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20–442 2016

S. HRG. 114–377 

THE TRANSFORMATIVE IMPACT OF ROBOTS 

AND AUTOMATION 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MAY 25, 2016 

Printed for the use of the Joint Economic Committee 

( 

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(II) 

JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

SENATE 

DANIEL COATS, Indiana, Chairman 

MIKE LEE, Utah 

TOM COTTON, Arkansas 

BEN SASSE, Nebraska 

TED CRUZ, Texas 

BILL CASSIDY, M.D., Louisiana 

AMY KLOBUCHAR, Minnesota 

ROBERT P. CASEY, JR., Pennsylvania 

MARTIN HEINRICH, New Mexico 

GARY C. PETERS, Michigan 

HOUSE OF REPRESENTATIVES 

PATRICK J. TIBERI, Ohio, Vice Chairman 

JUSTIN AMASH, Michigan 

ERIK PAULSEN, Minnesota 

RICHARD L. HANNA, New York 

DAVID SCHWEIKERT, Arizona 

GLENN GROTHMAN, Wisconsin 

CAROLYN B. MALONEY, New York, Ranking 

JOHN DELANEY, Maryland 

ALMA S. ADAMS, PH.D., North Carolina 

DONALD S. BEYER, JR., Virginia 

VIRAJ M. MIRANI, Executive Director 

HARRY GURAL, Democratic Staff Director 

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C O N T E N T S 

OPENING STATEMENTS OF MEMBERS

Hon. Daniel Coats, Chairman, a U.S. Senator from Indiana .............................. 1 

Hon. Carolyn B. Maloney, Ranking Member, a U.S. Representative from 

New York .............................................................................................................. 3 

WITNESS

Dr. Andrew McAfee, Principal Research Scientist, Massachusetts Institute 

of Technology, Cambridge, MA ........................................................................... 5 

Mr. Adam Keiper, Fellow and Editor of The New Atlantis, Ethics and Public 

Policy Center, Washington, DC ........................................................................... 7 

Dr. Harry Holzer, Professor at the McCourt School of Public Policy, Georgetown University, Washington, DC ...................................................................... 9 

SUBMISSIONS FOR THE RECORD

Prepared statement of Hon. Daniel Coats, Chairman, a U.S. Senator from 

Indiana .................................................................................................................. 40 

Prepared statement of Hon. Carolyn B. Maloney, Ranking Member, a U.S. 

Representative from New York ........................................................................... 40 

Prepared statement of Dr. Andrew McAfee, Principal Research Scientist, Massachusetts Institute of Technology, Cambridge, MA ......................................... 42 

Prepared statement of Mr. Adam Keiper, Fellow and Editor of The New 

Atlantis, Ethics and Public Policy Center, Washington, DC ............................ 51 

Prepared statement of Dr. Harry Holzer, Professor at the McCourt School 

of Public Policy, Georgetown University, Washington, DC .............................. 61 

Questions for the record and responses: 

Questions for the record for Dr. McAfee submitted by Senator Amy Klobuchar ............................................................................................................ 65 

Questions for the record for Dr. Holzer submitted by Senator Amy Klobuchar ............................................................................................................ 65 

Questions for the record for Mr. Adam Keiper submitted by Senator 

Tom Cotton .................................................................................................... 67 

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(1) 

THE TRANSFORMATIVE IMPACT OF ROBOTS 

AND AUTOMATION 

WEDNESDAY, MAY 25, 2016 

CONGRESS OF THE UNITED STATES, 

JOINT ECONOMIC COMMITTEE, 

Washington, DC. 

The Committee met, pursuant to call, at 2:32 p.m. in Room 106 

of the Dirksen Senate Office Building, the Honorable Daniel Coats, 

Chairman, presiding. 

Representatives present: Tiberi, Schweikert, Maloney, Adams, 

Beyer, Paulsen and Delaney. 

Senators present: Coats, Lee, Klobuchar, Casey, Peters, Sasse, 

and Heinrich. 

Staff present: Breann Almos, Ted Boll, Doug Branch, Whitney 

Daffner, Barry Dexter, Connie Foster, Harry Gural, Colleen Healy, 

Karin Hope, Matt Kaido, Jason Kanter, Christina King, Yana 

Mayayeva, A. J. McKeown, Viraj Mirani, Brian Neale, Thomas 

Nicholas, Brian Phillips, Ken Scudder, and Phoebe Wong. 

OPENING STATEMENT OF HON. DANIEL COATS, CHAIRMAN, A 

U.S. SENATOR FROM INDIANA 

Chairman Coats. The Committee will come to order. Today the 

Committee will examine how robots, automation, and technology 

are transforming our economy. I would like to thank our witnesses 

for being here, and I will be introducing the three of you shortly. 

But first I would like to draw the Committee’s attention to the 

gavel that I just used to start today’s hearing. It looks and functions like a typical gavel, but this gavel (indicating), which we normally use, is crafted out of a block of wood and carved down to— 

a machine will carve this down into the form that it is. This one 

(indicating) started as a pile of dust, a compound, a plastic compound. Instead of taking a block of wood and carving down the traditional gavel, we have built this—not me; this has been built 

through the 3D printing process by the Washington, D.C., Public 

Library’s Fabrication Laboratory, or what they call ‘‘The Fab Lab,’’ 

using 3D printing. An amazing advance in technology. Amazing. 

Three-D printing works by heating up raw material, in this case 

plastic, and the compound from which plastic is made, one small 

layer at a time until the object is completed. 

And rather than needing to mold or carve raw material as we did 

in the past, we now use a—we put our file into a printer and it 

creates the item according to the user’s specific expectations and 

specifications. 

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I also have with me a different 3D printed gavel that we will use 

to adjourn the meeting. I will have to bang it a little harder. But 

it was made by students at the Washington Mathematics Science 

Technology Public Charter High School located here in the District 

of Columbia. What an exciting new world we live in where objects 

can be manufactured on demand, and with such ease and specificity. 

I would like to thank both institutions for their contributions to 

today’s hearing, which tangibly illustrate the topic we are about to 

explore. I would also like to thank Senator Lee and his staff for 

helping the Committee prepare for today’s hearing. 

Recent technological developments have been pushing the envelope faster and further than was expected even a decade ago, making what was once thought of as a science fiction a reality. 

I remember the hassle of getting my children to program our 

VCR. And now my cable box is capable of recording all my favorite 

shows without me even asking. And meanwhile, some of my grandchildren are probably saying, ‘‘What was a VCR?’’ 

The robotic machines are here. Whether it is vacuuming our carpets or assisting in precise surgeries, robots are helping with and 

performing almost every task that we can imagine. This has led to 

a greater abundance of consumer products, and more productive 

and creative workers. 

However, as with the Industrial Revolution and previous revolutions, this new robotic revolution clearly is contributing to pressures arising within our changing labor force. Even before these 

technological advances, America’s workforce was starting to age 

and businesses were beginning to rely much more on automated 

labor than physical labor. Robots are expected to hasten this trend 

as they fill in for humans in both blue- and white-collar jobs. 

This picture—which I am going to put up; I don’t know where it 

is; we were going to put up somewhere—shows a modern assembly 

line and illustrates the prevalence of automation in today’s economy. Where workers used to assemble vehicles directly by hand, 

now they oversee teams of precise robots that can weld and assemble vehicles far more advanced than ever before. 

We have a number of assembly plants in Indiana. I have been 

through each and every one of them over a period of my service, 

dating back to 1981 in the Congress. I am used to seeing that line 

filled with dozens of human beings assembling parts to the making 

of an automobile or a truck, and by hand. 

Now all I see is a number of robots doing that same process. 

Where workers used to assemble directly by hand, they now oversee through teams of precise robots that can weld and assemble vehicles far more advanced than ever before. 

Automation’s rapid progress has also raised challenges with certain government policies. How can we foster an environment where 

innovators thrive and grow? 

How can we foster a social safety net prepared for 21st century 

labor markets? Do some government policies make human workers 

prohibitively expensive for employers? How will current workers 

adapt? And is our education system preparing our youngest citizens for the future economy? 

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These are important questions, and for guidance we look forward 

to hearing the views of our distinguished witnesses. 

Today we will hear from Dr. Andrew McAfee, principal research 

scientist and co-founder of MIT’s Institute Initiative on The Digital 

Economy. 

We also welcome Adam Keiper—I think I am pronouncing that 

correctly, Adam—fellow at the Ethics and Public Policy Center and 

editor of the quarterly technology publication, The New Atlantis. 

Our final witness is Harry Holzer, professor at the McCourt 

School of Public Policy at Georgetown University, and Senior Fellow in Economic Studies at the Brookings Institution. 

My thanks to all of you for providing us with your expertise and 

giving us a glimpse into the possibilities of the future. 

I now would like to recognize Ranking Member Maloney for her 

opening statement. 

[The prepared statement of Chairman Coats appears in the Submissions for the Record on page 40.] 

OPENING STATEMENT OF HON. CAROLYN B. MALONEY, 

RANKING MEMBER, A U.S. REPRESENTATIVE FROM NEW YORK 

Representative Maloney. Thank you so much, Chairman 

Coats, for really calling such an important and interesting and 

timely hearing. 

We are here today to discuss the impact of automation on jobs 

and the economy and how best to harness the immense power of 

technological innovation. 

The United States has long been a leader in this important area, 

and basic research funded by the Federal Government has played 

a key role in driving innovation. 

We know that automation can boost productivity, lift aggregate 

demand, reduce consumer prices, and improve our quality of life. 

While all of these benefits are apparent in the long run, we also 

know that in the short run innovation can displace workers, causing severe economic pain to workers whose jobs are automated out 

of existence, or whose wages are reduced dramatically. 

Today’s hearing is about the future. And let’s face it, automation 

is a difficult thing to predict. We do not know what is going to happen, and we just don’t know how fast it is going to happen, or in 

which industries, or what will be the exact consequences. 

One study finds that nearly half of U.S. jobs are at risk of being 

lost to automation in the next couple of decades. Other studies 

show that the impacts of automation will not be as great, or felt 

so soon. 

Throughout history, concerns have been voiced that new technologies would make human labor obsolete. It has not happened. 

While there have been dramatic shifts in how people have earned 

their livings, the quantity of jobs has increased and the quality has 

improved. 

Yet there are reasons to believe that this could be different in the 

future. I would like to add some of my questions to the excellent 

questions Senator Coats put forth: 

How do we equip our workers with the tools and skills needed 

to adapt to the future changes? 

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What should we do as policymakers to both advance innovation 

and the expected productivity benefits on the one hand, while also 

supporting workers adversely affected by technological changes on 

the other hand? 

And how can we harness this engine of prosperity while making 

sure that benefits are widely shared? 

I really am excited to learn more and to hear the questions and 

exchange here today with our excellent witnesses. But before I 

yield back my time, I would like to turn to Senator Peters, a former 

colleague in the House of Representatives. We miss you. And I 

would like to yield the balance of my time to him. He is the cofounder of the bipartisan Senate Smart Transportation Caucus. 

Senator Peters has a deep interest and knowledge of automation 

and its impacts in Michigan and the rest of the United States, and 

I yield him the remainder of my time, and it is always good to see 

you again. 

[The prepared statement of Representative Maloney appears in 

the Submissions for the Record on page 40.] 

Senator Peters. It is good to see you, as well, Ranking Member 

Maloney, and thank you for yielding your time. 

As a Senator representing Michigan, I am acutely aware of the 

incredible opportunities and challenges that automation brings to 

our economy. 

Today the American auto industry is generating connected and 

automated vehicle technology and mobility solutions that surpass 

really all of the innovations in that industry’s history. 

These disruptions will really redefine transportation in the 

United States and will result in thousands of lives being saved. It 

will reduce personal insurance costs. It will reduce congestion, and 

provides benefits to the environment. And these advancements are 

not decades away. 

In fact, in the Model Year 2017 Cadillac CTS will leave the factory equipped with vehicle-to-vehicle technology onboard which 

NTSA predicts at full penetration could reduce the number of accidents on our roads by nearly 80 percent. And at a time when nearly 40,000 people die on our highways every year, that is a big deal. 

As the industry moves towards a world where we have fully autonomous driverless cars that are talking to each other, and to infrastructure, we as policymakers have to start thinking about how 

to eliminate some of the potential barriers to these developments. 

As Ranking Member Maloney mentioned, I founded the Smart 

Transportation Caucus with my colleague, Senator Cory Gardner 

so that we can have these discussions about automotive cybersecurity, the future of liability, and other serious implications for the 

future. 

But I am pleased that here today we are talking about what 

these new technologies will mean for the American workforce when 

the livelihoods of so many men and women in this country actually 

depend on the driving of a vehicle, whether it is a car or a truck. 

The future of mobility, innovation, and automation presents both 

great opportunities as well as great challenges, and I look forward 

to hearing from the witnesses. 

And thank you, Chairman, for holding this very important hearing. 

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Chairman Coats. Thank you, Senator. And thank you, Ranking 

Member Maloney. 

Let me now introduce our panel of witnesses. Andrew McAfee is 

the principal research scientist at the Massachusetts Institute of 

Technology, studying how digital technologies are changing business, the economy, and society. In 2014 he co-authored a book entitled ‘‘The Second Machine Age: Work, Progress, and Prosperity In 

Time of Brilliant Technologies.’’ His work has been published in the 

Harvard Business Review, the Economist, The Wall Street Journal, 

and The New York Times. He holds a Bachelor’s Degree in Mechanical Engineering and a Masters in Management, and a Doctorate from Harvard Business School. We welcome you, Dr. 

McAfee. 

Adam Keiper is a Fellow at the Ethics and Public Policy Center 

and the editor of The New Atlantis, a quarterly journal about the 

ethical, political, social, and policy implications of modern science 

and technology. He has worked on Capitol Hill and various think 

tanks over his career, and he writes on science and technology policy. 

