Home > Uncategorized > “The Economist” on Innovation and Jobs

“The Economist” on Innovation and Jobs

This week’s issue of The Economist has an article on innovation and job creation: “Still full of ideas, but not making jobs“.

Here’s a quote:

America’s ability to innovate and raise productivity remains reasonably healthy. The problem is that the benefits of that innovation and productivity have become so narrowly concentrated that workers’ median wages have stagnated.

The article seems to imply that this is a temporary problem, and that we just need the right kind of innovation — something that will “share the benefits of innovation more widely.” 

The article also echos the conventional wisdom on the need for more education, saying: “Americans once led the world in educational attainment, but this is now barely rising while other countries have caught up (see article). ” Yet, the evidence on the ground shows that college graduates (even those with degrees in technical fields) are seeing increasing unemployment and underemployment, even as student debt levels soar.

The article completely ignores the issues I’ve been writing about here:

  • Specialized software automation and artificial intelligence applications—and in particular machine learning technology—will increasingly threaten knowledge-based occupations. This may be especially true of entry-level positions typically taken by new college graduates.
  • Robots are going to get better and cheaper, and ultimately they will invade a great many lower-wage occupations in the service sector.  These low-wage jobs are responsible for the majority of new jobs now being created.
  • The migration of all types of information and entertainment to digital format will continue. We have already seen substantial disruptions of business models in traditional labor-intensive industries as a result of this (print media, movie rentals, physical book stores, etc.).  As information is increasingly hosted in the cloud and delivered electronically, there will be fewer jobs.

Is it likely that future innovation will create new industries that are labor-intensive enough to keep up with growth in the labor force (at least 1 million new workers per year in the US) and also absorb potentially millions of people displaced from more traditional industries? I doubt it.  All the evidence suggests that the industries of the future will be technology-intensive with fewer opportunities for workers—especially those without elite, technical skills.

One of the few exceptions may be “green” jobs associated with installing solar panels, etc. However, these are largely temporary infrastructure jobs rather than permanent, sustainable positions, and the numbers seem unlikely to be sufficient to counteract the broader trend toward fewer jobs in other industries.

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  1. Ted
    May 3, 2011 at 8:31 pm | #1

    I too see no natural way to distribute benefits of increased productivity in a free market system. The benefits mostly rise to the owners. Mr. Ford seems correct — what jobs are left as automation approaches asymptotically the limits of technological innovation? I believe the distant solution is some kind of direct democracy. Where IT technology allows people to directly draft and vote on legislation. No lobbyist, politicians, elected officials or corporate manipulation.

    • Kevin McCann
      May 4, 2011 at 12:37 pm | #2

      No sir, with respect; That is why America is a Republic, not a Democracy. 51% = no freedom or representation of 49%. Minority rights are critical to a good society.

      • Ted
        May 4, 2011 at 5:04 pm | #3

        My apology, this isn’t a Blog for forms of government. However, an IT-based direct democracy can be set to 75%, 80% or even 99% majority vote. Which are all far better than our present 51% elected oligarchy, which passes legislation lobbied by less than 1% of the population?

  2. Rosa Garriga
    May 3, 2011 at 9:40 pm | #4

    I’ve recently come across your blog and now I’m reading with great interest your book, The lights in the tunnel, really fascinating!
    I’m now starting to pay close attention to the news to detect signs of what you’re predicting, but I believe you’ve nailed it down and it’s very worrying this is not on the agenda of media, politicians and so on.
    I just watched a presentation by Eric Schmidt on what he calls ‘augmented humanity’ and he does state that technology will do all the work for us, so we’ll have all the time in the world to do what we please. Of course for him, being a billionaire, that is not a problem…
    I’m now just starting my career (I’m 25 years old) and also I’m starting to build a portfolio of company shares and I can’t stop thinking about how all this is going to impact me, because I assume it will impact me in my lifetime.

