Comments 21

How Scary is Disruptive Technology?

Sep 28, 2016 Martin Feldstein

The US unemployment rate currently is less than half the rate in the European Union. There are many reasons for the disparity; but a critical one is the absence in the US of labor laws and union rules that prevent employees and firms from adapting to the latest innovations.

CAMBRIDGE – The steady stream of improvements in driverless cars has convinced me that before too long the roads will be filled with cars and trucks operating without humans at the wheel. Likewise, I am convinced that the revolution in artificial intelligence will allow computers and robots to do many of the tasks that white-collar workers now do.

It’s not surprising, therefore, that many people are worried about the fate of those whose jobs are vulnerable – or have already been lost – to the latest disruptive technology. What will happen to the millions of men and women who now drive trucks and taxis when the trucks and taxis can drive themselves? What will happen to the accountants and health workers when computers can do their jobs?

Some analysts have estimated that, with many fewer employees needed to produce the current volume of goods and services, a large share of current employment could be made redundant.

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Martin Feldstein

Writing for PS since 2008
122 Commentaries

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush's Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama's Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

0 Comments on this paragraph, 24 in all 24 Comments on this article

Robert Kolker Jan 20, 2017

If the work week is shortened, say to 20 hours, you can be sure there will be people trying to hold down three jobs. Wages have stagnated since 1975, and the only way to keep up is multiple jobs and over-using credit cards.
Sang Oun Lee Dec 11, 2016

I cannot believe that it is so 'disruptive' optimistic view on disruptive technologies. The reason why it is disruptive because it will cause drastic changes, not just because it is the natural sequence of history. Just to consider the aging population due to technological advance, traditional laborers will not be able to adapt to new technology unless proper training is introduced. Thus, it is so natural that so many unemployment is likely to happen. Further, it is also possible that the youth will gain more burden with the aging populations' pension fees at the same time. What should be considered is to prepare for the dramatic change from disruptive technology, once diffused to the public
Seth Wagoner Nov 27, 2016

History showed that agricultural workers could retrain as manufacturing workers and increase their standard of living. I am not, however, aware of all that many cases of manufacturing workers retraining in anything that increased their standard of living. I'm sure it happened in isolated cases, but in general they retired or went into lower paid, lesser skilled jobs in the service sector. Their kids are mostly stuck in low wage jobs with student debts that may or may not have gotten them a mostly useless qualification at the end.

There are plenty of jobs for people with STEM degrees from good universities, which require an IQ of 110+, a fair bit of cash and many years of hard work to obtain. Anyone in the lower 75% of the IQ spectrum is never going to qualify, let alone graduate. Every job they could possibly qualify for is likely to be taken by a robot inside the next decade. If not it will be because Americans prefer to enslave their children than buy robots that are far cheaper to maintain.

In all seriousness, you economists really need to stop talking to historians and start talking to computer scientists. Or we're dead.
Robert Kolker Nov 20, 2016

Technological Advance has always produced a certain amount of unemployment. There are those who can adapt to technological change and those who cannot in spite of their best good faith efforts to do so. What we need is to formulate some kind of Contract which agrees to support those who are too old to adapt to the new technological scene or are unable because of health reasons or limited intellect. The deal is this: in exchange for the increased benefits of new technology we will not let those who are permanently displaced by the technology sink.

I think that is a reasonable deal. Call it Progress Insurance.
Thomas Adams Nov 13, 2016

Dr. Feldstein's optimistic outlook is notedly in contrast to most of the experts in the field of AI research and utilization I've read. Of course his argument likely might hold water for a limited time; but eventually, and sooner not later there will be artificial sentience... at which point our days are numbered.
Only then will we stop worrying about jobs, and turn our thoughts and energies to surviving extinction. Tofler knew this was the likely outcome of our Future... Shock as do others who anticipate it with joy. What they miscalculated was their own ability to control the beast and fend off the inevitable outcome.

