June 22, 2014
Steve Rattner has a column in the NYT in which he correctly argues that robots should not provide any reason for concern about future labor market prospects. As Rattner correctly points out, robots are just another form of productivity growth. As a general rule, productivity growth allows for rising living standards and more leisure. Rattner is also right to point out that productivity growth has actually been unusually slow in recent years, the opposite of the concern about robots destroying jobs.
Where Rattner goes wrong is in arguing that the gainers and losers in terms of labor market prospects have been determined by technology and globalization, as opposed to policies that have been designed to make some groups winners and some groups losers. This is very clear from examining the list of winning occupations on his chart. The highest, with median pay of $187,200 in 2012, is physicians. (Most other sources put the median pay of doctors at well over $200,000.) Our doctors are paid close to twice as much as their counterparts in other wealthy countries. This is primarily because we have a government policy of protecting them from both foreign and domestic competition.
Similarly people in finance can get enormous pay because the government grants large banks too-big-to-fail insurance, meaning it bails them out when their incompetence puts them into bankruptcy. (The I.M.F. recently estimated the size of this subsidy at $50 billion a year.) The government also subsidizes the industry by taxing other sectors more so that the financial sector can largely escape taxation.
Anyhow, Rattner is right that we need not fear productivity growth but he is wrong to claim that the winners and losers have been determined by the natural course of economic development as opposed to deliberate government policy.
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