And Harry Holzer is a Professor of Public Policy at the McCourt 

School at Georgetown University. He is currently an Institute Fellow at the American Institutes for Research, a nonresident Senior 

Fellow at the Brookings, a Senior Fellow at the Urban Institute, 

and a Research Affiliate of The Institute of Research on Poverty at 

the University of Wisconsin at Madison. Prior to coming to Georgetown, Professor Holzer served as Chief Economist for the U.S. Department of Labor and Professor of Economics at Michigan State 

University. He received his B.A. and Ph.D. in Economics from Harvard. 

Welcome, Dr. Holzer. 

With that, let me start with our witnesses, and, Dr. McAfee, you 

can be first and give us a summary of your remarks. And then we 

will go down the line, and then turn it over to some other Members 

and work through the question process. 

Dr. McAfee. 

STATEMENT OF DR. ANDREW McAFEE, PRINCIPAL RESEARCH 

SCIENTIST, MASSACHUSETTS INSTITUTE OF TECHNOLOGY, 

CAMBRIDGE, MA 

Dr. McAfee. Chairman Coats, I would like to thank you, Vice 

Chair Tiberi, and Ranking Member Maloney, and other Members 

of the Committee, for having me here today. It is a great honor. 

I want to make four points. 

The first one is that the American workforce is very clearly going 

through some fairly major changes. And to illustrate that point, I 

would like to show a graph of the post-war United States economy 

that has four lines on it. 

Two of those lines relate to output. They are GDP per capita and 

productivity over decades of time. And two of those lines are about 

the workforce. They are about raw job creation. And then median 

household income, on average. Are we creating good jobs, or not? 

And what you notice with that picture is that for several decades, 

after the end of World War II, those four lines were all going up. 

That’s the direction that we want. And they were all going up just 

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about in lockstep. And then more recently we noticed what my coauthor and I call ‘‘the great de-coupling.’’ The two lines related to 

output have continued to go on a pretty healthy upward trajectory, 

while the two lines related to the workforce have in a sense stalled 

out. And, by some measures, the median American household or 

family is worse off in income terms than they were at the turn of 

the century. 

So something is pretty clearly going on. 

The second point that I would like to make is that this is a really 

complicated phenomenon, but one of the forces driving these 

changes is technological progress. And the way that has been happening so far is that technology has been really good at automating 

routine work. And by that, I mean both physical work—this of an 

assembly line in a factory; and knowledge work. Routine knowledge 

work is a payroll clerk in that same factory. We have had technologies for decades now that have been pretty good at automating 

that kind of work. 

And if I could show my next picture, that is my favorite picture 

of what happens as technology does its work over time. This is a 

graph of total U.S. manufacturing output, again over almost the 

entire post-war history. That is the blue line. And we continue to 

be a manufacturing powerhouse around the world, and manufacturing output goes up almost every nonrecession year. 

The red line is total U.S. manufacturing employment. And that 

has been on a fairly steady downward trajectory. So this graph 

clearly shows that we are doing more and more with fewer and 

fewer workers over time in this industry. It is a trajectory that we 

are starting to see in other industries, as well. 

The third point that I would like to make is, as we are fond of 

saying in Indiana, we ain’t seen nothing yet. And, Senator Coats, 

the gavel that you showed as an illustration of some of these amazing developments in additive manufacturing, or 3D printing, when 

I look around at the technology landscape and I see artificial intelligence systems, and deep learning, and machine learning that can 

beat humans at the games that they themselves devised, when I 

see autonomous cars and trucks, when I see drones that can move 

in a swarm and accomplish work together with no oversight whatsoever, I see all these forces coming together. 

And the main thing that I think is going to happen is that these 

phenomena that we have already seen in the workforce, this 

hollowing out of the middle class, the pressures that we see on the 

average American family, who that middle class was built on the 

back of routine physical and knowledge work, I expect these phenomena to continue, and for some of these challenges to accentuate 

because technological development is not slowing down. 

I believe it is speeding up. And it is eating into areas where it 

has not been present before. It used to be the case that if you wanted to listen to a person and respond to what they wanted, you had 

to have a human being involved in that work. It is just not the case 

anymore. 

The final point that I want to make, though, is that this is not 

the time for alarmism and for thinking about—for planning for an 

economy that has no more jobs. That is just not where we are yet. 

We are generating on the average of more than 150,000 jobs every 

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month in the country. So we are not yet at the point of peak jobs 

or peak labor. 

Instead, I think we need to kind of retool, or reconfigure some 

things that we are doing to meet the challenges of this age that we 

are heading into. And to keep in mind for myself what the right 

changes, or right policy interventions are, I just keep humming the 

Old McDonald Theme Song to myself. Because ee-I-ee-I-oh tells me 

a great deal about where we need to make some changes. 

And for me that means education. It means immigration reform. 

It means facilitating and encouraging more entrepreneurship. It 

means doubling down on our infrastructure, which is in fairly 

unhealthy shape. And then finally, the ‘‘oh’’ for me is original research. It is pretty clear that companies are great at applied research, and they tend to under-invest in the very fundamental developments that eventually yield things like the Internet and the 

iPhone to us. 

Thanks very much. 

[The prepared statement of Dr. McAfee appears in the Submissions for the Record on page 42.] 

Chairman Coats. Thank you, Doctor. 

Mr. Keiper. 

STATEMENT OF MR. ADAM KEIPER, FELLOW AND EDITOR OF 

THE NEW ATLANTIS, ETHICS AND PUBLIC POLICY CENTER, 

WASHINGTON, DC 

Mr. Keiper. Mr. Chairman, Ranking Member Maloney, and 

members of the Committee, thank you for the opportunity to participate in this important hearing on robotics and automation. 

In the years ahead, these aspects of technology may profoundly 

reshape our economic and social lives. A good place to start discussions of this sort is with a few words of gratitude and humility. 

Gratitude, that is, for the many wonders that automation, robotics, 

and artificial intelligence have already made possible. They have 

made existing goods and services cheaper, and helped us to create 

new kinds of goods and services, contributing to our prosperity and 

our material wellbeing. 

And humility because of how poor is our ability to peer into the 

future. There is reason to believe that major breakthroughs in automation and robotics are right around the corner, but we should 

recall that just because we can imagine something does not mean 

it is actually possible; even if it is possible, that doesn’t mean it 

will really happen. Even if it really does happen, that doesn’t mean 

it will happen in quite the way we imagined it; and even if it does 

come to pass in something like the way we imagined, there are 

likely to be all manner of unintended and unexpected consequences. 

That said, what do we know? And what do we believe is coming? 

There are two reasons today’s concerns about automation are fundamentally different from what came before. 

First, the kinds of thinking that our machines are capable of 

doing are changing, so that it is becoming possible to hand off to 

our machines ever more of our cognitive work. 

Second, we are also creating new kinds of machines that can 

navigate and move about in and manipulate the physical world. 

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The recent blizzard of technical breakthroughs in movement, sensing, control and, to a lesser extent, power are bringing us for the 

first time into a world of autonomous mobile entities that are neither human nor animal. 

To simplify—maybe over-simplify—a vast technical and economic 

literature, there are basically three scenarios for what the next several decades hold in automation, robotics, and AI. 

In the first scenario, automation and artificial intelligence will 

continue to advance, but at a pace sufficiently slow that society and 

the economy can gradually absorb the changes. The job market will 

evolve, but in something like the way it has changed over the last 

half century. Some kinds of jobs will disappear, but new kinds of 

jobs will be created. And in many cases we will find new ways for 

human beings to use and to work alongside machines. 

In the second scenario, automation, robotics, and artificial intelligence will advance very rapidly. They will take off. In this scenario, there may be great productivity and enormous economic 

growth, but jobs may disappear at a pace that will make it difficult 

for the workforce to adapt without pain. Pressures on American 

workers in mid-skill jobs will be exacerbated, and there will be new 

pressures on workers in high-skilled and low-skilled jobs. This scenario could involve severe economic disruption, and perhaps social 

unrest and calls for political reform. 

In the third scenario, advances in these fields will produce something utterly new, maybe something dangerous. This is more of the 

sci-fi notion you’ve probably heard about, the ‘‘singularity,’’ ‘‘superintelligence,’’ things like that. These are strange and radical possibilities, and it’s difficult to say much about what they might mean 

at a human scale. 

Now a handful of policy ideas have been proposed that would 

seek to let us enjoy the fruits of these technological advances while 

avoiding some of the worst possible effects of disruption. 

Some of the ideas involve adapting workers to the new economy. 

We hear that workers must engage in life-long learning, and upskilling, and they must be as flexible as possible. Of course education and flexibility are very good things; they can make us resilient in the face of what economists call creative destruction. Yet we 

have to be careful not to place too much of our hope in flexibility 

since workers are not just workers. They are also members of families, and members of communities. Flexibility can be easier to talk 

about than to do. 

Another proposal one often hears discussed is a universal basic 

income guaranteed to every individual, even if he or she does not 

work. This idea has both critics and supporters across the political 

spectrum. It would present a profound transformation of our economic system but, some would argue, maybe a necessary one if we 

see a profound shift in the nature of work. 

Mr. Chairman, the rise of automation, robotics, and AI raises 

many questions that extend far beyond the matters of economics 

and employment we are discussing today—including many legal, 

practical, regulatory, and moral matters, maybe even existential 

matters. And I mention a few of these in my written testimony. 

I just want to end by saying another word or two about the 

meaning of work. The science fiction author Arthur C. Clarke said, 

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some four-and-a-half decades ago, that we shouldn’t worry about 

people losing their jobs because of automation. We should look forward to it. We should embrace it. ‘‘The goal of the future,’’ he said 

should be full unemployment. That should be our goal. 

That notion raises deep questions about who and what we are as 

human beings, and the ways in which we find purpose in our lives. 

Work is not just a matter of toil, but a source of structure, meaning, friendship, fulfillment. In the years ahead as we contemplate 

the blessings and the burdens of these new technologies, my hope 

is that we will strive, whenever possible, to exercise human responsibility, to protect human dignity, and to use our creations for the 

improvement of truly human flourishing. Thank you. 

[The prepared statement of Mr. Keiper appears in the Submissions for the Record on page 51.] 

Chairman Coats. Doctor, you’re on. Thank you. 

STATEMENT OF DR. HARRY HOLZER, PROFESSOR AT THE 

McCOURT SCHOOL OF PUBLIC POLICY, GEORGETOWN UNIVERSITY, WASHINGTON, DC 

Dr. Holzer. Thank you very much for having me this afternoon. 

I would also like to make four points about how technology and automation will affect the labor market, and about appropriate policies to deal with that. 

So my first point is that fears of automation and the view that 

they will eliminate millions of jobs historically have been vastly 

overblown. We all know about Luddites in Britain. At various 

times in the U.S. we have had automation scares like in the 1950s 

and 1960s. This has never, so far, turned out to be true. There has 

been no aggregate job loss in the long run associated with new 

technologies, even though individual workers have often been displaced. 

But my second point: Even if technology hasn’t eliminated large 

numbers of jobs in the aggregate, it can and has reduced earnings 

among large groups of workers. In the past 35 years, the digital 

revolution, globalization, and weakening institutions like labor 

unions together have reduced employment and good-paying job categories, especially for those workers with only a high school education or less. The jobs most effected were goods-producing jobs for 

men, clerical jobs for women. But at the same time, wages and jobs 

have increased for workers who either have the technical skills to 

deal with the new technology like machinists, technicians, and engineers, or who have other skills that complement the machinery. 

Those skills could be analytical, or communication skills, or even 

creative skills. There is a strong skill bias in the technology that 

actually helps some workers and hurts others. 

There is likely a capital bias, as well, that the owners of the capital embodying the new technology profit at the expense of workers 

overall. 

But on the skill bias, Dr. McAfee referred to polarization. We 

have had growing polarization in the labor market. Growing top. 

Growing bottom. Shrinkage in the middle. But the middle is not 

disappearing. And it is not going to disappear any time soon. There 

is a new middle growing in sectors like health care, IT, advanced 

manufacturing, parts of the service sector. But those jobs require 

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a lot more education and post-secondary training than many workers in the labor market have. 

The problem is that polarization is leading to stagnating or even 

declining real wages right now for less educated Americans, and especially less educated men. And the declining real wages of lesseducated men tend to, number one, reduce their activity in the 

labor market. A lot of them have simply left the labor market. And 

also their participation in institutions like marriage. And I think 

this hurts the overall economy, as well as their families, their children, and their neighborhoods when this occurs. So we want to halt 

and reverse that wage stagnation. 

My third point: Artificial intelligence and robotics are very hard 

to predict in terms of future trends. It is possible that the breadth 

and the pace of labor market dislocations will grow, as my colleagues had indicated, but let’s be clear. To date there is no evidence whatsoever that this has happened yet. 

Productivity growth in the U.S. has actually been declining in 

the last 10 years. That is exactly the opposite of what you would 

predict based on all the stories we have heard. The fluidity and dynamism and churning in the labor market have declined in the 

United States. Again, the opposite of what you might have heard. 

Now that could turn around. That could change in 5, and 10, or 20 

years. Jobs could become more unstable, and they could become 

harder to find. We just don’t see it yet in the numbers. 

Which means, number four, future automation should not be an 

excuse to avoid or eliminate a sensible, moderate set of worker supports and services to address the labor market problems that we 

have already seen. And several of those problems now exist. Therefore we need solutions on several fronts—the most important being 

the skill bias of technology. 

There is a range of changes we need to make in our skill-producing institutions, especially community colleges, to strengthen 

workforce services, career counseling, growing partnerships between industry and our skill-producing sectors. Making community 

colleges more responsive to the labor market with higher accountability is important. I am a supporter of accountability in this 

sense. Apprenticeships. Career technical education and life-long 

learning. All of those need to be on the table for improving skills. 

I think institutions have to be protected . . . not only the right of 

workers to collectively bargain, which are under assault in various 

places, I believe we need to support high-road employers who invest in the skills, high performance, and high compensation of their 

workers. A lot of employers do very well taking the low road, reducing their labor costs at any price. They can do very well in that 

sense. And that might be what hurts our productivity in the United 

States. 