No worries, the need for Ivy league demigods will have long passed as well...
Ian Staines Oct 31, 2016

You are a smart guy but you are wrong.
Firstly, you don't know - the last 20 years have proven that so called experts can't see the next 6 months never mind the next 20 years.(Financial crash 2008, rise of Al Kiheda and ISIS, the iPhone etc)
Secondly, Artificial Intelligence is the game changer for mankind not "robots".
Esther Lopez Oct 28, 2016

I agree with this rosy picture of the future. The machines will do the work of people, and people will be busy at making better machines.
The issue of reward for fewer hours work will also be resolved by being paid for quality of work rather than 'hours at desk'.
Kris Henderson Oct 26, 2016

"A reduction in working hours per employee translates into quality-of-life improvements" - only if you can afford it!
Less hours of work generally means less pay each fortnight, this will not translate to more time spent on leisure like eating out if you can hardly afford to eat in and pay a mortgage, school fees and everything else.
Yes working less sounds like a fine idea I would readily support (see Keynes essay from 1939), but how can this be done in an environment where inequality continues to grow and resources continue to be restricted to the few?
Tomas Ramirez Oct 21, 2016

Unemployment rates in US and Europe have a different accountability that is why it look like higher in Europe. Chart: What's the real unemployment rate? -> http://www.cnbc.com/2015/09/04/-the-real-unemployment-rate.html
Norm Winn Oct 14, 2016

A few months ago I read a report that discussed permanent job loss in the United States since 2000 - estimates ranging from 7.5-8.5 million jobs eliminated. Of this total, approximately 1 million were attributed to NAFTA and another 2 million to our trade imbalance with China. The remaining 4.5-5.5 million jobs lost were due to advances in technology (automation, smart networks, process control). The report went on to estimate another 40-45 million jobs would be permanently lost between now and 2050 as further advances are made in the services and administrative fields.

The 6-8 million jobs already lost plus the estimated 40-45 million more that may be lost represent 46-53 million jobs permanently eliminated from the US economy, or roughly 1/3 of total US employment (151 million according to the September 2016 CES survey). I grant, some of those displaced workers will retire, but a great many won't be in a position to. And how will the loss of all those incomes impact the tax base, and the myriad of programs dependent upon tax receipts for funding.

Not everyone can or will get a college degree for a variety of reasons. But for the sake of your argument, lets say they all did. Just what industry or combination of industries will absorb 40-50 million college educated workers, given current trends away from hiring full time workers compounded by declining wages and loss of benefits?

Your optimism that displaced workers will somehow, somewhere find a job is a nice sentiment. Unfortunately, it won't pay the cost of housing, food, transportation, or medical care. As a nations, we can't afford to stop innovating. But we need for our elected representatives (and all the wannabes) to start figuring out how to address this looming issue.
Rokon Zaman Oct 6, 2016

AI and Robotics are blessing for the USA and other advanced nations, as manufacturing plants will likely be returned back from the East to the West. But what is in it for developing countries? http://techpolicyviews.blogspot.com/2016/10/ambient-human-consciousness-era-for.html
- Jose araujo Oct 19, 2016
  
  @Florian, I find it amazing how pople can think of this problems in the vacuum.
  
  Robots don't buy stuff, so they are never going to be the main problem. We need consumption to produce stuff and generate profits.
- Florian Strahberger Oct 7, 2016
  
  A) the problem is: robots don't purchase things. If you reduce costs by using robots, these costs are the income of the masses. Less income -> less consumption -> rising risk of recession, if no compensation (by investments and/or rising of debt-financed consumption).
  B) People in developing countries can offer their work in virtual-teams globally. Huge opportunities in middle-management and "easy to learn" office jobs - up to engineering and scientific jobs. This is the new trend of globalization - no need to worry for the developing countries.
Florian Strahberger Oct 5, 2016

A) The "unemployment rate" does not reflect the reality about the labour market and the situation of the people. I'd suggest to have a look at "Not in Labor Force" chart as well: http://data.bls.gov/timeseries/LNS15000000

