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Yes, AI Can Create More Jobs Than It Destroys
Sophia, a robot integrating the latest technologies and artificial intelligence developed by Hanson Robotics.
The Luddites and technophobes have a point. Machines do displace workers. Always have. From the cotton gin, machine tools, and punch cards to combine harvesters, industrial robots, and business software. And it is this “displacement effect” that leads to scary forecasts about AI and robots leading to mass technological unemployment and underemployment.
But MIT’s Daron Acemoglu and Boston University’s Pascual Restrepo argue in a rich new paper, “Artificial Intelligence, Automation and Work,” that there is far more to the story. For starters, automation may allow tasks to be performed more cheaply, increasing demand for them. The introduction of ATMs was followed by more jobs for tellers because it reduced the costs of banking, and banks opened more branches. Or the productivity effect could be broader: Agricultural mechanization lowered food prices and created more demand for non-agricultural goods and the workers producing them.
But the heart of the paper is really about what Acemoglu and Restrepo call the “reinstatement effect.” Sometimes tech progress can create new tasks and more employment opportunities, just the opposite impact of automation. From the paper: “As tasks in textiles, metals, agriculture and other industries were being automated in the 19th and 20th centuries, a new range of tasks in factory work, engineering, repair, back-office, management and finance generated demand for displaced workers.” The Luddites often fail to factor this in.
Good news: Acemoglu and Restrepo think AI is no different than technologies of the past in its ability to create new tasks to balance out those that get automated, whether by boosting productivity (and incomes and consumer demand) or through reinstatement. They note, for instance:
A recent report by Accenture identified entirely new categories of jobs that are emerging in firms using AI as part of their production process (Accenture PLC, 2017). These jobs include “trainers” (to train the AI systems), “explainers” (to communicate and explain the output of AI systems to customers), and “sustainers”(to monitor the performance of AI systems, including their adherence to prevailing ethical standards). The applications of AI to education, health care, and design may also result in employment opportunities for new workers.
But there are no guarantees here. And the transition process will likely be difficult, just as it was with the first Industrial Revolution. A great history lesson here about “Engel’s Pause”:
The rapid introduction of new technologies during the British Industrial Revolution ultimately led to rising labor demand and wages, but this was only after a protracted period of stagnant wages, expanding poverty, and harsh living conditions. During an eighty year period extending from the beginning of the Industrial Revolution to the middle of the 19th century, wages stagnated and the labor share fell, even as technological advances and productivity growth were ongoing in the British economy, a phenomenon which Allen (2009) dubs the “Engel’s pause” (previously referred to as the “living standards paradox”, see Mokyr, 1990). There should thus be no presumption that adjustment to the changed labor market brought about by rapid automation will be a seamless, costless and rapid process. … It is perhaps telling that wages started growing in the 19th-century British economy only after mass schooling and other investments in human capital expanded the skills of the workforce. Similarly, the adjustment to the large supply of labor freed from agriculture in the early 20th-century America may have been greatly aided by the “high school movement” which increased the human capital of the new generation of American workers (Goldin and Katz, 2010).
The degree of difficulty of our 21st-century transition will depend on how quickly and appropriately we can educate and train our workforce, though the economists concede “there is little concrete information about what types of skills new technologies will complement, underscoring the importance of further empirical work in this area.” Failure here will not only make the transition more painful but also will crimp productivity gains. Maybe that’s already happening and is why productivity growth has been so weak despite all the tech advances we see around us.
The economists even raise the prospect that we are suffering from an “excess of automation” brought about by a weakness in worker skills and a tax code that subsidizes capital relative to labor. Or maybe too many of the advances are of the automating variety, rather than task-creating. (A similar theory has been proposed by Clayton Christensen.) This could be a sign that not enough brainpower is being applied to breakthrough discoveries and research. But the bigger point is that these technologies are not incomprehensible, unstoppable, unalterable forces of nature. What we do matters in making sure technology progresses and that it continues to benefit all of us.