    Btw, an article from the NY Post seems to agree with you: ‘What is left, when this recession finally recedes, is a landscape where mid-skilled jobs are fallow, where someone who once worked in retail has lost their job due to the rise in online shopping, or an administrative executive has been replaced by new software. [...] Without the training or the education for the formerly middle class worker to move up, the only direction is downward”
    The link to the article: http://www.nypost.com/p/news/opinion/opedcolumnists/class_dismissed_why_middle_income_rcd27q5kphT3ZnUCH7vh4L#ixzz1LKOIYS2y

    Thanks Martin for your book and thought-provoking blog posts, I hope you keep it up!

  3. Kevin McCann
    May 4, 2011 at 12:30 pm | #5

    If we pursue the thought of “less jobs because of innovations” and we set up a permanent social net for those unable to get future jobs forever, will it become self-fulfilling in this transition period? Could economic struggle combined with less Socialism (more freedom) generate new opportunity, not thought of, as it has in the past? This may not help when we get to strong AI, but it would help keep the innovation curve up and keep us from going bankrupt before we get there.

    Sincerely, Kevin McCann

    • May 6, 2011 at 12:28 am | #6

      Is it possible that the ultra-rich Plutocrat-class will stop siphoning wealth and that people will magically double in intelligence, outpacing the rampant machine-sourcing of jobs? I guess it’s possible, but I wouldn’t count on it.

      • Kevin McCann
        May 7, 2011 at 4:37 pm | #7

        No. What will we little people of the proletariat do?

  4. noimagination
    May 4, 2011 at 2:27 pm | #8

    A potential solution: Binary Economics, the problem remains… how do we get there from here. So I read Mr. Ford’s book some time ago (more than a year ago) and his idea is fundamentally sound. Structural unemployment is a big problem and it’s only going to get worse. Fundamentally the same thing happened when we moved from an agricultural society to an industrial one, with one very big exception. The agricultural to industrial change took several generations. The rate at which robots and AI are going to replace humans in the next 5-15 years is going to be incredibly disruptive. This is going to be especially disruptive to growing economies of BRICK countries, they need those low wage factory jobs as a foundation for more complex work, and many or most of those jobs will move back to the “first world” countries as robot labor allows competitive advantages of less time in shipping, faster design to implementation (fashion changing in days instead of years).

  5. Daniel Essman
    May 4, 2011 at 6:01 pm | #9

    Two problems that capitalism has never successfully dealt with: One, overproduction; Two, worker obsolescence. Both these systemic failures were painfully evident in the 1930′s. The tractor made the Joads (Grapes of Wrath) obsolete; warehouses were filled with unsellable goods. As idiotic as it sounds, real food was being dumped because hungry people didn’t have money to buy it. Our economic order is dominated by an ideological notion (that work makes free) which is the first tier of a logical pyramid that considers people redundant…unnecessary. It is a dystopic mindset. When one hears public condemnation of “entitlements”, one recognizes this mindset. In the 70′s, President Nixon wanted to institute a negative income tax. Paying people not to work is comparable to paying farmers not to plant…or…giving subsidies to corporations. The problem of full employment is real. The solutions are fairly simple for those of us not crippled, confused or blinded by the (let’s face it) religion of free market capitalism.

  6. Kevin McCann
    May 5, 2011 at 6:11 am | #10

    Daniel Essman :Two problems that capitalism has never successfully dealt with: One, overproduction; Two, worker obsolescence. Both these systemic failures were painfully evident in the 1930′s. The tractor made the Joads (Grapes of Wrath) obsolete; warehouses were filled with unsellable goods. As idiotic as it sounds, real food was being dumped because hungry people didn’t have money to buy it. Our economic order is dominated by an ideological notion (that work makes free) which is the first tier of a logical pyramid that considers people redundant…unnecessary. It is a dystopic mindset. When one hears public condemnation of “entitlements”, one recognizes this mindset. In the 70′s, President Nixon wanted to institute a negative income tax. Paying people not to work is comparable to paying farmers not to plant…or…giving subsidies to corporations. The problem of full employment is real. The solutions are fairly simple for those of us not crippled, confused or blinded by the (let’s face it) religion of free market capitalism.