B) The next step of globalization: after money and goods it's now the labour-market what is going to be globalized. A change to project-economies, with virtual project teams and global staffing.
The main problem of CSCW (Computer Supported, Cooperative Work) is/was a communication-problem. With new technologies of advanced communication, ICT-based collaboration will be superior to face-to-face. The project-workers in teams with a locally distributed configuration will no longer need to be communication-experts with extraordinary skills - good, clear, target-oriented communication will be enabled through software.
In more and more cases the costs of living will decide about the job-opportunities for the brain-workers.
Competitive advantage of nations in this field are no longer a thing of clusters - but a per capita one:
Education & low living expenses.
Melih Erdoğmuş Oct 4, 2016

Given the situation that the professor referred to a part of the history in which we'd been through such a ''revolution'', it's not going to be same this time. All those revolutionary things that the human-being had done until now have come to an end. I believe in no other options but referring to a situation that might be seen between Sarah Connor and Skynet. That would-be possible scene may be too crazy to be in for all of you but any individual on earth informed about the latest movements that the artificial intelligence is up to right now can easily comprehend my doubts and worries about where this might be leading to.
cristiana corno Oct 3, 2016

Dear Professor,
on the opposite I think human are playing with fire .... the artificial inteliigence as sci-fi explains would be the last human invention: after that the machines will be able to create. I think we are playing with the singularity and capitalism is taking us there. Profit will not die (as Marx prophetizes) but it will take shape of a robot. We will not be essential any more... it is hard to see our price (salary) going up in these circumstances.
Unfortunately I do not see illuminated minds, at the moment, who are addressing this very dangerous process with which we are playing or letting other people play.
Negative interest rates, reducing the cost of capital, are further helping in compressing wages, and making the capital factor cheaper than the work factor.
When reading sci-fi I always wondered how could the humanity get so stupid to substitute themselves? Now I know because they were looking for bigger profits....
- Nuno Silva Oct 4, 2016
  
  The final part of Cristiana's comment sounds quite familiar to me, «because they were looking for bigger profits».
  
  I often get to this same answer when I see something extremely bad and ask myself "Why would someone do such a bad and potentially self destructing thing?". For bigger profits. For 1 more Dollar, for 1 more Euro.
  
  Probably, this is THE problem in our present economic-financial globalised system that we must solve if we (humans) want a future for us. We must find a way to effectively stop the idea that "anything is okay for 1 more unit of profit".
  
  I'm not very confident in our success.
Georges Makhtouf Sep 29, 2016

Worth adding a real-life example to Professor Feldstein's article:

The invention of the bank ATM was supposed to eliminate bank teller jobs. In fact, those have greatly increased in the U.S. since ATMs became widespread. With ATMs reducing the need for bank tellers at each individual branch, it became cost-effective for banks to create many more bank branches than before to sell their financial products, thus increasing the total number of jobs over all bank branches.
Michael Public Sep 29, 2016

You are an economist and do you only consider the short term because in the long term "we are all dead". In the long term which I see ad a hundred years there will be virtually zero jobs that a machine cannot do better. At some point inbetween now and then techo-unemployment will rise dramatically. What we need to consider now is a new system where shareholders don't own and control all the technology. This is not communism but rather practical common sense, just as in the US corporations may not own rivers, beaches, water supply, air supply, nature reserves, police forces, armies or courts.
Egil Ulateig Sep 29, 2016

This is a typical American view, based on a number of myths.
The main one is that it is a very risky business to base belief in past experiences on history. There are so many excamples on the contrary. The other is the real unemployment figure, which I base on a number of solide sources. The third is: what kind of jobs and at what wages. So the future employment market should be base on workers without rights, without labor unions? Professor John Gray predicts that one third of the potential work force will permanently by without jobs in the brave new world.
john kennedy Sep 28, 2016

The jobs you envision do not nor are they likely to provide incomes adequate to support a family , provide savings for emergencies,savings for education and retirement. Government will have to provide resources to a vast portion of the population or suffer the consequences.
Jeff Miller Sep 28, 2016

Professor Feldstein is a fine economist. Brilliant of course – what Harvard professor isn’t? – and fully versed in how to present a subject full of factual anecdotes that support his premise while blithely ignoring any that don’t. As such he represents the best and brightest of Harvard.

