May 23, 2015
Thomas Friedman, the man who told us the world is flat and told us about “hyperconnectivity,” is again raising the alarm about economic disruptions ahead. He tells readers about a new study which finds that 47 percent of the jobs in the United States are at risk of being taken over by smart machines and software in the next two decades. Wow!
Economists have a technical term for smart machines and software displacing workers. It’s called “productivity growth.” Back in the old days, when people who wrote on economic topics for major news outlets were expected to have some knowledge of economics, we thought productivity growth was good. It created the possibility of rising wages, shorter work hours, general improvements in living standards.
We can assess the assess the implications of the study Friedman cited for productivity growth. Suppose that half of the “at risk” jobs disappear over the next two decades. This would translate into a 1.3 percent annual rate of productivity growth. That would be slower than the U.S. has experienced for any sustained period since World War II. We should indeed be worried about the slow pace of technological progress in this case.
Suppose that all the “at risk” jobs identified in the study are eliminated over the next two decades. This translates in a 3.1 percent rate of annual productivity growth, roughly the same pace as during the Golden Age from 1947-73. This should be good news. Workers should be able to enjoy higher pay, shorter hours, and longer vacations.
There would still be one serious dark cloud on the horizon in this fast productivity growth scenario. In the same column Friedman quotes Tom Goodwin, an executive at Havas Media:
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”
Yes indeed, something very interesting is happening. We have companies who are argue that because they operate over the web, laws and regulations on safety, labor standards, non-discrimination and other areas do not apply to them. The argument would be comical, except in a system as corrupt as the one we now have in place in the United States they may get away with it. (The fact that Amazon still does not have to collect the same sales tax as its brick and mortar competitors in many states is a testament to the extent of this corruption.)
If we allow huge companies to push fairy tales to evade the rules that apply to everyone else, then we have a real risk that most of the benefits of technology will be appropriated by a tiny minority. That was not exactly Friedman’s point, but it certainly is an issue that deserves attention.
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