Thirdly, if the labor market becomes more unstable, we do need 

to make sure that universal benefits are available and portable. 

Health care, paid family leave, etc. And then finally, we actually 

might need to invest in more job creation if the place of displacement picks up and overwhelms the labor market. 

So there are lots of issues on the table, lots to discuss, and happy 

to engage in that conversation afterwards. Thank you. 

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[The prepared statement of Dr. Holzer appears in the Submissions for the Record on page 61.] 

Chairman Coats. Dr. Holzer, thank you. I think this is a fascinating topic here with major implications for the future of the 

country and for, as you said, individuals, workers, families, our society. 

I am going to try to combine a couple of thoughts here into one 

question and turn to the three of you to respond. 

Dr. Holzer, it pretty much goes along the line of what you were 

saying, because my question was going to be this: We have, if you 

look back in history, several game changers of immense proportions. You know, moving from an agricultural society to a manufacturing society. And now we are moving into a new type of—is there 

something different about this phase that we are moving into that 

separates it from any other? 

Can we base some conclusions on conventional wisdom and research relative to what has happened over historical? Or are we 

seeing something entirely new, that we really cannot totally forecast the direction that it is going? 

You raised the question, Dr. Holzer, that I would like to have the 

others respond to, of the sort of a mystery of why isn’t productivity, 

with all this automation, with machines working 24/7, you don’t 

have to pay for health care, they don’t go on vacation, they don’t 

go on holidays, tremendous increases in the productivity, why don’t 

we see that trend in productivity on a much higher trend going up 

rather than being fairly flat? And participation rate. Is the fact 

that automation is taking over jobs contributing significantly to our 

low, relatively low participation rate? And what impact is that having on the participation rate? 

So if I could start with Dr. McAfee, this is my question, and ask 

each of the three of you. And, Dr. Holzer, then you can kind of 

wrap up there. But what are your thoughts of the other two witnesses regarding this? 

Dr. McAfee. Chairman Coats, I think you are asking exactly the 

right questions, and they are extremely difficult questions. 

To your first one, is this time different? The only honest answer 

is: We don’t know. And I agree with Professor Holzer, the historical 

pattern would lead you to be kind of calm about what is happening. 

Because we’ve faced big disruptions before, and our economy grew, 

our labor force grew, and the American worker was better and better off. 

The reason I showed that first picture was to show that there’s 

something that looks fairly different in the data. When we look at 

job growth, it has tapered off. When we look at average incomes, 

they have been slowly declining or holding steady for a very long 

period of time, well before the Great Recession. So there seems to 

be something new in the data there. 

And when I look around at the kinds of technological advances 

that we’re seeing, I try not to get too starry-eyed about them, but 

they do feel like something new under the sun to me. My way of 

thinking about it is, most of our previous technologies could only— 

only encroached a small amount into the total bundle of things that 

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12 

nologies that could lift more than we could, that could travel across 

distances faster, and that could do arithmetic better than we could. 

Okay, we bring a lot more to the table than that. We can deal 

with ambiguous situations. We can understand human speech. We 

can recognize very, very subtle patterns. That’s all fantastic. 

I’ve seen technologies that can do all of those things, do them at 

a very high level, and I think are either already or very quickly 

going to achieve superhuman performance in a lot of these areas. 

To give one example, if a piece of technology is not already the 

world’s best medical diagnostician, I think it will be fairly quickly. 

So my version—and again, we have to be very humble and cautious 

about this—my take is that something actually is different now. 

Your other excellent question, why hasn’t this shown up in the 

productivity statistics? There’s a huge debate about that. I think 

two things are going on. Number one, a lot of these science fiction 

advances that I’ve been talking about are very, very new. They’re 

honestly, most of them, within the past five years. They just 

haven’t had a chance to defuse throughout the economy very, very 

broadly yet. 

The other thing is, I like to keep in mind an image of two economies. There’s kind of an extraordinarily productive, automated, 

technologically sophisticated one. You know, think of Google and 

Apple as exemplars of that. And then think of another economy 

that’s very, very labor intensive and only grows by adding more 

people to the mix. Think of the home health aide as an example 

of that. 

Basically most of the jobs we are adding are in that second lowproductivity economy, more so than was in the past. When that is 

the case, we are going to observe very low productivity growth, as 

we’re measuring it, even though that first economy is ticking along 

at a very healthy clip. 

Chairman Coats. Mr. Keiper, anything you’d like to add to 

that? 

Mr. Keiper. I think that was a wonderful answer. I would like 

to associate myself with most of that answer. I would just add a 

point or two as to why there has not been more productivity over 

the course of the last decade. 

The Great Recession is a major cause, or a major explanation 

that I think most of us would turn to. And just to also amplify 

what Professor McAfee was saying, it takes time for some of these 

technological advancements to be picked up and adopted by firms 

in less high-tech sectors. 

So you may see over the course of the next years and decades 

ahead real advances in productivity in firms that are in, forgive 

me, stodgier fields than you might see in Silicon Valley. 

Chairman Coats. Thank you. And, Dr. Holzer, just to wrap up 

here, give us your thoughts. 

Dr. Holzer. Well I think Dr. McAfee did cover most of the relevant things. I’ll just add a few things. So there could be a time 

lag, as everybody suggests. Robert Solow, the great economic analyst of technical change famously said at the end of the 1980s, if 

there’s all this technological change going on, why don’t we see any 

of it in the productivity numbers? And of course in the 1990s you 

did see it, briefly. 

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13 

A second possibility, though, is that the nature of the changes 

will not be as dramatic as some of those we’ve seen today. And the 

biggest proponent of this view is Robert Gordon at Northwestern, 

who has written a very challenging book where he’s saying this 

stuff doesn’t compare at all to the changes in the late 19th century, 

early 20th century: electricity, the internal combustion engine, indoor plumbing that dramatically changed American businesses and 

American homes. 

So he’s a techno-pessimist. He just doesn’t think that these technologies will be as ground breaking. But it also could be, as Dr. 

McAfee said, that a lot of the growth right now is for services that 

right now can only be done by humans. 

A lot of the elder care, child care kinds of work. It is not necessarily very high skilled, but robots can’t do that and won’t be 

able to do that. The human touch will not be there for a long, long 

time. So it could be a mix of these things. We won’t know for 

awhile. But you asked what about the declining labor force participation, and is it directly that the machines are displacing workers 

and kicking them out of the workforce? I don’t think that’s it. I 

think there is an intermediate step having to do with wages. 

All the forces that have reduced the wages of less-educated workers—technology, globalization, weakening institutions—as those 

wages have stagnated and declined, a lot of workers simply don’t 

believe it is in their interest or worth their while to stay in the 

labor force. And I think that is why they leave, and that is why 

dealing with stagnant wages through, or separately from the technology, I think is our prime concern right now. 

Chairman Coats. Thank you. Thank you, witnesses, for those 

answers. 

Vice Chair Maloney. 

Representative Maloney. Thank you so much. 

Dr. McAfee, you wrote in a recent piece in The Financial Times 

that the skills many people have are becoming less valuable in the 

labor market because of globalization, and also technological advances. 

You wrote, and I’m quoting here, quote ‘‘We need to figure out 

how to deal with this situation. This will be one of the most important policy arenas over the coming decade.’’ End quote. And on 

page 6 of your written testimony today, you note that the Econ 101 

Playbook is very clear on what has to be done, but that it is not 

being followed. Could you clarify what you mean by that? And 

what could we be doing in a better way in the policy arena to both 

boost productivity and ensure that more people can benefit from 

these new technologies? And I would like to hear Dr. Holzer and 

Mr. Keiper’s take on this question, too. Thank you. 

Dr. McAfee. Yes. Thank you. Let me try to address the education first, and then broaden out to the whole Econ 101 Playbook. 

As one of my colleagues says, the way we are educating people 

right now—in other words, I believe it is still dominated by rote 

learning, by the memorization of large amounts of facts and the 

ability to regurgitate them, and the ability to do fairly basic math 

and arithmetic, for example. I have a colleague who says those are 

exactly the skills you need if you’re on top of a mountain with no 

Internet access. 

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14 

[Laughter.] 

Or they are exactly what we needed workers to do 50 years ago. 

That is just not what we need anymore. And if it is true that technology has been eating into that routine work, we need to be teaching our students and our workers to be good at the less routine 

stuff. What is in that category? I would say creativity. I would say 

different flavors of social skills such as negotiation, motivation, persuasion, coordination. There is research that shows how valuable 

these skills still are. I didn’t learn a lot of those in school. 

And then finally, just the ability to recognize a problem and to 

go after that problem, which is a combination I believe of creativity 

and grit. We are learning a bit, I believe, about how to teach those 

in schools. Our educational system at the primary level is still 

dominated by rote learning and fairly basic quantitative skills. And 

I think that needs to change. I hope it happens quite quickly. 

Your broader question that I heard about the Econ 101 Playbook, 

for example, our infrastructure gets a grade of D+ from the Society 

of Civil Engineers in America. I just don’t see any reason why that 

needs to be the case. 

The entrepreneurship in America, as Professor Holzer says, is on 

a steady decline. Most measures of business dynamism are actually 

heading in the wrong direction for the past decade or so. 

Figuring out why that is and reversing it I think is critically important. When I think about the fact that a shampooer in Tennessee needs 70 days of training before they can start their job, it 

makes my head spin. So there does appear to be a thicket of regulations and other barriers that are getting in the way of entrepreneurship and job creation and dynamism. And so dealing with that 

seems very important to me, too. 

And then finally, when you go look around Silicon Valley and the 

other centers of great dynamism, I am just unbelievably impressed 

by the number of foreign-born founders and workers and extraordinary contributors out there. 

So liberalizing our immigration policies and getting those people 

who want to build their lives and careers into America seems to me 

an incredibly straightforward thing to do. I don’t know an economist who disagrees. And yet I find our immigration policies kind 

of Kafkaesk. 

Representative Maloney. Dr. Holzer, I would like to bring you 

into this. What are your comments on it? 

Dr. Holzer. We all agree that there’s a skills’ problem in America, and skills exist—— 

Chairman Coats. Doctor, push your [microphone] button. 

Dr. Holzer. There’s many different kinds of skills, different dimensions of skills. Dr. McAfee talked about important general 

skills—reasoning ability, communicative skills, etc. Those are clearly very important. There are more specific technical skills that 

matter, as well, that many of our industries like advanced manufacturing are having trouble finding people to do that kind of work. 

So we have skill gaps on different dimensions. A big problem is 

our K through 12 system. Our K–12 system doesn’t prepare a lot 

of workers for the kinds of technical training that often needs to 

happen at community colleges. So that is an issue. 

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15 

But the whole institution of community college to me is a funny 

hybrid. Historically it was a liberal arts institution, a stepping 

stone to the four-year schools. And a lot of the people there still 

think that way. Most of the instructors there want to teach anthropology, not machine tooling, or not phlebotomy, and that is an 

issue. 

But the institution itself doesn’t respond very well to labor market forces. Institutions get the same public subsidy no matter what 

their outcomes are. So their incentives to really emphasize career 

development, career-building skills, I think are limited. 

And in general the training for a lot of the jobs that are hard 

to fill is actually pretty expensive. Equipment, putting equipment 

on college campuses, is really expensive. Instructors in many of 

these areas, everything from nursing to machining, are also expensive. 

So a lot of the forces are not aligned well for an intermediate institution like community colleges to play the kind of role it can. We 

all talk a lot about apprenticeships, work-based learning. There are 

other issues there about why small- and medium-sized employers 

either don’t have the knowledge about that or the resources to do 

that effectively. 

So I think on a lot of different dimensions we could do a lot better. But it is going to take a lot of work, and it is going to take 

some resources, as well. 

Representative Maloney. Mr. Keiper, I loved your quote at the 

end of your testimony this morning. I would like to get a feel of 

how extensive are robots in our world. I know that in medical technology they are using robots quite a bit. And certainly Mr. Peters, 

Senator Peters, mentioned in the building of cars. But what percentage, how much of it is in America? And I welcome anyone to 

comment on it. 

I went to China several years ago and I wanted to see their solar 

plants, where I expected to see a lot of people running around and 

working very hard. And what I saw were a bunch of robots walking 

around with humans managing them on a computer. You could 

have blown me away. I didn’t know that that type of work was 

there. 

So where do we stand? Are we even with the world going forward 

with robots? Or are others producing more robots than we are? 

Where do we stand in the globalization of it? How big is it? Is it 

helping? And then of course how do we protect our workers in it? 

Mr. Keiper. All wonderful questions. And some of them are very 

complicated. I guess it is difficult in some ways to know how many 

robots there are because different people define them different 

ways. 

You know, if the word ‘‘robot’’ had been around 100 years ago— 

it hadn’t yet been coined—we probably would talk about early 

household appliances like the dishwasher as a robot. But because 

it preceded, predated the coining of the word, we didn’t apply it 

that way. And, you know, I think there will be a period when we 

talk about robotic cars, as driverless vehicles, and then after awhile 

we’ll just start calling them cars. 

So it depends partly on terminology. But to answer what I take 

you to really be getting at, robots are being adopted in developed 

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countries around the world, chiefly in the manufacturing sector. 

The United States is by most measures leading the world in this 

area, although other developed nations are doing very well. Germany. China, in some respects. It depends on how you measure: in 

raw numbers of robots, or per capita. 

I just want to say two small additional points, just to piggyback 

on things that each of the other panelists mentioned. First, something Professor Holzer mentioned about the era of incredible invention that we saw from the mid-19th century through the early decades of the 20th century when we saw electrification, and lighting, 

and audio recording, and all these amazing things. And by some 

comparisons, they got the low-hanging fruit, and arguably it’s harder to see where the next steps are. 