Published in Economics, Technology
True – and I’ve often seen one or more available tellers and a line for the ATMs in my local bank branch.
I don’t think that’s true of modern day Luddites. For most of history technological improvement was a disruption but not a permanent setback. Farmers could move to cities and work in factories. Buggy whip factory workers could find work in the Goodyear tire plant or at Ford making Model T’s. Plenty of lateral moves for more and more people.
What happens when technology eliminates lateral moves too? What happens to the average to below average person who will never be an engineer, scientist, entertainer, politician, manager? Is barista a lateral move? Are there even enough barista jobs to accommodate the numbers sufficiently? Heck, what happens when technology eliminates tuck drivers, baristas, and burger flippers too?
What happens when technology also eliminates the next higher level? Machine learning and diagnistics could get sophisticated enough to eliminate human back office or management. Especially if we’re talking about AI and not just technology improvements, then that is a real conceptual possibility.
I’m not saying we should halt all improvements. I’m just asking – what happens next? The answer isn’t always “something will come up”.
The problem that economists are glossing over, is that people are not fungible, the people who loose jobs to AI are highly unlikely to get a job that AI creates.
Reforming the education system to provide a better educated workforce is outright laughable. The only form of reform that produce any tangible results is complete privatization. Government management of the education system as been an epic failure.
Is it true? Are there numbers for this? I remember in the past going into a bank branch and seeing 4-6 teller stations staffed with tellers. When I go into a branch now I see maybe one or two. Are there more branches? Probably. I’m skeptical, though, that there are more tellers. Perhaps as a function of population growth, but I question whether that is true at base levels.
The problem is low IQ people. AI will take most of the jobs they can due. 90 and below are going to become jobless. If you can’t due customer service and can’t interact well with people and are dumb, good luck in finding employment. Everyone else will be fine at lest until my kids are dead. Job training and education is not going to cut it. They can’t increase IQ. Right now 83 and below really can’t find jobs in the current market in most locations. 90 might be a bit high of a cut off and returns from AI will decrease the more complex and low volume the task. However not beimg able to find a job will slowly go up based primary in IQ and it will then flatline.
When ever I see a teller at my bank there isnt a problem doing that – they normally have 2-4 on duty, it only takes a few minutes to process the short line of people who cannot be serviced by the ATM. In the past year – I have only been at a teller maybe 3 times… Most of my banking is done online, I rarely even visit an ATM.
There’s an interesting book published in 1836 about the exponential advances in technology then taking place and their impact thereof on human society. The author believed that the displacement of human labor by technology was in its very early stages (as people now say about robotics and artificial intelligence), and saw little limit to the process. He was concerned with how this will affect–indeed, had already affected–the relationship between the sexes and of parents and children, as well as the ability of ordinary people to earn a decent living.
It is very interesting and worthwhile to read his thoughts in the light of our current automation debates. I reviewed it here: Technology, Work, and Society–the Age of Transition.
You are guilty of badthink.
I can’t see how that assessment is obviously wrong. Perhaps the process has taken longer than he expected and will take longer still. Even if true and truly worrisome, though, I don’t think banning advancement and technology is the solution. What I worry about is that eventually the shrinking puddle evaporates – then what? What is a conservative approach to the scarcity of scarcity?
I was so busy think about how the effects of his premise where wrong … That I didnt consider his premise…
No, Technology does not create more jobs than if displaces. If it did it would not be a labor saving device and thus would not be successful in the marketplace. In order for technology to be successful it must extend the effectiveness of human labor.
What good would it be to have a robot chef, replace a kitchen staff of 5 (15 people counting shifts) if that robot needs technical support of 8 people?
Paralegals are, I think, at greatest risk of being replaced. I can see the day where lawyers simply scan the client brief into a computer, and the computer generates possible legal strategies and precedents for each one.
— The American dictionary in spell check is getting to me! Its Labour! Its Colour! — had to let that out, whilst on the topic of robots.