    There is no overproduction in a capitalist free market system, not for long. It always adjusts, although it hurts; (not as bad as the always poorly “planned economy”) But that will not help as we approach strong AI. History is not going to repeat itself. This is different. This is expotential, and it’s getting fast! In Ford’s book, The Lights in the Tunnel, it shows a very interesting solution, as you say, “to pay people not to work” It’s been thought of before perhaps. However, Ford put an interesting twist, in that we may pay you more if you learn. Sounds nice. But what will money be? Although I am optimistic about the distant future (2045), I have been very worried about this coming transition period ever since reading The Singularity Is Near years ago. Economics is a study of human motivation. Will I continue to work 70+ hours a week to pay taxes when much of the population gets paid for nothing? If we improve life span by 30 years 20 years from now, who will pay for retirements. We are not well positioned with our massive debt. Will thousands of riots break out as old style economies start to come apart? Will opportunities be seized during chaos? Will they try to kill technology?
    Unfortunately, many things will be blamed for the coming unemployment in our political world. If we get through it; we will have abundance! It is only speculation as to what that will do to our minds!
    It’s funny; the driving force of a lot of advancement has been capitalism. Yet it might end up as a pure socialist economy run by who knows what. It may have to be so.

  7. Kevin McCann
    May 5, 2011 at 6:33 am | #11

    Ted :My apology, this isn’t a Blog for forms of government. However, an IT-based direct democracy can be set to 75%, 80% or even 99% majority vote. Which are all far better than our present 51% elected oligarchy, which passes legislation lobbied by less than 1% of the population?

    No need for apology. We can’t talk economics without touching on forms of government. I enjoy your back and forth. By the way, what’s funny is the lobbyist are doing what is designed in the Constitution, addressing their government representatives. It wouldn’t be such a problem if the government was doing what is in the Constitution, that is being limited. I think we got who the problem is back-ass-words. Remember: “the bigger the government, the smaller the citizen.” Citizens are very small right now, that’s why lobbyist seem so big. It’s all going to change radically soon anyway; as the combination of exponential accelerating technology meets massive debt, unemployment, improving health and war. I think only a super, super, cheep abundant energy will bail us out. Hope we make it.

    • Liberty
      June 3, 2011 at 4:19 pm | #12

      Kevin:

      “..the combination of exponential accelerating technology meets massive debt, unemployment, improving health and war. I think only a super, super, cheep abundant energy will bail us out..”

      I would like you to consider that more powerful technology will do more work with less effort and resources. For example, vehicles may be made by robots, with diamond or other carbon based material, use very little energy, etc. and be driven robotically and less than 10% of the current vehicle density will be required. This will happen with almost everything; admin, food, homes, etc. and commuting will be history. As employment falls so will incomes and the cost of goods because technology will make things for so much less the goods will too – they will have too because demand will make it so. So, supply and demand will be back into balance but we will have to work very little for it.

      Economically speaking, the debt creation strategy of the last 40 years must end. This was possible because the inflation it caused could be paid off from future growth. Growth is over. Growth is due to increasing markets due to populations growth, consumption per head and increasing cost of production. All this is ending. The rise in population is slowing, competition in producers is growing and people are becoming saturated with goods. Short term, people will consume less because of a fall in income but the cost of IT based goods will fall dramatically and investment in essentials such as food, housing, energy, etc rises causing them to fall in price eventually. Massive deflation will be the norm. We are seeing the beginning of that now.

      I cannot see many wars but the fall in employment will make huge numbers irrelevant economically while demand for top end skills technologically and managerially will increase causing a huge gap in wealth and power within countries. This scares me.