It reminds me of the famous line from venture capitalist Peter 

Thiel. He says, ‘‘I was promised flying cars and all I got is these 

140 characters.’’ A reference to Twitter. 

[Laughter.] 

The point I think really is that—and it’s a point Thiel himself 

has made—is that we need to encourage creativity and looking for 

major kinds of innovations. It is wonderful that we are talking 

about driverless cars. I wonder if we couldn’t think about greater 

kinds of innovations and get back some of the optimism that we 

had in the middle of the 20th century that in some ways seems to 

have waned. 

And then finally, Professor McAfee mentioned the possibility of 

educators teaching creativity and grit. Can you really teach creativity and grit? I don’t know. Maybe. Maybe not. I think teachers 

can certainly harm creativity and can harm grit. And we have to 

at the very least do our best to prevent that from happening. 

The last thing I’ll say, I read recently a biography of Gordon 

Moore. He’s the man who gave us Moore’s Law, co-founder and 

president of Intel. And, you know, really a creative man. And he 

chalks up some of his success to his kind of wild, outdoors childhood and his early love of chemistry where he was free to just go 

around in his backyard and blow stuff up. I mean, he just blew 

stuff up for fun. You can’t really do that today. We live in a different kind of world, a different society. And a kid who is just blowing stuff up for fun is more likely to get into some serious legal 

trouble than to grow up to become one of the wealthiest and most 

important innovators of the century. 

So it is not just a matter of instilling in children creativity and 

grit, it’s a matter of thinking about as parents, as communities, 

how to not kill those things off when they arise naturally. 

Chairman Coats. Thank you, Vice Chairman Tiberi. 

Vice Chair Tiberi. Thank you, Chairman Coats, and thanks for 

holding this fascinating hearing today. Great testimony from all 

three of you. 

Dr. McAfee, I was quite interested in your written testimony 

when you comment about trade. In my home State of Ohio opponents of trade use—or say, every single job that’s been lost is because of trade, not because of technology, or automation, or things 

that you talk about in your testimony. 

You mention in your written testimony that mid-wage, mid-skill 

jobs like factory jobs—and my dad was a factory worker—are not 

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being created at the same rate as in the past because of 

globalization and technological progress, which I have seen in Ohio. 

The other thing I have heard, as well, is over-regulation. Earlier 

this year a CEO of a service company told me that because of what 

he believed was over-regulation by the Obama Administration that 

some, across industries by the way, were going to use technology 

sooner than they otherwise would. He gave me an example in the 

restaurant industry. My first job was McDonald’s. That job that I 

had in the future in America in the restaurant industry probably 

will not be there for a 16-year-old because technology was going to 

take that job. And he cited the fact that over-regulation of employment in France—and he had been to France—where now you order 

in many restaurants not with a person but with a tablet. And the 

first person you see is when you pick up your food. 

And then I heard that a major restaurant chain in the United 

States just last month, citing over-regulation, was actually testing 

this pilot out in the United States. So it is that, as well. 

So we’re not going backward with respect to globalization or 

technology. The world continues to move ahead, whether we do or 

not. Whether it is on trade. Whether it is on technology. And as 

you wrote in your testimony, it has provided unbelievable benefits 

to the society and to our country and to our citizens. 

Yet, as you say, people aren’t feeling it. They aren’t believing it. 

Even though they might pay lower prices, and might have better 

products, they’re not associating those benefits with what you talk 

about in your testimony. 

And your testimony highlighted several ways that government 

can lessen the negative impact of these challenges and side effects. 

And I was particularly struck by your point about the importance 

of encouraging entrepreneurship. It helps ensure that we have a vibrant economic system and ecosystem that is constantly regenerating itself. 

I have seen it in my central Ohio district, creating employment 

opportunities for more workers. I am the first in my family to graduate from high school. So I don’t know if you’ve seen this information that was just released earlier this week by the bipartisan Economic Innovation Group. They highlighted some pretty interesting 

economic terms. The research they released said that new business 

formation between 2010 and 2014, which the Obama Administration called the time of national economic recovery, that we suffered 

an unprecedented collapse compared to previous recoveries in our 

history. 

And that, furthermore, new business formation was far more geographically concentrated than in past recoveries in our history. And 

to put it in perspective, this is an unbelievable statistic, 20 counties 

in the United States—20—alone, produced half of all net new businesses in the U.S. economy between 2010 and 2014. 

So these findings I believe underscore why it is important to support legislation that Congressman Ron Kind worked on together, 

and that’s the Investing In Opportunity Act to increase access to 

capital in distressed communities, and new enterprises, and 

startups. 

Your testimony highlighted another solution, which is the need 

to decrease the over-regulation of new innovation. Can you kind of 

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expand on that and elaborate on the policy and regulatory issues 

that are of most concern to you in relation to entrepreneurship, and 

stifling entrepreneurship? 

Dr. McAfee. Vice Chair Tiberi, thank you for that excellent 

question because it is an area of increasing concern to me as I look 

around. A couple of things. 

I have already mentioned the fact that there appears to be this 

increasingly dense thicket of things that an employer or a worker 

has to confront before they can start something up. And navigating 

your way through that becomes increasingly difficult, and it looks 

like more and more people are saying I’m just not going to bother 

with it. 

One of my favorite phrases coming out of Silicon Valley these 

days is ‘‘permission-less innovation.’’ And by that they mean: Let 

me go do something out there in the world. If it is causing harm, 

if there are negative consequences, we understand that and we will 

deal with that. But please don’t make me submit my innovation to 

any kind of oversight committee or bureaucracy, which will then 

tell me if I can proceed or not. 

So I love that phrase. And I’ve become a big fan of this notion 

of permission-less innovation. You mentioned the really terrible unemployment situation in France and some other European countries. 

It strikes me in my discussions there that they do have a less 

enthusiastic view of permission-less innovation. There seems to be 

a greater idea that the state needs to have a role in approving or 

channeling the course of innovation. 

And I certainly don’t think that we need to just let innovators 

go willy nilly and never ever get in their way and let them drive 

their driverless cars wherever they want to as soon as they want 

to. That would not be prudent. 

But in general, I do think the thicket is dense and getting thicker, and I do worry about attempts or ideas that I hear that take 

us away from that idea of permission-less innovation. 

Chairman Coats. Thank you. Our next Senator, Senator Klobuchar, had I known what I now know, I would have had a robot 

come in here with a cake in its hand to present to you with candles, light those candles, and we would all sing Happy Birthday. 

Senator Klobuchar. Oh, that would have been nice. Thank you. 

But it is the sentiment that counts. Thank you very much. 

I want to thank you and the witnesses for this important hearing. I am really focused on the apprenticeships and preparing our 

workers for this new economy, coming from a State that already 

has a 3.8 percent unemployment rate. We just don’t have workers 

to fill some of the technological jobs involved in manufacturing and 

high-tech work we’re doing. And we are going to start losing some 

businesses in rural Minnesota simply because we don’t have the 

workers. 

So that, plus what you all have been talking about with this permission-less—I just like that. It sounds kind of exotic for the Joint 

Economic Committee—but with the innovation, creates this demand. 

And I wondered, I guess I would ask you, Dr. Holzer, about this, 

I’m just obsessed with doing more with apprenticeships. This counDeShaun on LAP51NQ082 with DISTILLER

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try made a MOU with Switzerland, and Switzerland and Germany 

are doing to get more students into that technological field. 

We have a new high school in one of our towns that is amazing. 

It has tracks you can pick from. One of them is manufacturing. All 

the equipment is on the first floor. We’ve got companies that are 

coming into the schools. We’ve got community colleges that are 

partnering because the high schools can’t get the machinery but 

the community colleges maybe can. Just how do you think this 

should all work? 

And what could the Federal Government’s role be, when we only 

fund about 10 percent for education. I figure it’s incentives and 

things like that, but why don’t you address it? 

Dr. Holzer. Well thank you for the question. If you don’t mind, 

I would use this opportunity to say what we should not do. What 

we should not do is get rid of all regulation. I was troubled by the 

tone of the last question. 

Senator Klobuchar. Yes. 

Dr. Holzer. This implication that regulation is always bad simply is not true. It is not true in theory. It is not true in fact. Minimum wage laws. EEO laws. Occupational Safety and Health. Pension protection. There are a lot of market failures out there. There 

are a lot of inequities. 

If you do regulation badly, if you overdo it, if we had a $15 or 

$20 minimum wage in this country, I would agree. If the range in 

which the minimum wage is now are talked about or possibly increases, much more modest, it won’t have that effect. So I just 

thought we needed some balance. 

Senator Klobuchar. I appreciate that. I could tell you were getting worked up. 

Dr. Holzer. I was having a little trouble. 

Senator Klobuchar. Now get worked up about my thing. 

[Laughter.] 

Dr. Holzer. Let’s move on to your question about apprenticeship. 

There are lots of wonderful examples of things happening out 

there. In many ways it is hard to scale them. A lot of what we are 

doing to expand apprenticeship in America, it is often a very retail 

operation, employer by employer. 

Senator Klobuchar. Right. Community—— 

Dr. Holzer. Providing incentives. And I’m not sure there’s any 

other way to do that, given the—— 

Senator Klobuchar. Well, Arne Duncan did some grants that 

were effective in our sort of exurban areas where they would be 

given the incentive to pair up with—— 

Dr. Holzer. There are. And we’re seeing an expansion of sector 

partnerships with community colleges. And I like the model. I like 

where you have apprenticeships with employers where at the same 

time the worker gets a certificate, or an associates degree. So they 

get the general skill credentials as well as the specific skills. 

But it is simply hard to scale. There are biases in the system. 

As I said, there’s institutional problems. The incentives aren’t always aligned. And as I said earlier, if people get to the 11th or 

12th grade and they’re still reading at the 8th or 9th grade level, 

you know, that is an inhibitor as well. 

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Senator Klobuchar. And the other thing is, having been a prosecutor and done all these truancy work, you’ve got kids dropping 

out that maybe if you did something while they were in high 

school, where they were working somewhere, getting a one-year degree, a two-year degree, depending on what it was, that would be 

good. 

Dr. Holzer. I agree. 

Senator Klobuchar. You have a whole workforce you are losing. And they can then go on to get more years of school. 

Dr. Holzer. That’s right. And I really believe that in middle 

school American students need a lot more exposure to the workforce. Because then they really see that this really boring algebra 

class actually could be very useful for you in a whole range of wellpaying jobs. And then you are more motivated to do it. 

And high quality CTE in the high schools. Models like P. Tech 

and Linked Learning, and career academies, all of those, and 

there’s a pretty solid evidence base on at least some of them, they 

are all very promising models. 

The question is always how do we scale up to replicate those 

good models. 

Senator Klobuchar. Yes. 

Dr. Holzer. And also because the German companies are flocking to American, the manufacturing companies. They are astounded at what they see, but they know they can’t implement 

their model. It’s got to be an American model and American institutions, and that stuff—— 

Senator Klobuchar. Um-hmm, and also more women. We were 

just talking about, Mary Barra, the CEO of General Motors, who 

was an engineer and worked her way up through the company, and 

is speaking out on this idea that we need more women, more people of color, because we don’t have enough people going into these 

areas. And for women, especially, the factory floor is no longer 

dark, dirty, and dangerous, as you’ve pointed out how high-tech it 

is. 

So I think that is a piece of this, as well. 

Mr. Keiper, did you want to respond at all? 

Mr. Keiper. Only one additional point. This idea of apprenticeship as it catches on, I think it’s wonderful. I would love to see real 

experimentation in that area across the states. You know, different 

kinds of models being adopted and tested. 

One area that the Obama Administration has said a little bit 

about, but I think a lot more could be said about, is encouraging 

our young people to take an interest in the trades. For really what 

seems like decades in some ways—— 

Senator Klobuchar. And their parents aren’t always encouraging from what they’ve experienced. 

Mr. Keiper. Right. I mean we have encouraged our young people 

more and more to go into office jobs, and data management, moving paper around, moving pixels around, and I can’t help but wonder whether some people, including some of the people who are 

electing to get out of the workforce, some of the lower-educated 

men that Professor Holzer was mentioning who are having trouble 

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21 

tion if they had been encouraged to look into plumbing, and being 

an electrician, and roofing, and carpentry—— 

Senator Klobuchar. And whether they can trade into it now. 

And we have such a need that it becomes worth having companies 

finance those. 

Mr. Keiper. That’s right. We tend to understate, when we nudge 

our children in those directions, we tend to understate the real 

value of being your own boss, working in the trades, and we tend 

to also forget that, you know, of all the jobs that are going to be 

automated, or going to be replaced with artificial intelligence, 

you’re not going to have a robot doing your roof any time soon. 

You’re not going to have a robot electrician in your house. 

The trades, at least for the foreseeable next several decades, are 

going to require the kinds of problem-solving and dexterity that 

human beings can uniquely bring to bear. 

Senator Klobuchar. That’s a nice way of putting it. Thank you 

so much to all of you. 

Mr. Keiper. Happy Birthday. 

Senator Klobuchar. Thank you. It was Bob Dylan’s birthday 

yesterday, too. He’s from Minnesota. I thought I’d add that in for 

some glamour. 

[Laughter.] 

Chairman Coats. Thank you, Senator. 

Senator Lee was instrumental in asking for this hearing to be 

held. I think it is a fascinating subject, and we thank you, Senator 

Lee, and your staff, for helping us pull this together. 

So, you’re on. We’ll give you a little lenience with time here, for 

your support. 

Senator Lee. Thank you very much, Mr. Chairman. 

I would also like to wish Senator Klobuchar a very Happy Birthday. And later on I will be singing Happy Birthday and I’ll do my 

interpretive dance to it, before I’m replaced with a robot. 

[Laughter.] 

Dr. McAfee, I would like to start with you. Utah has a program 

that allows elementary schools to partner with certain leaders in 

the high-tech industry to teach 4th, 5th, and 6th graders basic coding skills over a 16-week period. 

That this program exists is exciting. The fact that it is exciting, 

and the fact that it is somewhat unique and rare ought to be concerning to us. 

