Monday, September 30, 2013

Automation and Future Unemployment

The impact of cheaper and more sophisticated forms of automation has recently been examined in this report by two researchers from Oxford University’s Programme on the Impacts of Future Technology:
Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerisation?,” September 17, 2013.
Some summaries of the report can be read here:
Josh Lieberman, “Half Of U.S. Jobs Are At Risk Of Computerization: Which 10 Are The Least Safe?,”, September 25, 2013.

Mark Hoffman, “Study: Half of All US Jobs Could Be at Risk of Computerisation,”, September 27, 2013.

“Nearly half of US jobs could be at risk of computerization, Oxford Martin School study shows,” September 19, 2013

Richard Eskow, “The Robots Are Coming – Now What?,” September 26, 2013.

Michael Snyder, “Oxford Professors: Robots And Computers Could Take Half Our Jobs Within The Next 20 Years,” September 29, 2013.
Their main conclusion is that 47% of US jobs might be lost owing to automation in twenty years, with similar trends in many other nations.

Also, they conclude:
“Our model predicts that most workers in transportation and logistics occupations, together with the bulk of office and administrative support workers, and labour in production occupations, are at risk. These findings are consistent with recent technological developments documented in the literature. More surprisingly, we find that a substantial share of employment in service occupations where most US job growth has occurred over the past decades …, are highly susceptible to computerisation. Additional support for this finding is provided by the recent growth in the market for service robots ... and the gradually diminishment of the comparative advantage of human labour in tasks involving mobility and dexterity.”
Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerisation?,” September 17, 2013. pp. 43–44.
And also of interest was this part of the paper:
“Our paper is motivated by John Maynard Keynes’s frequently cited prediction of widespread technological unemployment ‘due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour’ (Keynes, 1933, p. 3). Indeed, over the past decades, computers have substituted for a number of jobs, including the functions of bookkeepers, cashiers and telephone operators … . More recently, the poor performance of labour markets across advanced economies has intensified the debate about technological unemployment among economists. While there is ongoing disagreement about the driving forces behind the persistently high unemployment rates, a number of scholars have pointed at computercontrolled equipment as a possible explanation for recent jobless growth.”
Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerisation?,” September 17, 2013. pp. 43–44.
While it is absurd to deny that the surge in unemployment across the Western world since 2008 has been fundamentally caused by the aggregate demand shocks stemming from the Great Recession, nevertheless there would appear to be underlying structural unemployment problems caused by automation as well.

Market economies have no tendency to full employment equilibrium, and there is no necessary reason to think that the issue of structural unemployment will be solved by magic market solutions.

And there are also other issues: with the fall in prices and factor input costs, possible commodity deflation could put downward pressure on wages in other industries, which means debt deflationary problems as goods prices, wages, nominal debt and asset prices are grossly distorted in relation to one another.

The solution to these problems is: full employment macroeconomic policies, maintaining of a basic level of income for all (especially the unemployed), and policies to detect and deal with debt deflation.

Keynes, J. M. 1933 [1930]. “Economic Possibilities for our Grandchildren,” in John Maynard Keynes, Essays in Persuasion. Macmillan, London. 358–373.

Frey, Carl Benedikt and Michael A. Osborne, “The Future of Employment: How Susceptible are Jobs to Computerisation?,” September 17, 2013.


  1. More solutions. Shorter work weeks, more holidays and longer vacations. More education for younger people, keep them out of the workforce longer. Earlier retirement. Increase the labor share, higher pay to increase demand. Reduce the burden that the financial sector imposes on the real economy. Increased spending on infrastructure.

    In other words nearly the exact opposite in every area of what we are currently doing.

  2. You can not force people to work less if they do not want to. Besides if the number of jobs decreases dramatically no policy will be able to stop that. We can not go to 1 hour work - most jobs (especially the ones that will remain) do demand one person to keep constant focus.
    Instead of adding more policies and thus complexity to the system the only logical way ahead is exploring possiblities for universal basic income.

  3. Universal income has serious drawbacks.
    From what we already see in nowaday's politics, the prospects for this kind of solution to mass unemployment are not very bright. The existing benefits, small as they are, enable right wing politicians and even allegedly social democratic ones to blame poor people and depict them as parasites for other poor people to resent against.
    What do you think would happen were a government to implement basic income policy ?
    What's in it for the still working taxpayers ?
    Even it were reasonnably fair as a social contract, which I strongly deny, it would still be a political suicide for any mass movement to stand for it.


  4. I'm sorry if my comment has nothing to do with the post. But I like your blog, it contains a lot of data and explores a lot of history. I would like to know if there are any liberal blog (here in Brazil liberal = classical liberalism or similars) or any blog that defend the free market, which is similar to yours (explores the history, with datas and empirical evidences)