So because elevator and switchboard operators lost jobs to technology but supposedly found jobs elsewhere therefore all workers who lose jobs to technology will, ipso facto, find jobs elsewhere. This premise is supported by the current 4.9% overall unemployment rate and the 2.7% college graduate unemployment rate and the larger share of college graduates in the youth labor force. As further support the professor makes the statement that 81% of all jobs today are service jobs and since they may involve touching a person they won’t be lost to robots. Until they are of course.

What the good professor ignores is that those service jobs generally pay less than the jobs those displaced workers used to have. The professor also ignores the need for business to make a profit so yeah, those who are still workers may have more leisure time but may not be able to afford to take the time. Unless the professor foresees business paying workers a 40 hour wage for a 20 hour workweek. That doesn’t even work in France. And with a million poorly educated immigrants it isn’t likely to last in Germany much longer either.

The professor claims that technology today is not disruptive because it wasn’t historically. And he bases that on the foundation of a 4.9% overall unemployment rate. What he ignores is the large drop in the participation rate. In so doing he also ignores the fact that the labor force participation rate for young people has declined dramatically. Popular wisdom has it as the result of the retiring baby boomers when in fact their participation rate is quite stable. So much for popular wisdom not to mention political exigency. https://www.stlouisfed.org/on-the-economy/2015/february/why-did-labor-force-participation-by-youth-drop

Professor Feldstein claims – without justification – that manufacturing employment dropped from 13m in 1950 to 9m today because of “robots and automated machinery”. One can only conclude that Professor Feldstein believes the vast numbers of products currently being manufactured in China and other third world nations – all of which used to be made in this country – don’t exist. It must be assumed that he believes our manufactured goods trade deficit is fiction. Ignoring this elephant in the room is quite necessary of course if one is to believe the professor’s premise.

It is quite reasonable to agree with the Professor on one point. The US employment force is far less regulated and restricted than that of Europe. Can anyone spell, “low bar”? When a circumstance is unpleasant or disappointing it may be human nature to compare it to another even worse circumstance. But it does not relieve the current unpleasant circumstance. It is akin to the “misery loves company” chide. That is a poor substitute for facing the contemporary reality.

There is another issue involved in this country regarding employment. It is rarely mentioned by our elites and often just ignored by policy makers. That is the fact that some 20% of high school students drop out of high school. Every year. Worse, that 20% number is better than it used to be. Professor Feldstein conveniently ignores this cohort of youth (and with time, non-youth) that are under educated, poorly motivated and low skilled.

The jobs that were shipped overseas could have been filled by this domestic low skilled labor – assuming various welfare programs were limited – so as to at minimum bring them into the labor force. Occasionally the reality of a menial job encourages a person to seek more education and/or training. Why is it our workers responsibility to provide jobs and employment to Chinese peasants while Harvard professors drone on about the benefits of “disruptive technology”?

It is the professor’s contention that because US labor laws and regulations are less restrictive than those in Europe then US “… employees will adjust positively to the changing technology.” Once more, can anyone spell, “low bar”. How about comparing US labor law and regulations to those in China, Malaysia, India, et al. We don’t look so good then.

Nor does Professor Feldstein’s premise that technology will not be disruptive because workers have always adjusted. It is all too convenient to presume that those workers who were disrupted always adjusted when the reality may just be that they never did. The employment statistics are just that. Statistics. It is entirely possible – and highly likely – that other workers took the new jobs while the disrupted workers just disappeared into the non-participating workforce which the Professor deigns to acknowledge . Statistics are great for overall descriptions. They are useless to any one particular individual. Unless of course that individual happens to be a tenured professor at Harvard.
Jeff Miller Sep 28, 2016

Professor Feldstein is a fine economist. Brilliant of course – what Harvard professor isn’t? – and fully versed in how to present a subject full of factual anecdotes that support his premise while blithely ignoring any that don’t. As such he represents the best and brightest of Harvard.

So because elevator and switchboard operators lost jobs to technology but supposedly found jobs elsewhere therefore all workers who lose jobs to technology will, ipso facto, find jobs elsewhere. This premise is supported by the current 4.9% overall unemployment rate and the 2.7% college graduate unemployment rate and the larger share of college graduates in the youth labor force. As further support the professor makes the statement that 81% of all jobs today are service jobs and since they may involve touching a person they won’t be lost to robots. Until they are of course.