You know, our schools teach people well, but they generally follow what some might call a 20th century model to educate people 

and prepare them for what has become a somewhat unique 21st 

century workplace. 

So these educators in Utah are doing great work, innovative 

work, by helping prepare students for the unique employment 

skills that they will need in the future. 

My question, though, is about what happens next. You know, I 

think it is possible that what we think of as high-skill jobs today 

could easily become tomorrow’s low-skill jobs, such as in much the 

same way that the high-skilled welders of yesterday, many of 

whom have now been replaced at least on assembly lines for automobiles and many other manufactured products, many of them are 

now without jobs. 

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22 

So software developers today could find that in many instances 

their jobs have been replaced through automation. What do you 

think happens when that occurs? And when we develop technology 

that does our coding for us? 

Dr. McAfee. Senator Lee, it is a great question. And I like your 

insight that some of the jobs that we consider very safe and very 

prestigious today might actually flip around because of technological progress. 

I think Mr. Keiper got it exactly right. We are not going to automate the work of an electrician, or a plumber, or a prime contractor any time soon. That is still a human job. However, when 

I look around I see technology able to do a lot of the work that a 

medical diagnostician does, that many kinds of lawyers do, that financial advisers do. 

I recently turned a lot of my assets over to what they call a 

‘‘Robo Advisor,’’ which generates a mathematically optimal portfolio 

for you and manages it over time with no human intervention 

whatsoever. 

Senator Lee. What kind of a commission does the robot charge? 

Dr. McAfee. Less than a human does. I’ll tell you that. That’s 

one of the reasons I did it. So I think there could be this interesting 

inversion for some professions that we consider, again, very prestigious, very safe right now. They are going to see a lot of automation. Not in the science fiction future, but in the next five to ten 

years. 

Not all of them, however. You mentioned coding. And I think 

teaching little kids to code is great for two reasons. One is that 

that job appears to be relatively safe. We have had really lousy 

luck getting computers to code themselves. Writing good code appears to be closer to writing a novel, and all the attempts at automatic fiction that I’ve seen are just laughably bad. 

So we do need a lot of digital professionals to keep making these 

technologies for us. More fundamentally, though, I think the reason 

it is great to teach little kids to code is because it teaches them a 

style of very clear, very difficult thinking that will serve them very 

well no matter what they wind up doing with their lives. 

One of the efforts that I love in that area is the First Robotics 

Competition, which has spread like wildfire throughout the country, where teams of kids, teams working together, build an actual 

robot that competes against other teams’ robots. 

It was started by a guy named Dean Kamen, who I think is the 

closest thing we have to an Edison in America these days, who just 

looked around at this kind of stultifying educational system and 

thought it was inappropriate for a bunch of reasons. So he has 

grade school and high school kids build robots and go at it with 

each other. And it’s been a runaway success. 

Senator Lee. That sounds exciting. It sounds like a good reality 

TV program, especially if you end up doing like hand-to-hand combat among robots. 

Dr. McAfee. That happens, yes. 

Senator Lee. Mr. Keiper, you talk in your testimony about the 

nature of work, and the value of work both to individuals and to 

society as a whole. 

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23 

What do you think the innate human desire to create value and 

to be valued in society and by society, what do you think is to come 

of that? And how do you think that will be affected by these 

changes in technology? 

And in particular, as more jobs become automated, do you think 

for some of the reasons I just mentioned that it would be somewhat 

hazardous to adopt policies that would involve subsidizing nonwork? What would that do to that desire to create value and to 

lead to new and different jobs? 

Mr. Keiper. Well that’s a wonderful and very complicated set of 

questions. Let me deal with the last part first. 

We have learned over the course of the last 70 years or so to be 

very sensitive to incentives and disincentives to work. And, you 

know, we saw in the major battles over welfare reform in the 1990s 

huge disputes about how law might incentivize or disincentivize 

work. 

And as some people have begun to talk about universal income, 

guaranteed basic income as a potential policy solution to a future 

in which nobody has to work in some distant future because productivity is so high all of our basic needs are taken care of and 

fewer and fewer people need jobs, that’s a really, that’s a really 

complicated idea. 

Economists have been fighting about this proposal for decades. 

Because if you want to create such a thing, you want to structure 

it in such a way that you’re not disincentivizing work. Some of the 

most interesting and creative approaches to the guaranteed income 

policy are approaches that structure it in such a way that they encourage good behavior, including involvement in the economy. 

I think it’s very likely that we’ll hear people from both the left 

and the right really start to discuss and analyze and debate guaranteed income in the years ahead, as that happens it is going to 

be important to really attend to that incentives question that you’re 

pointing out, the question of making sure we’re not disincentivizing 

work. 

Because, as you say, work is—it’s not just a matter of doing 

something that you dislike for which you are compensated. At its 

worst that’s what it can—well, not its worst, it can be even worse 

than that—but at its minimum, it’s that. But it can also be a 

source of pride, and dignity, self-definition, and meaning and purpose in human life. 

And that is sometimes a little—it sounds a little idealistic, I 

know, but it is really true when you talk to people, and we kind 

of stop looking just at the economic numbers, but listen to that 

anecdotes, the ‘‘anec-data,’’ as well. 

Senator Lee. Thank you very much. Thank you. I see my time 

has expired. I will save the rest of my questions for the second 

round. Thank you. 

Chairman Coats. Thank you, Senator. Congressman 

Schweikert. 

Representative Schweikert. Thank you, Mr. Chairman. 

Can I throw a hypothesis and pitch something at you? Because 

I have not heard it actually discussed. There are some articles and 

data sitting here in front of me basically talking about that the entire world has a dwindling workforce. If you actually look at the deDeShaun on LAP51NQ082 with DISTILLER

24 

mographic curve of the entire world, that prime productive age 

groups is actually on a very steep decline worldwide. 

I have other things here basically saying if you add in energy 

costs, China now is a more expensive place to manufacture than 

Indonesia, Thailand, Mexico, India. I am looking at many of the 

charts that actually look at productivity per hour, and many of 

those countries that we fret about repeatedly here in discussion, actually their labor productive costs per hour are exploding. 

Isn’t the movement towards automation our way to deal with, 

first, our domestic crisis here of a decade of—and if you actually 

dig into the data, it’s actually partially, substantially demographically driven, of falling productivity or flat productivity, that if we’re 

going to demand higher wages for our citizens it’s going to come 

with a marriage of talent, labor, and automation, and the fact of 

the matter is the rest of the world is starting to have a shortage 

of that productive capacity? 

Tell me where I’m wrong. Anyone? 

Mr. Keiper. I would just jump in first to say I don’t think you 

are wrong. But two additional points. 

One, the causal arrows go both ways. Which is to say, the rise 

in automation and the increasing complexity of certain kinds of 

jobs requiring more and more years of education have something 

to do, according to demographers and economists, with the changing structure of—— 

Representative Schweikert. Well, but much of that demographic curve is just pure population. I mean, pure age population. 

Mr. Keiper. Sure. But age and population I mean are the result 

of people marrying at certain times, having children—— 

Representative Schweikert. Higher income, birth rates fall. 

Mr. Keiper. Exactly. And those sorts of things are related in 

complicated ways to the changing nature of work. So that is just 

a small amplification to what you were saying. Not a point of criticism, but a point of agreement, if anything. 

And then I would just add, to kind of further amplify what you’re 

saying, as the demographics change, you look at societies that are 

aging rapidly, ours is aging not as rapidly as some countries in Europe. Or, you know, we’re not entirely sure what China is going to 

look like. But the one-child policy has had a profound effect on that 

country’s demography. 

Representative Schweikert. I’ll make your argument. We may 

have a very good idea. 

Mr. Keiper. Well, in some ways we really might. And it’s not 

pretty. And you’re going to hear increasingly, and if I’m not mistaken I think Professor McAfee has written a bit about this, and 

you’re going to hear increasingly people talking about the need to 

use different kind of automation, different kinds of robotics to really work in the growing elder care industry. 

Representative Schweikert. Well we are a little off from 

where I’m wanting to go and I think Dr. McAfee has actually written on a version of this. 

My two I want to pitch conceptually is, I have a productivity 

problem in this country. How do I use the demographics I’m 

blessed with, which is I’m aging but I’m aging a lot slower than 

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25 

those I compete with, find a way to adopt technology, and that 

technology may also allow my workforce to work longer? 

And I know sometimes that’s a whole another side obligation, but 

if I’m 70 and wish to continue to be in a productive capacity, does 

technology allow me to maintain my skill sets? And does that help 

me find a way to continue a productivity curve while the demographic strain on many of those countries I’ve competed with for 

such a long time? 

I actually think there’s optimism if I direct this the right way 

with the proper incentives. I mean, Dr. McAfee, right or wrong? 

Dr. McAfee. Right, Representative Schweikert. I am personally 

not worried about the productivity stall-out that we are experiencing now. Because when I take the innovations that I’ve looked 

around and seen for the past couple of years, and project them forward for 5 or 10 years, our service industry workers today who are 

not very productive doing things like health care, I believe they’re 

going to become much more productive. 

You mentioned this kind of slow ticking demographic time bomb 

that many countries are confronting. We’re confronting a less severe version of it. The reason I think that should worry us is not 

because we won’t have enough people to turn out the goods and 

services that our economies need. I don’t think that’s the case at 

all. 

It is because our current workers pay for our current retirees. 

The social welfare system is configured that way. As these populations gray, I believe that is going to put a lot of strain on these 

different countries. 

Representative Schweikert. Look, I have a fixation on it because I thought it was very well written. In December The Wall 

Street Journal did that 2050 Series, and some wonderful graphics, 

some brilliant demography in it, and they make your point. In 131⁄2

years, Social Security is out of money. In 81⁄2 years, Medicare is out 

of money. And so the underlying theme of these sorts of discussions 

is: Okay, if you really care about maintaining of these social contracts, how do we dramatically increase productivity so we have 

that thing called, oh yeah, money. 

Thank you, Mr. Chairman. Yield back. 

Chairman Coats. Thank you. Senator Peters. 

Senator Peters. Thank you, Mr. Chairman. This has been a fascinating hearing. I’ve got a number of questions, but I thought I 

would start with something that I mentioned in the opening comments, which is something I have been very involved in being from 

Michigan and what is happening in the auto industry, and the 

new, transformative technologies that are coming online. In fact, 

folks are saying with the new autonomous features will be more 

disruptive, or at least equal to when the car first came off the assembly line. That is what we are talking about. 

But I would like to get each of your perspectives on autonomous 

vehicles. What’s happening in mobility, as you are looking at the 

greater context of what automation is going to do to jobs. You 

know, this is certainly a central piece that all of you have mentioned in your testimony or in your writings. 

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26 

Give me your assessment of that. As policymakers, what should 

we be thinking about as we are thinking about autonomous vehicles, specifically? We’ll start with Dr. McAfee. 

Dr. McAfee. Senator Peters, thank you. I called in all of my favors in 2012 and got a ride in one of Google’s autonomous cars. 

And at the time I felt like an astronaut. I felt like I was having 

an experience that very few other people ever had, or would get to 

have going forward. 

Four years later, I went for a test drive in a Tesla, just a month 

or so ago, and it has a completely autonomous highway driving feature on it. So in four years that technology went from kind of astronaut-level rare to anyone can walk off the street and experience 

this. 

I think that is a great example of how quickly technology is progressing these days. And to your specific question, I think that 

completely autonomous vehicles are, if they’re not feasible today, 

they will be very, very quickly on American roads in traffic. Maybe 

not rush hour Manhattan, but certainly across our interstates. 

The main implication of that, I guess there are two: One is that 

fewer lives will be lost. Safety will go up. The goods that we ship 

across the country will get a lot cheaper. It will be a great boon 

for the country in a lot of ways. 

The challenge is I believe in a majority of U.S. States today the 

single most common job is truck driver. And I don’t think that will 

be the case even a decade from now. 

So again, preparing for that and dealing with that aspect of this 

hollowing out I think is going to become an increasingly urgent policy arena for us. 

But my prescription is never to try to turn off the autonomous 

car. It delivers great benefits to us. And I think American auto 

manufacturers want to be in the lead on that technology. 

Senator Peters. Absolutely. Absolutely. 

Dr. Holzer. 

Dr. Holzer. So I agree with Dr. McAfee that the losers in this 

will be motor vehicle operators, truck drivers, bus drivers, etc. And 

that has been an important occupational niche for relatively unskilled workers in America. 

Senator Peters. One of the largest in fact, isn’t it? 

Dr. Holzer. Pardon me? 

Senator Peters. It is one of the largest occupations. 

Dr. Holzer. That’s right. That’s right. So that could be a big 

change. Now it depends. The diffusion of this new technology into 

use by lots of businesses, I’m not sure of the speed of that transition. It may be very quick. But there may be all kinds of things 

where the judgment of a driver is still required. 

So when I think of UPS and the skills of a UPS driver have actually gotten pretty high in terms of being able to do all kinds of 

GPS, figuring out the location of the customers, the tracking of the 

products. 

I don’t know that driverless autonomous vehicles are going to 

eliminate all those needs for that kind of work. So I can see that 

in some sectors of transportation it might be very rapid; in other 

sectors, more slowly. 

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But let’s suppose it’s rapid and we start having this problem of 

displaced truck drivers, bus drivers, etc. What do we do with them? 

We haven’t talked much about that. 

So to approach this, one is to try to teach them a new skill. 

That’s what people mean when they talk about life-long learning, 

sending people back. 

It’s a little easier when you’re talking about a welder, which is 

one of the examples before. Old-fashioned welding vs. new precision 

welding. You have a strong base and you just need a little bit of 

tweaking. 

Our success with retraining and re-educating is going to depend 

a lot on the age of that bus driver or truck driver. And, number 

two, on their underlying skill set. Right? So it’s easy to send a 30- 

year-old back to community college than a 50-year-old. It is easier 

to send somebody back who actually is pretty good at reading 

manuals and handling technical material than someone who is not. 

