Does Technology Eliminate Jobs?
May 19, 2017 by Bill Rosenthal

Pundits and commentators are concerned that automation is eliminating jobs, and some say it is happening at an unprecedented rate. An article in the New York Times last December captured the widespread worry. Its title: “The Long-Term Jobs Killer Is Not China. It’s Automation.”

You only have to look around to see what kinds of jobs are being lost to automation. Taxi drivers are being replaced by ride sharing services. Factory workers are losing positions to robots. Real estate agents are losing work to real estate web applications. Coal miners are losing work to natural gas and solar power. And on and on. And yet, the latest report from the U.S. Bureau of Labor Statistics puts unemployment at only 4.4 percent. In fact, unemployment has declined by 0.6 percentage points over the past year, a figure that represents 864,000 jobs. If you’ve tried to hire anyone lately, particularly for an IT job, you know the labor market is fairly tight.

If so many people are losing jobs to technology, why is unemployment declining? A new report, titled “False Alarmism: Technological Disruption and the U.S. Labor Market, 1850–2015,” sheds some light on the subject. It is published by the Information Technology & Innovation Foundation, and you can probably guess its main point from that title. The report examined occupational trends decade by decade for 165 years. It found that “occupational churn” (defined as the sum of jobs growing and jobs declining as percentage of total employment) peaked at over 50% between 1850 and 1870. It has gone up and down since then, but mostly down, and it is currently at the lowest level ever measured: less than 10%.

That’s not to say people don’t lose jobs or that jobs are not eliminated by technology. But technology tends to create jobs as well as eliminate them. It’s true that it creates fewer jobs than it destroys, but the net loss is lower than appears on the surface: “The period from 2010 to 2015 saw approximately 6 technology-related jobs created for every 10 lost, which was the highest ratio — meaning lowest share of jobs lost to technology — of any period since 1950 to 1960.” In addition, technology tends to drive prosperity and prosperity tends to create more jobs.

If anything, the report says, the current low rate of occupational churn is unhealthy: “The single biggest economic challenge facing advanced economies today is not too much labor market churn, but too little, and thus too little productivity growth. Increasing productivity is the only way to improve living standards — yet productivity in the last decade has advanced at the slowest rate in 60 years.”

Rather than worrying about technology-driven unemployment, the report says, we should be encouraging innovation, resisting entrenched interests that try to stop it, and make it easier for workers to adjust to changes in the labor market. The report promises policy recommendations on managing such labor market transitions in the near future. But I can suggest one right now: training. When you add new skills, you are diversifying your skills portfolio. Just like in the investment game, diversification is the key to protecting yourself from market downturns.