No, AI Won’t Lead to Mass Unemployment
By: Christian Hubbs
Tags: Artificial Intelligence, Economy, Productivity, Employment, Future Of Work

No, AI Won’t Lead to Mass Unemployment

New technology will lead to new wealth and opportunities

Photo by Lukas on Unsplash

I recently had the pleasure to attend a debate between Martin Ford (author of Rise of the Robots) and Antony Sammeroff (UBI: For and Against) on the topic of automation and joblessness that has been hounding the AI community for the past decade. The public debate has only picked up in the past year as Andrew Yang has come onto the scene with his signature UBI proposal, billed as a response to the looming threat of permanent, technological unemployment through automation.

Many of the proponents of the economic apocalypse view, however, are sorely mistaken and repeatedly make similar errors. AI — as well as the most powerful technologies — will lead to changes in the job market and potentially painful disruptions for some. These changes will not lead to disaster, but will eventually bring greater prosperity to the vast majority of people.

First, let’s focus on the mistakes made by Ford, Yang, and others.

The Wrong Metric

Each of these thinkers focuses on the wrong metric, namely: jobs.

“Jobs” become the focus as if they are the summum bonum of economic prosperity. This misses the point because we don’t work for the sake of work, rather we work in order to consume. It would be rather simple to increase the total number of jobs if that indeed were the goal.

Consider the story of Milton Friedman who was in Indonesia and saw road builders using shovels rather than modern equipment for their work. When he asked why they were working by hand this way, he was told this way requires more jobs, to which he responded, “why don’t you give them spoons and create even more jobs?”

The implications of using a spoon vs. shovel vs. excavator to build a road are obvious. By substituting human labor with capital and technology, we can greatly increase our productivity while also reducing cost, which yields more roads and greater output for less.

Businesses move to more efficient means of production to reduce cost and increase output to the benefit of the consumer, this is why our material standard of living has been on the rise — and with increasing rapidity since the industrial revolution. Most everyone had a “job” in the past, but were all together poorer without automation.

If any metric ought to be discussed, it ought to be a measure of the standard of living of the population which captures how well people are living. Falling prices and cost of living through increased production and automation raise purchasing power and enable each dollar to go farther in satisfying your wants, which paints automation in a much different light.

New Jobs and New Innovations

Most commentators on AI disruption fail to account for new fields and developments that will emerge as a result. To be fair, it is difficult to imagine what career options will exist in the future (who would have imagined social media marketers and community managers before the advent of the Internet) but it seems alarmist to ignore the creation of new fields and roles all-together.

This line of thinking also falls victim to the lump of labor fallacy which holds that the amount of work to be done is more or less fixed. The fact is, humans have near unlimited wants and desires leaving room for the entrepreneur to innovate to satisfy those desires which, in turn, creates additional work and labor.

There’s another effect of production increases and cost decreases, demand increases as well, which often leads to an expansion of employment in a given sector. For example, the improvements in natural language processing (NLP) have led to a number of legal start-ups that seek to automate the responsibilities of a paralegal by searching through massive amounts of case files and court documents for relevant information. On first blush, one might assume this is the death knell for paralegals. On the contrary, The Economist reports that the demand for paralegals has increased because they can perform better searches while doing it faster and cheaper than before.

This same price-supply-demand dynamic has played out countless times in the past, from ATM’s leading to more bank teller positions to more recent improvements in AI yielding more and better reporting by the AP. As prices drop, demand increases and industries grow to meet that demand for less. In short, everyone benefits.

Automation Increases Wealth

In contrast to a naive reading of GDP statistics, populations grow in wealth via production. Producing more and doing so for less (i.e. more efficiently) increases wealth.

Consider a recurring example in the AI and jobs debate: the fate of truck drivers with the onset of self-driving trucks. Ford and Yang argue that these people are going to be thrown out of work en masse, and that this will balloon into a major, economic catastrophe due to the lack of jobs and consumption. This, as the great economist Frederic Bastiat would say, is what is seen. But it ignores the unseen, the second-order effects of moving to autonomous vehicles.

If autonomous trucks are indeed more economical and can substitute for truck drivers, consumers will see a great windfall as prices across the economy will fall. Nearly all physical goods we consume need to be transported from point A to B. A reduction in those costs will be transferred onto consumers as businesses reduce prices to compete for customers. This means food, clothing, medicine, fuel, construction material, and so on will see a reduction in price, pushing down the cost of living through more efficient production and transportation.

It is true that there may be difficulties for the displaced truck drivers as they will need to find new sources of income. The positive, however, is that they — along with the rest of the population — will not need to earn as much to maintain their same standard of living in the face of falling prices. People can choose to use this economic gain in whatever way they wish, for example, working less to afford more time for volunteering or leisure.

The Historical Record

Honest AI jobs alarmists will admit that history stands in stark opposition to their prognostications. The cycle I’ve outlined above of more economical production processes leading to increased wealth and higher standards of living has played out many, many times despite repeated dire warnings of impending mass unemployment with the latest innovation. While the Luddites are the classic example, the change in agriculture over the decades is more informative.

While agricultural employment accounted for over half of all jobs in the mid-1800s (and over 90% in the early 19th century), technology has reduced this sector to less than 2% of all jobs. As shown in the plot above, employment has increased even more. This same pattern has been repeated around the globe, with nearly all economic indicators showing a rise in well-being as the percentage of the population engaged in agriculture decreases with the largest gains coming to those where this is occurring the fastest. In other words, we’ve seen wide-spread technological disruption before and are seeing it today in many developing nations, but it is a net benefit.

Advancements in Automation

Gainful employment is important, there is no doubt about it. And innovation can cause short-term disruptions. However, despite the protests of Ford, Yang, and others, there seems little reason to believe “this time is different.” Economic laws simply don’t change over time, even if our understanding of them improves. The same sort of forces that have been at play for centuries will continue.

Given the numerous benefits automation has provided humanity throughout the centuries, the changing demographics, and the new jobs and industries which have sprung up around these innovations, AI should be embraced as it revolutionizes work and improves our lives.