So it is going to depend on that. 

For people, there’s going to be a lot of people for whom it simply 

doesn’t make sense to retool and retrain. And for those, I frankly 

think the best thing we can offer them is some kind of wage insurance. Wage insurance does incentivize people to work, not to stay 

on unemployment insurance. It incentivizes people to shift to a 

lower-wage job, but then the government, the Federal Government, 

makes up part of the loss. So if you have to downshift from a $20-an-hour job to a $10-anhour job, the government might pay half of that difference for two 

or three years. Of course we’d have to fund that, and that would 

require some additional resources. But that is another way of protecting some folks who simply can’t be retooled and sent back, but 

others can. And I think we need to be doing some of both to prepare for that kind of world. 

Senator Peters. Thank you. 

Mr. Keiper. 

Mr. Keiper. Just a quick follow-on to what both of the other 

panelists have mentioned. If you want to encourage and want to 

take advantage of the many benefits of driverless vehicles, I would 

urge you to encourage the legal and insurance industries to continue the work that they’ve already begun in sorting out questions 

of liability and damages, which in some ways may present greater 

hurdles than the technical problems, many of which are already 

solved. 

Senator Peters. Well, my time is about up, but you are absolutely right about that; that sometimes policy is a lot slower than 

technology, and the technology is moving very, very rapidly. And 

I would add that, in addition to some of the insurance issues also 

cybersecurity is a big deal, given the fact that it is bad enough 

when someone steals the money out of your bank account; it is 

worse if they drive you into a wall. So those are two other things 

that we have to do here as policy makers. 

Thank you to all of you. Appreciate it. 

Chairman Coats. Yes. Fascinating questions. No one has yet 

raised pilotless planes. I’m not sure how many of us would want 

to board that plane right now. On the other hand, driverless 18- 

wheelers gives you pause about what’s coming down the road at 

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you. And there’s going to have to be some education with the public 

here and demonstrations, I think. But I assume it is just as easy 

to put people from location to location on a pilotless plane as it is 

in a car. It is something to ponder as you lie in bed at night thinking about the future. 

Congressman Beyer. 

Representative Beyer. Thank you, Mr. Chairman. 

And I want to begin by piling on Mr. Keiper’s comments earlier 

about changing the education system. The Senator and Chairman 

served in Germany and saw it first hand, and I did in Switzerland, 

where they were taking kids at 13 and 14. In Switzerland, literally 

two-thirds of the work of the children’s force and channeling them 

into plumbing and roofing and auto mechanics, but also nursing, 

and radiology, and pharmacy assistants. And so last I checked, the 

unemployment rate was 1.8 percent. And year after year they turn 

out enough kids at 19 for the jobs that exist. It is tough when they 

get to be 50 years old and they’re a coal miner, but we have to try 

anyway. 

Mr. Keiper, you wrote about universal basic income and negative 

income tax, and what do you do when actually a significant part 

of the population doesn’t need to be employed. And you wrote, also 

you said that it’s been discussed favorably for various reasons by 

prominent conservative and libertarian thinkers. 

Can you expand on why they would be for that? I understand the 

left-leaning progressives—— 

Mr. Keiper. Sure. Before I get to that, let me just say, yes, I’ve 

gone to, visited Germany and Switzerland and studied their education system and taken an interest in it. And while I don’t think 

it would be perfectly applicable here, there may be some states that 

might want to experiment with adapting American education in 

something like that direction. 

As far as the guaranteed basic income, it’s something that Hayek 

talked about, something that Milton Friedman spoke about favorably, something that I think Charles Murray has written and spoken about favorably if I’m not mistaken. I’d defer to my economist 

colleagues here to say more about that. But my sense is that folks 

on the conservative and libertarian side of the spectrum see it as 

a couple of things. 

One, it is a way to continue to encourage innovation. 

And, two, it would be a—I think this is Friedman’s approach— 

it would be less complicated than continuing the bureaucratic system of welfare that we had in place when he was writing about it. 

He was worried about, you know, all of the costs and pressures 

caused by this complicated system of welfare that we had in place. 

He thought maybe if you replaced it with something that was simple and clean and seamless, that that would be an improvement. 

There’s much more to it than that. There’s all kinds of economic 

modeling that, you know, my colleagues here could say much more 

about I’m sure, but it’s interesting. It’s surprising how you get people on the left and the right talking about this with interest. Very 

little interest in the kind of moderate middle, although I think that 

is likely to change in the years ahead. 

Representative Beyer. Dr. Holzer. 

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Dr. Holzer. So I’m going to speak as someone from the moderate 

left-center position who is skeptical. I understand that this could 

be necessary down the road. I am not anxious to go there anytime 

soon for a couple of reasons. 

Number one, we have a tax revenue problem in this country just 

funding the liabilities we have in Social Security and Medicare. 

And we have, politically, an issue—to get the demagogues out—we 

have a massive resistance to almost any kind of tax increase. So 

this would require, after we’ve already paid for Social Security and 

Medicare and Medicaid, this would be a massive expenditure of tax 

revenue on top of that. And it’s hard for me to see the American 

public any time in the near future going there. 

Representative Beyer. If I can interrupt you for a second, I 

only have a minute-and-a-half left, I have a very specific thing for 

you. Most of the new economy jobs have not lent themselves to 

unionization. How should the labor movement adapt to this new 

economy? 

Dr. Holzer. Not very well, necessarily. 

Representative Beyer. Moving forward? I struggle with the 

Labor Day speeches. What do I say? 

Dr. Holzer. With good reason. Some people think that the model 

of unionism that we have in America was developed mid-20th century. It was very well suited to that kind of economy, and it is less 

well suited to an economy with a lot of dynamics, and a lot of fluidity in and out of jobs, and dramatic new competition. 

So if you look at the SEIU, as one industry, they have found 

niches. They have been successful unionizing hotel workers in 

places like Las Vegas and LA that we might not have anticipated. 

But also they take on more political roles, right? So they work hard 

for candidates and for policies like a higher minimum wage. I think 

we’re struggling for a new institutional model that fits the new reality of the 21st century labor market. But in the meantime, there 

are some important roles to be played for that institution. And 

we’ve seen actually, the Communications Workers are very good at 

expanding the skill set of their workers. So I think some of these 

unions have done a good job of finding a new niche and a new role 

to play in the 21st century labor market. 

Representative Beyer. Okay, thank you, Dr. Holzer. Mr. 

Chairman, I yield back. 

Chairman Coats. Thank you. 

Senator Casey. 

Senator Casey. Mr. Chairman, thank you very much. I appreciate the testimony today and appreciate the work that goes into 

your appearance today and what you’ve told us already in the testimony. 

I want to tell the Chairman that as we get an opportunity once 

in awhile to brag about our states, Pittsburgh, Pennsylvania, in 

many ways has really been at the forefront of robotics’ automation 

for years. Literally, not just years but for decades. And they are 

into a brand new chapter. 

In fact, there is a neighborhood in Pittsburgh they used to call 

the so-called ‘‘strip district,’’ but now is known also by the phrase 

‘‘robotics row.’’ Just looking at some of the companies there now, 

Near Earth Autonomy is one. Real Earth is another company that 

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performs the world’s most accurate indoor 3D mapping, for example. 

The Near Earth Autonomy operation has an aerial robotic platform to analyze crop data that will help accelerate plant breeding. 

So on and on with brand new technology. And that is some of the 

new breakthroughs that we are seeing in a community like Pittsburgh, which had to recover over the last several decades from the 

collapse of steel and the larger manufacturing economy going in 

the wrong direction, now that they’ve figured out a way to invent 

a new future. 

But I was struck by Doctor—Dr. McAfee, when your charts tracking what’s happened, the combination of what’s happened to workers and productivity at the same time. One chart that I remember 

from going back about two years ago now was the original, at least 

what I remember as the original version tracking productivity and 

wages, similar numbers where World War II to 1973, productivity 

was up 97, wages were up 91; 1973 forward, productivity still went 

up over I think it was 72 percent. Wages only went up 9. 

So no matter what chart you use, or how you track it, there’s 

been a disconnect between wages and productivity. 

So with that as a just kind of a basic foundation for my one and 

only question, we’ll start with Dr. Holzer and anyone else who 

wants to weigh in: 

With these advancements in technology and also with the knowledge we have about what has happened to wages over time, even 

when productivity was up, wages have been basically flat, how do 

we ensure that workers get their fair share of the benefits of these 

technological breakthroughs, the type of breakthroughs we see with 

automation and robotics and otherwise? 

Dr. Holzer. I think first of all that that disconnect in the chart 

between productivity and earnings is a complicated one. So for instance the rise of health care costs certainly accounts for part of 

that. That eats up part of it. So if you show average compensation 

rather than average wages, it is not as much of a disconnect. 

If you use mean vs. median, too much earnings have gone to the 

top 1 percent, sometimes because they’re superstars and they deserve it. Sometimes because we have terrible market failures in our 

financial sector. So there’s all kinds of things going on. 

The best thing we can do is to educate our young people in skills 

that complement the new technologies, in skills that are not made 

obsolete. So playing in a symphony is not going to be outsourced 

or replaced by a robot. But, frankly, doing good child care and good 

elder care also is not. Those tend to be low-wage occupations, sometimes lower than they really should be, but there’s a range of skills, 

some technical and some creative, in all of those kinds of occupations and skills and we want to do a better job of educating our 

young people. 

And then on top of the reforms in the system to try to deal with 

some of those terrible market failures that have caused too much 

of our income to go to the top. So I think it is that mix. But the 

best bet remains skills that are adaptable over people’s life span, 

specific to the current job and career, but still where they have 

some flexibility to retool. So it is a mix of general and specific 

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skills. And again, looking towards the things that complement technology that will not be easily replaced. 

Actually in Pittsburgh the Eds & Meds—— 

Senator Casey. Right. 

Dr. Holzer [continuing]. Interaction has been dramatically important. And again, those are the education sector and the health 

sector. Some diagnostics can be done through technology. Many 

cannot. Many of the elder care for patients. And so that is an interesting example of ways in which technology will not wipe out everything we care about. 

Senator Casey. I know I’m out of time. Mr. Keiper, Dr. McAfee, 

if you want to answer in writing, or whatever the Chairman would 

prefer? 

Chairman Coats. No, go ahead and answer. 

Dr. McAfee. Very quickly, Senator Casey. I think my colleague’s 

answer is excellent. Education and reskilling is obviously crucial. 

The only thing I would add is, I am a huge fan of an expansion 

of the Earned Income Tax Credit. Whereas, if we have people who 

are trying to do the right thing and get out there in the workforce 

and work at a relatively low wage job like child care, like elder 

care, let’s top their wage up with a subsidy. 

I actually prefer that to a substantial increase in the minimum 

wage because that might have a disincentive effect on the employers from employing that person. I would like to see our system 

work so that we directly incentivize both the employer to employ 

that person, and that person to get out there and do that job via 

topping up their wages. 

Senator Casey. Okay. Mr. Keiper, either now or in writing, 

whatever is best. 

Mr. Keiper. I think those were excellent answers. I guess I 

would only add, if you look further out into the future, some of the 

theorists who think about these things worry about the possibility 

of a shift in the balance between labor and capital. And I think 

that has come up. We have kind of alluded to it a few times here 

today, which is to say, we can imagine a future where the people 

who are the first investors and owners of some of these more advanced automated technologies are going to reap much more of the 

profit—since many machines will bring more value than workers 

because there’s going to be less need for certain kinds of work. 

That’s a possibility. It’s very complicated, and there’s good reason 

to think if that does happen it won’t last because many of these 

technologies may be democratized. They may become more affordable for more people. 

It’s hard to say, though. 

Senator Casey. Thank you very much. 

Dr. Holzer. It might be an argument for profit sharing. 

Senator Casey. Okay. Thank you. 

Chairman Coats. Dr. Adams. 

Representative Adams. Thank you, Mr. Chairman, and Ranking Member. Thank you for hosting today’s hearing. And, gentlemen, thank you for your testimony. 

Manufacturing is an important industry in the State of North 

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ments can displace manufacturing workers, manufacturing output 

has partially grown since the Recession, but we still have a ways 

to go in recovering jobs that were lost, which has been to some extent exacerbated by automation. 

But I think part of helping employment in the manufacturing industry rebound is understanding that automation and the skilled 

workforce can co-exist. And as a matter of fact, I think it is critical 

that they do co-exist in today’s global economy. 

Dr. Holzer, we have seen growth in the manufacturing sector in 

terms of output over the last several decades, with the exception 

of contractions within the industry that took place during the Recession. In contrast, employment in the manufacturing sector has 

declined, partially attributable to the growth of automation. 

So what role do you think automation played in the previous decline in U.S. manufacturing employment in the early 2000s? And 

how can we ensure that job growth and automation are working in 

tandem as our markets continue to evolve technologically? That is 

for Dr. Holzer. 

Dr. Holzer. So there’s different kinds of manufacturing. There’s 

high-end advanced manufacturing which we’ve focused a lot on 

today. And then there’s the apparel sector and some of the nondurable, which are less technologically advanced, but in fact those 

are relatively low-wage jobs, although important to a state like 

North Carolina in many cases. 

So I think, I think imports from China in the early 2000s devastated nondurable manufacturing. That had nothing to do with 

the business cycle, just the massive growth of China producing reasonably high quality products for very low wages, and our nondurable sector simply couldn’t compete with that. 

And that is going to happen sometimes. Nondurable manufacturing is just not a sector where I think Americans can concentrate. And again, they are increasingly becoming lower-wage 

jobs anyway. 

In durable manufacturing, it’s a very different story. China has 

not played nearly as much of a role in durable and advanced manufacturing. And some companies that have actually gone to China 

sometimes have insourced back into America because—and in fact 

that’s why so many German Companies are here. I know in North 

Carolina hundreds of manufacturers from Germany have entered 

North Carolina because of the advantages of low taxes, low regulation, proximity to consumers, all make the United States competitive in a lot of advanced manufacturing industries. 