      • June 6, 2011 at 6:09 am | #13

        Liberty: What you say is interesting. Kurzweil talks about an economy of abundance, the mechanics of which are not yet clear. When energy becomes super cheep to produce, there will be no motivation to be efficient with it. I might just air condition my whole back yard. There may be a building boom as never seen. The energy problem will likely be solved with nanotechnology solar. When that happens, everything changes in world economics. We will quickly be able afford to pump and clean water throughout the world. This will be wonderful. Population growth will slow because people will be so much healthier and successful that the culture of “many kids” will change as it has on other wealthy nations.
        We must get over this hump of our current economic crises without the political opportunist destroying the freedoms we have. But then again, the people may not care as long as they have the goods they want. Being “saturated with goods” was not something we thought of when I had economics many years ago. I don’t think most economist YET think that’s possible; but perhaps it is for a large enough part of the population. We will have to think of a way pay those “irrelevant workers” in the short term so they don’t burn down the system.
        Alas, I do see war in the short term. Millions want to kill all who don’t believe as they do. I can’t yet imagine how it will be though. The number of drone aircraft is accelerating too. 300 in the year 2001 to more than 7000 today have read someplace. Perhaps even solders will be out of a job someday.
        I would like to call this time we are in now “The Acceleration” as opposed to “pre-singularity”. The word may be more digestible to the non-believers. What do you think?

  8. Kevin McCann
    May 5, 2011 at 6:40 am | #14

    Have you seen these wherehouse workers? http://www.youtube.com/watch?v=lWsMdN7HMuA
    Watson will answer the phone.

  9. Daniel Essman
    May 5, 2011 at 7:37 pm | #15

    Keving: To assert that there is no overproduction in capitalism is just silly. I know that you know that. You course correct, you said, “…not for long.” Consider the vagueness of not for long. My namesake was a sheriff who, in the course of arresting a tweeker, was stabbed with a hunting knife. In a fraction of a second it penetrated his side about 3 inches. He survived. His convalescence lasted about a month…not long.

    No, economics is not a science of human motivation any more than meteorology is a study of human motivation. Economics is the study of systems of social organization, the movement of capital, the rules governing the exchange of goods and services. We describe and understand such systems because they are mindless in themselves, yet they constrain our behavior in the same manner that a tornado drives us into a basement. We study economics to get power. We study economics to make ourselves free.

    Yes, we humans work for money. But money is a tool, a convenience…it’s not our only motivation. I’m not writing this response for money. QED! But am I getting paid? If so, what specie? Perhaps simple respect from you folks, my fellow sojourners…perhaps the inner need to silence stress-inducing cognitive dissonances…perhaps to satisfy the potent human force of curiosity.

    And when I hear, “Why should I work my ass off so you welfare bums can sit around doing fuck all.” my first response is why bother responding to a zombie…so I don’t…not to the brain dead. But this web page is not a farmhouse surrounded animated corpses. Here, right here we are trying to answer the question: What should our economic system look like when actual physical work is unnecessary?We won’t be able to answer that question when our ability to think clearly is en-coffinned by ideology.

    Thanks for the dialog. I’m reminded of a poem by Richard Brautigan called “All Watched Over by Machines of Loving Grace.” Check it out: http://www.redhousebooks.com/galleries/freePoems/allWatchedOver.htm

  10. Kevin McCann
    May 7, 2011 at 5:12 pm | #16

    Ted :My apology, this isn’t a Blog for forms of government. However, an IT-based direct democracy can be set to 75%, 80% or even 99% majority vote. Which are all far better than our present 51% elected oligarchy, which passes legislation lobbied by less than 1% of the population?

