January 24, 2019
That is the gist of a piece telling us that automation (a.k.a. productivity growth) will surge in the next recession. Since the Congressional Budget Office (CBO) and most other forecasters project continued slow productivity growth, the prediction of an imminent surge in automation goes against standard views in the economics profession.
I have to say, the basic story here is hard to follow. Here are the first two paragraphs:
“Robots’ infiltration of the workforce doesn’t happen gradually, at the pace of technology. It happens in surges, when companies are given strong incentives to tackle the difficult task of automation.
“Typically, those incentives occur during recessions. Employers slash payrolls going into a downturn and, out of necessity, turn to software or machinery to take over the tasks once performed by their laid-off workers as business begins to recover.”
This one has to draw a really big “huh?’
Employers need to turn to automation out of necessity because they are laying off workers? How about if they didn’t lay off workers, then they wouldn’t need to replace them with automation.
In the old days, we used to think that the incentive to automate was greatest in the upturn when labor is tight and wages are high. In the downturn, workers are willing to work for lower pay because they have few other options. Why would companies see this as the time to automate?
The evidence for this argument is that in the recoveries from the last three recessions we have seen a much slower increase in the return of the routine jobs that can be easily automated than in prior recoveries.
The evidence shown here is not very compelling on this point. The main reason we didn’t see a recovery of these jobs following the 2001 recession was a massive increase in the trade deficit that cost us 2 million manufacturing jobs. For some reason, economists are adverse to talking about the rise in the trade deficit as an important factor in the labor market, but those of us who care about reality have no choice.
The weak upturn in routine jobs following the 2008–2009 recession, goes along with a weak recovery of non-routine jobs. In other words, we had a weak recovery. There is still the experience of the recovery from 1990–91 that needs to be explained, but I’m not sure that we would want to make very strong claims about the labor market based on a recovery almost three decades ago.
Anyhow, I hope that we do see the increase in productivity growth that Van Dam is predicting, but I’m afraid I don’t find his story very compelling.
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