There the big problem is the skills. And do enough American 

workers—in North Carolina, as you know, when Siemens built 

their gas turbine engine plant, I think about five or six years ago, 

they refused to build the plant until they had worked out the skills’ 

problem with some of the UNC, with Piedmont Community College 

and UNC, which indicates that the skills problem is crucial for the 

innovation to continue, and it is also crucial for the workers to 

share in the benefits of that. 

So it goes back to the issue of how do we make sure that our 

young people have those technical skills to be able to be complements with that machinery. It has to start early in the K 

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cation can be a very important part of this. Not old-fashioned voc 

ed to attract minority kids away from college; high-quality career 

education. Exposing young people to technical skills and employ 

building skills much earlier. 

We need to make sure that those jobs can be widely shared and 

the benefits distributed widely. And for folks who can’t do that, the 

Earned Income Tax Credit is extremely important, as is wage insurance, as are very moderate increases in the minimum wage. 

Representative Adams. Okay. That was going to be my followup question to you. You’ve answered it. 

But let me ask about tax credits and how important you think 

they are in terms of also workforce training incentives, and increasing productivity and innovation. How are these things going to be 

important, do you think? 

Dr. Holzer. You mean tax credits, for instance, for employers? 

Representative Adams. Yes. 

Dr. Holzer. Um, we don’t have strong evidence on that right 

now. I think South Carolina is a state which is paying employers 

a $1,000 tax credit for every new apprentice they take on. I don’t 

know if that’s going to work or not. It is an interesting model. 

What we need here is a lot of experimentation and a lot of evaluation to see what the impacts are. 

So tax credits could play an important role to try to help and 

incentivize. There are a lot of employers who do very well in what 

we call the low road system. A combination of tax credits and technical assistance might convince more of them to upgrade their skill 

content in their automation. 

Representative Adams. Thank you, sir. My time is up. Mr. 

Chair, I yield back. 

Chairman Coats. I am going to turn to Congressman Beyer 

again. He would like to start a second round. And then, given the 

schedule issue I have, I am turning over the gavel made by the students at the Washington Science Tech’s Charter School to my colleague, Senator Lee. I know he has some other questions he would 

like to ask. So I am happy to turn that over to him. He was instrumental in helping to put all this together, so I hand you the 3D 

designed gavel, and manufactured gavel, as well, if that doesn’t 

work, here’s the old-faithful wood carved gavel. And you’ve got the 

Chair. Do whatever you want to do. 

Such power we’re handing over to you. 

[Laughter.] 

Mr. Beyer. 

Representative Beyer. Thank you, Mr. Chairman, and your excellency. I said two questions. 

Dr. McAfee, there was a lot of discussion today about the slow 

rate of increase in labor productivity. And you did mention earlier 

that that is controversial, all the measurement techniques. And I 

just look at my life, and the lives of people around me, and email, 

how much we get done per day. 

I mean I think we communicate five or 10 times as much as I 

did 20 years ago. Twitter, and the fact that we know what happened in the news 30 seconds ago, as long as we stay on top of it. 

Telework, which is exploding, at least through the Metropolitan 

Washington Area. 

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And it’s a terrible thing to say as an employer, but people always 

work harder at home. You know, the 24/7, on Saturdays, and Sunday nights. Or, medicine. The fact that you can get blood tests in 

20 minutes, or 15 minutes, or an X–ray a minute later, or—my 

brother just got a new hip and went home that afternoon. Or even 

Amazon, where you order the book in the morning and it shows up 

that afternoon courtesy of the U.S. Postal Service. 

How do we make, as an economist how do you think about how 

we make real progress in measuring what the difference in productivity actually is? 

Dr. McAfee. That is an extremely tough question, sir, because 

as you are pointing out, you gave some wonderful examples. None 

of them show up in the productivity statistics. 

Representative Beyer. Right, right. 

Dr. McAfee. They are invisible. But they are clearly increasing 

our welfare. As you point out, they are increasing our health, which 

might be the most important thing of all. They are increasing the 

convenience that we enjoy in our lives, and they are not visible in 

our classic economic statistics. 

These are some of the reasons why I am actually not that bothered about the labor productivity slowdown as we’re measuring it, 

because that was never intended to be a welfare measure. It is not 

a measure of how well we are doing as an individual or as a society 

overall. 

Some of my colleagues are trying to work on correcting those 

measurement errors and coming up with more comprehensive ways 

to think about the betterment that technology brings to us. So stay 

tuned for those. 

I just want to repeat a point that I made earlier, though, which 

is even with all those problems, I am pretty confident that over the 

next five to 10 years labor productivity, even as poorly as we’re 

measuring it, is going to go up a great deal because the technologies that I’ve seen over the past couple of years I believe are 

going to diffuse pretty rapidly throughout the economy and improve some of these industries like health care. 

Representative Beyer. I find just the Cloud, itself. You know, 

a little family business. We’re going to save a million dollars this 

year by moving from processors in-house to the Clouds. 

Dr. McAfee. And that is a really good example, because the 

Cloud is actually shrinking GDP. The Cloud is actually shrinking 

some software companies’ revenues. As a result, the way we’re 

measuring GDP, and therefore the way we’re measuring productivity, will show a decrease. And that was the Cloud making your 

business and lots of other ones better off. Absolutely it is. It has 

been a huge, huge advance. 

Representative Beyer. Dr. Holzer. 

Dr. Holzer. I have a slightly different take on this. And I have 

disagreed with my two colleagues remarkably little all afternoon, 

which has been very nice. 

This bias that GDP mismeasures, it doesn’t measure quality 

changes, for instance. That bias has always been there. It’s not 

clear that the bias is getting worse. 

There was actually a recent paper from the San Francisco Federal Reserve Bank trying to measure that that shows, if anything, 

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that bias has not gotten worse and does not account for the productivity slowdown. 

So I am a little less sanguine about that. And I don’t think people’s earnings—and there’s a lot of reasons why, separate from the 

bias issue, why productivity might not be rising. There’s an economist at Princeton named William Baumol. He was the inventor of 

what’s called Baumol’s Disease where he said in some parts of the 

service sector, like the symphony, you can’t raise productivity. It 

doesn’t matter how great the robots are. And he sees those sectors 

expanding, that there are certain kinds of tours that productivity 

just isn’t going to grow, and they’ve been an expanding part of the 

economy. 

That is a problem to the extent that without that productivity 

growth wages are going to stagnate as well. The other possibility 

is that, I am troubled by the gap between profitability and productivity. 

It is a conundrum we have. We have very high profitability in 

the U.S. economy right now. And that’s fine. I’m not against profits. But while productivity is stagnant, that’s a puzzling contrast. 

And one of the arguments is that companies have found a lot of 

ways to make money using very few workers, outsourcing, 

offshoring, turning their workers into independent contractors 

where they’re responsible for benefits. There’s a lot of that where 

the incentives are not necessarily to improve productivity and output. It’s to minimize labor costs at any price. 

So I am a little more troubled by the productivity trend. And 

maybe it will turn around. Maybe it will be just like the 1990s. 

Maybe we’re at the cusp of another Solow moment when productivity is going to take off. But I just think there’s, separate from 

the measurement bias, other incentive problems holding back productivity growth and therefore earnings’ growth. 

Representative Beyer. Thank you. Mr. Chairman, might I beg 

one last question? 

Senator Lee [presiding]. Sure. 

Representative Beyer. Mr. Keiper, Elon Musk, Stephen Hawking, and others have warned us about emergent properties, consciousness coming out of all the AI stuff. Do you have any concern 

about that, any worries for us as policymakers? Think Terminator. 

[Laughter.] 

Mr. Keiper. These are interesting questions, radical possibilities. And at the moment they don’t rise to the level of anything 

that anyone on this Committee ought to be concerned about. 

They are things, however, that folks in the technology fields, futurists, and academics should and are thinking about. And I think 

just for that subject, I would just leave it at that. 

Representative Beyer. Thank you very much. Mr. Chairman, 

I yield back. 

Dr. McAfee. Could I add one word to that? Because I get asked 

this question all the time, and I asked this of the artificial intelligence researchers who I get to interact with, and I heard a great 

response from one of them. He said: 

Worrying about the singularity or the summoning of the demon 

because of artificial intelligence is like worrying about over-population on Mars. 

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Representative Beyer. We’re working on that, too. 

[Laughter.] 

Senator Lee. I worry about that a lot. But after reading the 

book ‘‘The Martian’’ and then seeing the movie, you know, I’m less 

concerned than I used to be. 

I want to thank all of you for being here today. This has been 

a very informative hearing. As the hearing is evidence, we live in 

an era of rapid and dramatically transformative technological 

change. 

Within the past 20 years, the Internet has catalyzed a global, social, and economic revolution, one that has affected almost everyone all over the world. We have gone from bag phones in our cars, 

phones that are big to phones that fit in a bag, phones that are the 

size of a cinder block to phones that are tiny, in just a few years. 

And now we have not only phones but super computers in our 

pockets. 

The incredible science that is being used to make self-driving 

cars a reality and robots that can walk on two legs while maintaining balance, and lift heavy objects, is also creating pretty massive 

and largely understandable fear of the unknown. 

As former Secretary of Defense Donald Rumsfeld once famously 

said: There are known knowns, known unknowns, and there are 

also unknown unknowns. He had quite a way with words, still 

does. It is those unknown unknowns that cause serious uncertainty 

and sometimes lead to fears about the future. 

That is why we held this hearing today, was to explore those unknowns, particularly the unknown unknowns. The value of this 

technology to the world economy and to our domestic economy is 

of course enormous. The impact of this technology will go far beyond the bottom lines of businesses, though. 

It is and it will continue to have an impact on the nature of work 

and, by extension, the ways in which we live and define our lives. 

But it will also impact our society more broadly, and our social 

safety net, as some individuals see their jobs becoming automated. 

Even, and especially those, who don’t ever see their jobs as the 

type that could become automated. 

If you ask most people if they are likely to be replaced by robots, 

most people are probably going to say no. A much higher percentage of them are actually likely to see their jobs replaced, perhaps 

within their lifetimes. 

The American economy has been utterly transformed in the decades since we first created most of what we think of as our first 

safety net. That is not just welfare programs, but also our education system, and our health care system. In that time, Washington has not kept up. And now as these disruptions are accelerating, policy is falling much further behind and the American 

people are paying a price for Washington’s systemic and chronic 

policy paralysis. 

The nature of work is changing, but the nature of human beings 

is not. Work, vocation, service, providing, is at the nature and is 

at the core of human happiness. It is a source of meaning and dignity and community, and that goes for all of us, not just for people 

with college degrees, and with skills that put us into an elite category. 

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The American people have been resilient, and they have been 

more than patient, but they are competing in a 21st century economy while relying on a fraying 20th century safety net. None of us 

has all the answers. And I think that is the point. We need a safety 

net policy, or a set of policies, that are as flexible and nimble and 

diverse and as adaptable to technological change as our society and 

economy are becoming. And this is something that is going to need 

the insights of both parties to get it right—and not just both parties, but the insights of the brightest minds in our country. And for 

that reason, we have been very grateful to have you here to provide 

that. 

As we have discussed today, we cannot ignore the broader impact 

automation will have on our society and the policy changes that 

Congress should be considering as the nature of work continues to 

change, as it has been for centuries, but as it appears to be doing 

on an accelerated basis. 

Again, thank you for coming. Thank you for your participation 

and your insight today. And in closing out the hearing I would be 

remiss if I didn’t remind everyone that the gavel I am using to 

close out the hearing, this blue gavel, was made by the good students at Washington Math and Science Tech Public High School. 

Thank you, very much. We will stand adjourned. 

(Whereupon, at 4:25 o’clock p.m., Wednesday, May 25, 2016, the 

hearing was adjourned.) 

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SUBMISSIONS FOR THE RECORD 

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PREPARED STATEMENT OF HON. DANIEL COATS, CHAIRMAN, JOINT ECONOMIC

COMMITTEE

Today the Committee will examine how robots, automation, and technology are 

transforming our economy. I’d like to thank our witnesses for being here, and I will 

be introducing them shortly. 

But first, I would like to draw the Committee’s attention to the gavel I just used 

to start today’s hearing. It looks and functions just like a typical gavel, but it was 

not made from a block of wood. In fact, it was created just down the street at the 

Washington, D.C., Public Library’s Fabrication Laboratory, or ’‘Fab Lab,’’ using 3D 

printing. 

3D printing works by heating up raw material, in this case plastic, and ‘‘printing’’ 

one small layer at a time until the object is completed. Rather than needing to mold 

or carve raw material as in the past, now we can simply upload a file to a printer 

and it will create the item according to the user’s exact specifications. 

I also have with me a different 3D-printed gavel that we will use to adjourn this 

hearing. It was made by students at the Washington Mathematics Science Technology Public Charter High School, also located in the District of Columbia. What 

an exciting new world we live in, where objects can be manufactured on demand 

with such ease and specificity. 

I would like to thank both institutions for their contributions to today’s hearing, 

which tangibly illustrate the topic we are about to explore. I would also like to 

thank Senator Lee and his staff for helping the Committee prepare for today’s hearing. 

Recent technological developments have been pushing the envelope faster and further than was expected even a decade ago, making what was once thought of as 

science fiction a reality. I remember the hassle of getting my children to program 

our VCR. Now my cable box is capable of recording all my favorite shows, without 

me even asking. Meanwhile some of my grandchildren are probably asking, ‘‘What 

is a VCR?’’ 

The robotic machines are here. Whether it is vacuuming our carpets or assisting 

in precise surgeries, robots are helping with and performing almost any task we can 

imagine. This has led to a greater abundance of consumer products, and more productive and creative workers. 