    An economics professor, I once had (30 years ago), opened the first class with the quote, “If you lay all of the economist in the world end to end; you still don’t reach a conclusion.”
    Although many things can be described by economic models, the systems we are concerned with are those that effect human behavior. To make a rule (or design a system) is to change or control Human behavior. This sets off a cascade of other effects, most of which are unforeseen. The error of the planned systems has been ignoring the cascade of effects on human motivation. They do not have the constant feedback loop of capitalism. The pain of adjustment is put off for a time, but only for a time; and it will be much worse that the capitalist pain. The adjustment time in a hybrid capitalist/socialist system, like America, is greatly increased by the interference of outside forces, i.e. political/government and the collusion of the rich with them. That’s why that silly notion of limiting government is kind of important.
    I speak of money with full knowledge of what it is. I speak of working to pay for bums, as you say, in reference to the change in human motivation that will come with each new little rule the self-righteous put in to try to fix the last 1000 rules they put in. That is not ideology, it is history.
    Back to the subject at hand: Effects on motivation is why, I think, Martin Ford, in Lights in the Tunnel, put into his concept of paying non-workers more if they “work” at learning more. I ask: what do we pay them? The “ value” of everything has changed with full robotic production in a land of abundance.
    But alas, it is this interim period of the next 20 years that concerns me most, as economies search for equilibrium, politicians grab for power in the chaos, and the socialist planners ignore Human Motivation. War, debt, corruption, out-sourcing, back-in-sourcing with robotics, accelerating technology increasing life span of the retired. We have our work cut out for us to pay for all this.
    Bless your namesake, Daniel, for his service to society. Good people are fewer than needed.

    • May 7, 2011 at 11:43 pm | #17

      “That’s why that silly notion of limiting government is kind of important.”

      To quote, “The Black Swan Guy” Nassim Taleb: “I find it inconsistent (and corrupt) to dislike big government while favoring big business– but (alas) not the reverse.”

      Government is not some great evil cyclopic beast which must be decimated at all costs, despite the Cold War and Reaganomics baggage that clouds every conversation about politics and economics in America. Rather, government and business are more akin to a treacherous waterway between a Charybdis and Scylla which must be navigated with eternal vigilance and caution. The mistake of central planning is to assume that one can predict what precisely people wish to engage in for their pursuit of happiness, and that we can deny millenia of human evolution and history, deny the innate human drives for wealth, status and prestige and they will go away. The mistake of capitalism is that it assumes that competition is ever perfect, or even very good, which it isn’t; it is always rigged for similar reasons. People are not payed their wages based on their competitive value, people are payed what they can be forced to accept. If options for employment can be limited, either through market domination, cultural programming, or brute force (examples include Chinese Foxconn factories, Wal-Mart jobs), then people can be forced into accepting horrible compensation even if their labor is actually worth much more, Thus wealth inequality escalates unnaturally (which is why the top 1% blue blooded royalty in the US have been getting exponentially richer and everyone else has been stagnating or dropping) and creates market distortions. Thus capitalism unchecked fails and ultimately becomes feudalism or klepto-plutocracy, which is where we’re at now. The multi-trillion dollar heist by the super-rich that led to the near-global meltdown of 2008-2009 is merely a symptom of the disease. The massive wealth inequality has ultimately allowed the rich to effectively buy the government, even the Obama Administration, thus breaking the government’s ability to keep the private sector in check.

