“We are being afflicted,” wrote John Maynard Keynes in 1930, “with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come — namely, technological unemployment.” He elaborated:
This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour. But this is only a temporary phase of maladjustment. All this means in the long run is that mankind is solving its economic problem. I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of a far greater progress still.
Indeed, Keynes thought it entirely possible that, by 2030, scientific and technological progress would have freed humankind from “the struggle for subsistence” and propelled us to “our destination of economic bliss.” Technology would be doing our jobs for us, and the economy would have spread material wealth to everyone. Our only problem at that point would be to figure out how to use our endless hours of leisure — to teach ourselves “to enjoy” rather than “to strive.”
We’re now within spitting distance of 2030, so a progress update on the Keynesian utopia would seem to be in order. A good place to start might be this chart from MIT’s Andrew McAfee:
For more than 30 years after World War II, McAfee observes, GDP, productivity, employment, and income all rose together in seeming lockstep. But in the early 80s, we began to see a “great decoupling,” with growth in employment and household income faltering even as output and productivity continued to shoot upward.
By the end of 2011, things had become much worse in two ways. First, median household income was actually lower than it was a decade earlier. In fact, it was lower than at any point since 1996. And second, the American job creation engine was sputtering badly. Between 1981 and 2001 the economy generated plenty of low-paying jobs. After 2001, though, it wasn’t even generating enough of these, and employment growth started to lag badly behind GDP and productivity growth.
What happened? It’s not entirely clear. Surely there are many forces at work. But McAfee argues that one of the reasons for the decoupling is that technological progress, particularly in the form of computerization, is pushing the economy’s bounties away from labor and toward capital:
Digital technologies have been able to do routine work for a while now. This allows them to substitute for less-skilled and -educated workers, and puts a lot of downward pressure on the median wage. As computers and robots get more and more powerful while simultaneously getting cheaper and more widespread this phenomenon spreads, to the point where economically rational employers prefer buying more technology over hiring more workers. In other words, they prefer capital over labor. This preference affects both wages and job volumes. And the situation will only accelerate as robots and computers learn to do more and more, and to take over jobs that we currently think of not as “routine,” but as requiring a lot of skill and/or education.
McAfee has been writing astutely on the economic consequences of computerization for some time, and I think it’s fair to say that, like Keynes before him, he’s an optimist when it comes to technology. He believes, or at least wants to believe, that we’re in another “temporary phase of maladjustment” and that we’ll be able to innovate our way out of it and recouple what’s been decoupled. But just how we get off the path we’re on, he admits, is far from clear: “it’s not going to be reversed by a couple quick policy fixes or even, I believe, by deeper changes to our educational and entrepreneurial systems.” We’ve entered a new “technological era,” and the old assumptions and solutions may not hold anymore.
It’s always been pretty clear that technological progress has an economic bias — that it tends to reward some folks more than others. Many economists have argued (and many politicians have assumed) that the bias is fundamentally “skill-based.” Progress rewards the skilled and punishes the unskilled. That’s a tough problem, but at least you know how to solve it: you broaden the reach and quality of education in order to shift more people into the skilled camp. But, as Paul Krugman recently suggested, what we might be seeing today is capital-biased technological change, which “tends to shift the distribution of income away from workers to the owners of capital.” That’s a harder nut to crack:
If this is the wave of the future, it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets. Creating an “opportunity society” … won’t do much if the most important asset you can have in life is, well, lots of assets inherited from your parents.
The implications, writes Krugman, are “really uncomfortable.”
So maybe Keynes will be proved half-right. By 2030, technological progress will have freed the masses from their jobs, but it won’t have freed them from the struggle for subsistence.