However, as with the Industrial Revolution, this new robot revolution clearly is 

contributing to pressures arising within our changing labor force. Even before these 

technological advances, America’s workforce was starting to age and businesses 

were beginning to rely much more on automated labor than physical labor. Robots 

are expected to hasten this trend as they fill in for humans in both blue- and whitecollar jobs. 

This picture of a modern assembly line illustrates the prevalence of automation 

in today’s economy. Where workers used to assemble vehicles directly by hand, now 

they oversee teams of precise robots that can weld and assemble vehicles far more 

advanced than ever before. 

Automation’s rapid progress has also raised challenges with certain government 

policies. How can we foster an environment where innovators thrive and grow? Is 

our social safety net prepared for a 21st century labor market? Do some government 

policies make human workers prohibitively expensive for employers? How will current workers adapt? And is our education system preparing our youngest citizens 

for the future economy? 

These are important questions. For guidance, we look forward to hearing the 

views of our distinguished witnesses. 

Today we will hear from Dr. Andrew McAfee, principal research scientist and cofounder of MIT’s Institute Initiative on the Digital Economy. We also welcome Adam 

Keiper, fellow at the Ethics and Public Policy Center and editor of the quarterly 

technology publication The New Atlantis. Our final witness is Harry Holzer, professor at the McCourt School of Public Policy at Georgetown University and a Senior 

Fellow in Economic Studies at the Brookings Institution. 

My thanks to all of you for providing us with your expertise and giving us a 

glimpse into the possibilities of the future. 

PREPARED STATEMENT OF CAROLYN B. MALONEY, RANKING DEMOCRAT, JOINT

ECONOMIC COMMITTEE

Thank you so much Chairman Coats for calling such an important and interesting 

and timely hearing. We are here today to discuss the impact of automation on jobs 

and the economy and how best to harness the immense power of technological innovation. 

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The United States has long been a leader in this important area. And basic research funded by the federal government has played a key role in driving innovation. 

We know that automation can boost productivity, lift aggregate demand, reduce 

consumer prices and improve our quality of life. 

While all of these benefits are apparent in the long run, we also know that in 

the short run innovation can displace workers, causing severe economic pain to 

workers whose jobs are automated out of existence or whose wages are reduced dramatically. 

Today’s hearing is about the future. And let’s face it: automation is a difficult 

thing to predict. We know it’s going to happen. We just don’t know how fast it’s 

going to happen, or in which industries or what will be the exact consequences. 

One study finds that nearly half of U.S. jobs are at risk of being lost to automation in the next couple of decades. 

Other studies show that the impacts of automation will not be as great or felt so 

soon. 

Throughout history, concerns have been voiced that new technologies would make 

human labor obsolete. It has not happened. While there have been dramatic shifts 

in how people have earned their livings, the quantity of jobs has increased and the 

quality has improved. 

Yet, there are reasons to believe that this could be different in the future. 

I’d like to add some of my questions to the excellent questions Senator Coats put 

forward. 

• How do we equip our workers with the tools and skills needed to adapt to the 

future changes? 

• What should we do as policymakers to both advance innovation and the expected productivity benefits on the one hand while also supporting workers adversely affected by technological changes on the other hand? 

• And how can we harness this engine of prosperity while making sure that benefits are widely shared? 

I really am excited to learn more and to hear the questions and exchange here 

today with our excellent witnesses. 

But before I yield back my time, I’d like to turn to Senator Peters, a former colleague in the House of Representatives, we miss you. And I’d like to yield the balance of my time to him. He is the co-founder of the bipartisan Senate Smart Transportation Caucus. Senator Peters has a deep interest and knowledge of automation 

and its impacts in Michigan and the rest of the United States. 

I yield him the remainder of my time, and it’s always good to see you again. 

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QUESTIONS FOR THE RECORD FOR DR. MCAFEE SUBMITTED BY SENATOR AMY

KLOBUCHAR

IMMIGRATION REFORM AND THE ECONOMY

Dr. McAfee, in your testimony, you stated that many of the world’s most talented 

people want to come to the U.S. and build lives and careers, but our policies are 

often too restrictive. 

Immigrants have been part of our nation’s greatest achievements. Seventy-three 

of the Fortune 500 companies were founded by immigrants and even more were 

founded by immigrants or their children, including 3M, Best Buy, and Mosaic in 

Minnesota. 

• How can comprehensive immigration reform benefit the U.S. economy? • How can immigration reform help make the U.S. more competitive globally? 

IMMIGRATION REFORM AND INNOVATION

Dr. McAfee, we know that immigration reform will also help spur innovation. 

Over 25 percent of all U.S. Nobel laureates were foreign-born. And as noted in this 

year’s Economic Report of the President, one-quarter of all U.S. technology and engineering companies started between 1995 and 2005 were founded by immigrants. 

• What policies should be implemented to make sure that the U.S. is attracting 

and retaining the world’s talent? 

INFRASTRUCTURE INVESTMENT

Dr. McAfee, in your testimony, you discussed the importance of sensible public 

spending on infrastructure and how fixing our crumbling roads and bridges would 

help increase our productivity growth. 

Infrastructure from our ports, bridges and roads and water treatment facilities, 

and making sure that we have safer trains and efficient air travel is essential to 

the U.S. economy. Infrastructure serves as the foundation to support our country’s 

economic global competitiveness and connects communities and people. 

A well-maintained, efficient transportation system is essential to the future economic competitiveness of the U.S. 

I was one of the first Senators to support the FAST Act which authorizes significant levels of investment of $306 billion in the nation’s transportation infrastructure 

with Minnesota receiving more than $4 billion over the next five years. These funds 

will be used for our highways, bridges, rail and mass transit. 

• Please discuss how investments in infrastructure support the middle class and 

keep the U.S. competitive. 

• What other policies would you recommend to make sure that we have a 21st 

infrastructure and Internet? 

QUESTIONS FOR THE RECORD FOR DR. HOLZER SUBMITTED BY SENATOR AMY

KLOBUCHAR

IMMIGRATION REFORM AND INNOVATION

Dr. Holzer, we know that immigration reform will also help spur innovation. Over 

25 percent of all U.S. Nobel laureates were foreign-born. And as noted in this year’s 

Economic Report of the President, one-quarter of all U.S. technology and engineering companies started between 1995 and 2005 were founded by immigrants. 

• What policies should be implemented to make sure that the U.S. is attracting 

and retaining the world’s talent? 

INFRASTRUCTURE INVESTMENT

Dr. Holzer, in your testimony, you discussed the importance of sensible public 

spending on infrastructure and how fixing our crumbling roads and bridges would 

help increase our productivity growth. 

Infrastructure from our ports, bridges and roads and water treatment facilities, 

and making sure that we have safer trains and efficient air travel is essential to 

the U.S. economy. Infrastructure serves as the foundation to support our country’s 

economic global competitiveness and connects communities and people. 

A well-maintained, efficient transportation system is essential to the future economic competitiveness of the U.S. 

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1 Hunt and Gauthier-Loiselle (2010) indicate that a 1-percentage point increase in the immigrant college graduates’ population share raises patent production in the U.S. by 9–18 percent. 

Giovanni Peri et al. (2014) also show a 1-percentage point increase in the foreign STEM share 

of a city’s employment increases the wages of native college graduates by 7–8 percent and of 

native non-college employees by 3–4 percent. 2See Berndt and Hansson (1991), Nadiri and Mamuneas (1994); and Holtz-Eakin and Lovely 

(1996). 3 According to the U.S. Bureau of Labor Statistics, construction employment in the U.S. 

peaked at 7.7 million in 2006. It declined to 5.5 million in 2010 and has since recovered to only 

6.6 million. Thus, only half of the construction jobs lost in the Great Recession have returned 

to date. 

I was one of the first Senators to support the FAST Act which authorizes significant levels of investment of $306 billion in the nation’s transportation infrastructure 

with Minnesota receiving more than $4 billion over the next five years. These funds 

will be used for our highways, bridges, rail and mass transit. 

• Please discuss how investments in infrastructure support the middle class and 

keep the U.S. competitive. 

• What other policies would you recommend to make sure that we have a 21st 

century infrastructure and Internet? 

1. What policies should be implemented to make sure that the U.S. is attracting 

and retaining the world’s talent? 

There is no question that attracting and retaining highly-educated foreign workers, particularly in STEM fields, contributes to innovation, job creation, and productivity/earnings growth in the U.S.1

To encourage more foreign-born STEM workers to enter and remain in the U.S., 

we should: 

• Reform the H1B program—Current admissions of foreign STEM workers for 

temporary employment under the H1B program are capped at 65,000 per year, 

which is too low. I support raising the cap and the entry fee for employers, perhaps using a lottery process to determine both. The fees generated could be 

spent on increasing the education of native-born STEM workers in the U.S., 

particularly among minority populations. I would also make it easier for such 

workers to change employers in the U.S., though this might reduce the extent 

to which employers value the program; and I would make it easier for them to 

apply for permanent residence here. 

• Adopt a Merit Point System for Annual Immigration—This idea was part of the 

Senate’s Immigration Reform proposals in 2013. Instead of immigration being 

based primarily on family unification, adoption of a merit point system would 

make it easier for highly educated immigrants to obtain permanent residence 

status in the U.S. 

• Exempt Highly Educated Foreign STEM Workers from Caps on EmploymentBased Immigration—This idea was also contained in the reform proposals of the 

Senate bill. 

2. Please discuss how investment in infrastructure support the middle class and 

keep the U.S. competitive. 

Maintaining high productivity growth in the U.S. is a necessary condition for 

growth in our living standards, particularly for the middle class. A lengthy literature by economics researchers shows that infrastructure spending contributes to 

productivity growth in the U.S.2 Given the declines in infrastructure spending in the 

U.S. in recent decades, as well as the decline in our productivity growth over the 

past decade (Baily and Bosworth, 2015), it seems like the economic returns to infrastructure spending right now would be very high. 

An important additional positive effect of infrastructure spending in the short- to 

medium-term would be the creation of many more good-paying jobs for high school 

graduates in the U.S., particularly among men and in construction. Middle-skill and 

middle-wage employment has fallen in the U.S. in the past few decades, particularly 

for men without postsecondary education (Autor, 2010, 2015; Holzer, 2015). Construction employment has declined in the U.S. since the beginning of the housing 

crisis in 2006; it has recently recovered partially but not fully.3 Expansion of infrastructure development would boost the availability of such employment. With many 

Baby Boomer construction workers soon retiring, such an expansion would require 

us to train a new generation of such workers, which would be of great benefit to 

young men who are currently leaving the U.S. labor force in droves because of their 

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4See Mandel (2016). 

5See Atkinson (2016). 

weak earnings prospects. Expansion of apprenticeship opportunities in the construction trades would be particularly helpful here. 

3. What other policies would you recommend to make sure that we have a 21st century infrastructure and Internet? 

While the issue of how to fund such infrastructure growth remains hotly debated, 

a recent report from the bipartisan Congressional Budget Office (2016) offers clues 

about how to make sure infrastructure spending is efficiently implemented. And, 

while Internet policy is generally outside of my realm of expertise, some recent reports from the Progressive Policy Institute on this issue seem persuasive.4 Of 

course, ensuring that U.S. workers, at both the sub-BA and BA levels, maintain 

their computer skills is critical to ensuring that the benefits of the Internet are 

widely shared with U.S. workers.5

Autor, David. 2010. The Polarization of Job Opportunities in the U.S. Labor Market: Implications for Employment and Earnings. Hamilton Project, Brookings Institution, 

Washington DC. 

Autor, David and Melanie Wasserman, 2015. Wayward Sons: The Emerging Gender Gap in Labor Markets and Education. Washington DC: Third Way. 

Baily, Martin and Barry Bosworth. 2015. ‘‘Productivity Trends: Why is Growth So 

Slow?’’ Presentation, Brookings Institution, March 15. 

Berndt, Ernst and Bengt Hansson. 1992. ‘‘Measuring the Contribution of Public 

Infrastructure Capital in Sweden.’’ Scandinavian Journal of Economics. Congressional Budget Office, 2016. Approaches to Making Federal Highway 

Spending More Productive. Washington, DC. 

Holtz-Eakin, Douglas and Mary Lovely. ‘‘Scale Economies, Returns to Variety, and 

the Productivity of Public Infrastructure. Regional Science and Urban Economics, Vol. 26. 

Holzer, Harry. 2015. Job Market Polarization and U.S. Worker Skills: A Tale of 

Two Middles. Brookings Institution, Washington, DC. 

Hunt, Jennifer and Marjolaine Gauthier-Loiselle. 2010. ‘‘How Much Does Immigration Boost Innovation?’’ American Economic Journal: Macroeconomics. Vol. 2, No. 

2. 

Mandel, Michael. 2016. Long-Term U.S. Productivity Growth and Mobile 

Broadband: The Road Ahead. Progressive Policy Institute, Washington, DC. 

Nadiri, M. Ishaq and Theofanis Mamuneas. 1994. ‘‘The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries.’’ Review of Economics and Statistics. Nager, Adams and Robert Atkinson, 2016. The Case for Improving U.S. Computer 

Science Education. Information Technology and Innovation Foundation, Washington, DC. 

Peri, Giovanni, Kevin Shih and Chad Sparber. 2014. ‘‘Foreign STEM Workers 

Boost Wages for U.S. Workers.’’ National Bureau of Economic Research Working 

Paper. 

QUESTIONS FOR THE RECORD FOR MR. ADAM KEIPER SUBMITTED BY SENATOR TOM

COTTON

• There are some war fighting functions that machines can carry out more quickly and accurately than humans (such as targeting or engaging threats defensively). Other actions are not as easily automated (determining combatants or 

proportionality in combat). As technology advances, how should we create regulations about what decisions humans must make in warfare, and operations 

that machines should not do? 

• As machines increasingly have a place on the battlefield, how do we grapple 

with the rates of PTSD among those operators removed from direct combat? 

How do robotics and automation increase or decrease the ethical complexity of 

warfare? 

[Mr. Keiper’s response was not received before the hearing was printed.] 

Æ 

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