What the good professor ignores is that those service jobs generally pay less than the jobs those displaced workers used to have. The professor also ignores the need for business to make a profit so yeah, those who are still workers may have more leisure time but may not be able to afford to take the time. Unless the professor foresees business paying workers a 40 hour wage for a 20 hour workweek. That doesn’t even work in France. And with a million poorly educated immigrants it isn’t likely to last in Germany much longer either.

The professor claims that technology today is not disruptive because it wasn’t historically. And he bases that on the foundation of a 4.9% overall unemployment rate. What he ignores is the large drop in the participation rate. In so doing he also ignores the fact that the labor force participation rate for young people has declined dramatically. Popular wisdom has it as the result of the retiring baby boomers when in fact their participation rate is quite stable. So much for popular wisdom not to mention political exigency. https://www.stlouisfed.org/on-the-economy/2015/february/why-did-labor-force-participation-by-youth-drop

Professor Feldstein claims – without justification – that manufacturing employment dropped from 13m in 1950 to 9m today because of “robots and automated machinery”. One can only conclude that Professor Feldstein believes the vast numbers of products currently being manufactured in China and other third world nations – all of which used to be made in this country – don’t exist. It must be assumed that he believes our manufactured goods trade deficit is fiction. Ignoring this elephant in the room is quite necessary of course if one is to believe the professor’s premise.

It is quite reasonable to agree with the Professor on one point. The US employment force is far less regulated and restricted than that of Europe. Can anyone spell, “low bar”? When a circumstance is unpleasant or disappointing it may be human nature to compare it to another even worse circumstance. But it does not relieve the current unpleasant circumstance. It is akin to the “misery loves company” chide. That is a poor substitute for facing the contemporary reality.

There is another issue involved in this country regarding employment. It is rarely mentioned by our elites and often just ignored by policy makers. That is the fact that some 20% of high school students drop out of high school. Every year. Worse, that 20% number is better than it used to be. Professor Feldstein conveniently ignores this cohort of youth (and with time, non-youth) that are under educated, poorly motivated and low skilled.

The jobs that were shipped overseas could have been filled by this domestic low skilled labor – assuming various welfare programs were limited – so as to at minimum bring them into the labor force. Occasionally the reality of a menial job encourages a person to seek more education and/or training. Why is it our workers responsibility to provide jobs and employment to Chinese peasants while Harvard professors drone on about the benefits of “disruptive technology”?

It is the professor’s contention that because US labor laws and regulations are less restrictive than those in Europe then US “… employees will adjust positively to the changing technology.” Once more, can anyone spell, “low bar”. How about comparing US labor law and regulations to those in China, Malaysia, India, et al. We don’t look so good then.

Nor does Professor Feldstein’s premise that technology will not be disruptive because workers have always adjusted. It is all too convenient to presume that those workers who were disrupted always adjusted when the reality may just be that they never did. The employment statistics are just that. Statistics. It is entirely possible – and highly likely – that other workers took the new jobs while the disrupted workers just disappeared into the non-participating workforce which the Professor deigns to acknowledge . Statistics are great for overall descriptions. They are useless to any one particular individual. Unless of course that individual happens to be a tenured professor at Harvard.
Carsten Schmidt Sep 28, 2016

sounds a bit like a snakeoil salesperson i will admit. "I am optimistic and trust me" ... that is the full argument. to base a whole argument on history is not just ignorant in my view but also dangerous. and that the US will benefit from these changes now i think is extremely far fetched. the US has failed to make investments in education of the masses for more than 4 decades now. as the changes happen that are described here education is the only thing that will keep people employed. but the US has under-invested in this space leaving its poor and even middle class with little hope of the American Dream. Yes in the past especially the US weathered technology change, but back then it was the gold standard when it came to an educated citizenry, today that is by far no longer the case. and with politicians like Trump dreaming of getting us back to the coal age rather than having plans to triple down on education there is not much to be optimistic about.