Peter Gaskell (author of the book I cited) didn’t think banning advanced technology was a solution, nor did he think reducing hours of labor would help since that would merely increase the incentives to invent and install labor-saving machinery. He also thought preposterous the idea that “the expansion of trade” would solve the unemployment problem. He was correct in this point if you focus only on the industry with which he was most concerned (the textile trades), but he did not foresee the creation of vast new industries such as horseless carriages, nor did he really seem to fully appreciate the beneficent feedback loop that at least sometimes exists between automation and worker well-being, as with the auto assembly line which enabled the $5 day…and, later, a reduction in working hours.
He also did not foresee the Victorian reaction against the drunkenness and extreme promiscuity with which he was so concerned.
This. This is what concerns me as well. I do think today’s technology and tomorrow’s technology hold the potential for very different results than yesterday’s technology did. Whether that potential is ever realized remains to be seen, but I think it’s a very real possibility.
Related and interesting: The Day the Horse Lost its Job
The Victorian reaction is running out of steam
Just because technological growth has always led to improved material welfare for all and more and higher paying employment, doesn’t mean it always will, but since luddites and Malthusians have always been wrong about everything, it’s probably a good idea not to bet against technological improvement. The problem is always adjustment and that is more difficult with intrusive government, barriers to entry created by organized interests colluding with governments at all levels, and over regulation of just about everything just by habit and inertia. Behind our luddite activists one can always find an entrenched threatened old technology or some business trying to avoid competition.
I’m not trying to protect anyone or avoid anything. Just asking questions. Then again I’m no activist either. It’s just fascinating to me, that we are reasonably close to scarcity of scarcity, and that there are no satisfying answers to that.
If there aren’t enough spots on the farm or the factory anymore then where do people go? I’m not talking about switching from one technology to another or one industry to a different industry. Those are lateral moves. I’m talking category not flavor. Where do people go when they can’t get into the knowledge industry? Are service jobs sufficient to absorb that? Can service generate a comparable standard of living for so many people? Is service itself safe from automation?
Not to mention foreign pressure. Chinese, Korean, Japanese, Indian people can likely do the job just as good for less cost. Including the knowledge jobs.
Yeah, he is. Aside from Brian’s elitist comment, maybe we should look at population growth. Smart, average or below average, there are too many of us. No, I’m not advocating abortion. Where are the big families coming from? South America, Muslim countries? Chain migration doesn’t help the available job situation. Europe, with it’s declining population, is inundated with refugees. They were supposed to be doing the jobs dead Europeans wouldn’t do anymore.
Lawns aren’t going to cut themselves, but you don’t need 6 illegal immigrants to do it either. House cleaning, etc., the list goes on. And I have no plans on buying an expensive robot to clean the place. Besides, they miss the nooks and crannies.
In tribal societies when the water and food supply are scarce, they find ways to cut down on reproduction. Well, why not include population as a factor in the equations the AI thinkers are trying to develop?
Europe, with
it’sits declining population, is inundated withrefugeescolonists.Fixed it for you. Sorry about the reflex pedantry in the first one, I can’t help myself.
I agree, Attitude can overcome aptitude any day of the week and 5 times on Sunday.
Of course those are good questions but we don’t know the answers because we can’t know from where future change will come and how people will spend their time or what they will choose to consume, nor how governments and interests will warp it all through capture. All we know is that, if there is freedom under good laws, people work these things out. It’s Darwinian, or Hayekian, organic and nobody is in charge and if we make the mistake of thinking it needs to be managed by governments or industries, we’ll face lack of adjustment and fail. If there is so much abundance that we worry about the scarcity of scarcity we don’t really have to worry about “comparable standard of living” Stuff will continue to get cheap. Where I see scarcity and prices keeping me from having more of what I want is in industries where productivity and technology has been relatively slow, housing, medicine, basic semi skilled services for my home. Our economy is characterized by ever increasing bottlenecks. These are among the reasons(there are many others) for warped income distribution. Listen to recent Econ Talk podcast on Bottlenecks and Bootleggers, really interesting.