      Ultimately, this feudalistic plutocracy will only accelerate and solidify with the coming AI and robotic revolutions. The leverage point is uncertain right now, as both government and the private sector are essentially captured by the Ownership-class, who may continue to multiply their wealth simply by the fact that they own the means of production, the means of investment, and soon will no longer even require the human species in order to keep the gears of industry moving. This is already seen in areas like finance where human skill is increasingly elliminated and financial investment algorithms and AIs do the quant work, thus turning Wall Street into a skill-irrelevant winner-take-all game of who can acquire the most central and largest financial servers first. The same goes for other tech industries like search and social networking where network-lock-in is pervasive. This will eliminate the people’s check on the post-industrial complex as unions and strikes will become useless — corporations will just give the jobs to robots and AI who will never strike, never complain about overwork or hazardous environments, never tire. The (now unemployed) worker, will be even more powerless than he or she already is, and their cries of protest will be those of rats in cages of obsolescence. I think it’s obvious how Libya or Egypt-grade instability, possibly worse, could quickly arrive in such an environment. The government or some other global political social organization will be the only leverage we’ll have to stop a bloody revolution or worse. And I have serious doubts about any “abundance”. We’ve already got “abundance”, the Future is here, it’s just not evenly distributed. Yeah, we’ve got an uplink to Xanadu alright, a future stairway to “heaven” paved with gravel crushed from the bones of the arthritic, tirelessly slaving, subprime-debt laden, bargaining rightless, lower-caste Morlocks. AKA, everyone other than the Ownership class –who support for eternity the Trumps and Rothschilds and Goldman Sachs of the world through endless bailouts, whips cracked by slavedriving managerial super-AIs.

      • Kevin McCann
        May 8, 2011 at 1:57 pm | #18

        Wintermute: Alas, what you say is true. What do you suggest we do as individules, as a nation, as the world?

  11. May 12, 2011 at 9:15 pm | #19

    What about creativity and art? As more people get free time, there will be more demand for this. How they will pay for it though is the issue.

    Martin, I loved the book, although I have a lot of issues with the last part and your solution suggestions, something to bring up another time though.

    Have you seen Zeitgeist Moving Forward? You would find the suggestion of “Access Abundance” interesting.

    • Kevin C.
      May 13, 2011 at 9:07 am | #20

      However, very few people have enough creativity to actually make a living in the artistic fields; there’s a reason the term “starving artist” is known so well. Further, technology can exacerbate this; for example, the Internet has made it harder for people to earn a living as a writer. Further, creativity is not something easily taught; no amount of art schooling will turn a truly uncreative individual into someone who can earn a living on art.

  12. June 7, 2011 at 6:54 pm | #21

    Let’s be clear here: we are talking about massive income inequality as a result of rapid technological change — right? Let’s examine “why” this is going to occur.

    Primarily, it is due to intellectual property monopolies granted by the state. If everyone is simply free to produce whatever they want, without having to get permission from the government first, new inventions and methods would proliferate throughout society quite quickly. As a result, the proprietor of a new technology will see the gains from his invention diminish rapidly.

    If anybody can produce a product or deliver a service with a specific method, real purchasing power will skyrocket and income inequality will crash. Just look at prescription drugs: generics are 80% cheaper than name-brand drugs. Apply generics to all products: revenue approaches cost. In the year 2045+, mutual aid societies for the poor and unemployed would be able to produce their own goods and services at cost — creating their own economies.

    So let’s stop the whining and let’s advocate for the end of government production licenses (i.e. intellectual property)

  13. sheridan
    August 3, 2011 at 6:29 pm | #22

    I am thinking that we need a restructuring of how we treat large successful corporations in this country. I had an interesting talk with a friend in high tech recently. He is from India and works in IT and has a nice stable job (for now). He said that although so many are out of work, he can’t find enough employees (in IT and tech). I suggested that the companies that need those employees pay to educate them, this might be the incentive needed to increase the tech job force and force companies to pay at least a little price/or one could say make a contribution for the elimination of those low tech jobs resulting in hundreds and thousands of unemployed which drag on our economy. Perhaps also a tax on job elimination? That way the taxes can go to a general fun designated to retrain or in some other way retool or take care of those whose jobs are lost as a result of companies like Apple who are focused on innovation and profit and could care less about the U.S. economy ….. the rich get richer.

  14. sheridan
    August 3, 2011 at 6:32 pm | #23

    @Ted…have you checked out Americans Elect? Google it and you will see your idea is already underway about an IT government.

  1. May 3, 2011 at 8:58 am | #1
  2. June 6, 2011 at 8:59 am | #2
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