBI would serve as a baseline security blanket for the public and they will be encouraged to find additional income to add to the lump sum. Though there is some historic appeal from both sides of the aisle regarding the UBI, it is politically the least likely option to be enacted. Conservatives are skeptical of adding a significant amount of federal funding even if it were to reduce the red tape and number of programs already in place. Underlying this concern, policymakers of both parties tend to believe that a UBI would disincentivize work and create a rash of “free riders” within the economy.
In sum, automated innovation should not be impeded in any sense. The tangible benefits are too significant and outweigh the concerns cited above. It is important however, that we, as a citizenry, understand the potential drawbacks associated with these developments and that policymakers take a proactive stance to explore avenues to mitigate negative economic effects.