Rise of the Robots: Technology and the Threat of a Jobless Future

by Martin Ford

Beyond the potentially devastating impact of long-term unemployment and underemployment on individual lives and on the fabric of society, there will also be a significant economic price. The virtuous feedback loop between productivity, rising wages, and increasing consumer spending will collapse. That positive feedback effect is already seriously diminished: we face soaring inequality not just in income but also in consumption. The top 5 percent of households are currently responsible for nearly 40 percent of spending, and that trend toward increased concentration at the top seems almost certain to continue. Jobs remain the primary mechanism by which purchasing power gets into the hands of consumers. If that mechanism continues to erode, we will face the prospect of having too few viable consumers to continue driving economic growth in our mass-market economy.

AI and income

Three years later, a dystopian future much like the one Wiener had imagined was brought to life in the pages of Kurt Vonnegut’s first novel. Player Piano described an automated economy in which industrial machines managed by a tiny technical elite did virtually all the work, while the vast majority of the population faced a meaningless existence and a hopeless future. Vonnegut, who went on to achieve legendary status as an author, continued to believe in the relevance of his 1952 novel throughout his life, writing decades later that it was becoming “more timely with each passing day.”6

The introduction of new technologies did drive substantial increases in productivity, but the lion’s share of that growth was captured by workers in the form of higher wages.

Extended unemployment is a debilitating problem. Job skills erode over time; the risk that workers will become discouraged increases, and many employers seem to actively discriminate against the long-term unemployed, often refusing even to consider their résumés. Indeed, a field experiment conducted by Rand Ghayad, a PhD candidate in economics at Northeastern University, showed that a recently unemployed applicant with no industry experience was actually more likely to be called in for a job interview than someone with directly applicable experience who had been out of work for more than six months.34 A separate report by the Urban Institute found that the long-term unemployed are not appreciably different from other workers, suggesting that becoming one of the long-term unemployed—and suffering the stigma that attaches to that category—may largely be a matter of bad luck.35 If you happen to lose your job at an especially unfavorable time and then fail to find a new position before the dreaded six-month mark (a real possibility if the economy is in free fall), your prospects diminish dramatically from that point on—regardless of how qualified you may be.

Long term unemployment discrimination...

Surveys have shown that most Americans vastly underestimate the existing extent of inequality, and when asked to select an “ideal” national distribution of income, they make a choice that, in the real world, exists only in Scandinavian social democracies.

A further new problem is that the jobs being created during economic recoveries are generally worse than those destroyed by recessions. In a 2012 study, economists Nir Jaimovich and Henry E. Siu analyzed data from recent US recessions and found that the jobs mostly likely to permanently disappear are the good middle-class jobs, while the jobs that tend to get created during recoveries are largely concentrated in low-wage sectors like retail, hospitality, and food preparation and, to a lesser extent, in high-skill professions that require extensive training.

Occupational polarization has resulted in an hourglass-shaped job market where workers who are unable to land one of the desirable jobs at the top end up at the bottom.

In a 2010 paper, Autor identifies four specific mid-range occupational categories that have been especially hard-hit as polarization has unfolded: sales, office/administrative, production/craft/repair, and operators/fabricators/laborers.

In their more recent paper showing the relationship between polarization and jobless recoveries, Jaimovich and Siu point out that fully 92 percent of the job losses in mid-range occupations have occurred within a year of a recession.

Chrystia Freeland of Reuters puts it especially aptly, writing that “the middle-class frog isn’t being gradually boiled; it is being periodically grilled at a very high heat.”

We are making more stuff, but doing so with fewer and fewer workers.

Since the financial sector is, in effect, imposing a kind of tax on the rest of the economy and then reallocating the proceeds to the top of the income distribution, it’s reasonable to conclude that it has played a role in a number of the trends we’ve looked at.

Impact of financialization

The precipitous decline in the power of organized labor is one of the most visible developments associated with the rightward drift that has characterized American economic policy over the past three decades. In their 2010 book Winner Take All Politics, political scientists Jacob S. Hacker and Paul Pierson make a compelling case for politics as the primary driver of inequality in the United States. Hacker and Pierson point to 1978 as the pivotal year when the American political landscape began to shift under a sustained and organized assault from conservative business interests. In the decades that followed, industries were deregulated, top marginal tax rates on the wealthy and on corporations were cut to historic lows, and workplaces were made increasingly inhospitable to union organization. Much of this was driven not by electoral politics but, rather, by continuous lobbying on the part of business interests. As the power of organized labor withered, and as the number of lobbyists in Washington exploded, the day-to-day political warfare in the capital became increasingly asymmetric.

To some extent, the question here is one of categorization: if a nation fails to implement policies designed to mitigate the impact of structural changes brought on by advancing technology, should we label that as a problem caused by technology, or politics?

To my mind, the evidence I’ve presented here demonstrates that information technology has played a significant—though not necessarily dominant—role over the past few decades.

Among the forces poised to shape the future, information technology stands alone in terms of its exponential progress.

Nonetheless, the idea that technology might someday truly transform the job market and ultimately demand fundamental changes to both our economic system and the social contract remains either completely unacknowledged or at the very fringes of public discourse.

It would be a mistake, however, to apply that same reasoning to the impact of advancing technology. Up until the moment the first aircraft achieved sustained powered flight at Kitty Hawk, North Carolina, it was an incontrovertible fact—supported by data stretching back to the beginning of time—that human beings, strapped into heavier-than-air contraptions, do not fly.

In a PBS television special that aired in 2012, inventor and futurist Ray Kurzweil was asked about the possibility of a “digital divide”—meaning that only a small percentage of the population will be able to thrive in the new information economy. Kurzweil dismissed the idea of such a divide and instead pointed to empowering technologies like mobile phones. Anybody with a smart phone, he said, “is carrying around billions of dollars of capability circa 20 or 30 years ago.”12 Left unsaid was how the average person is supposed to leverage that technology into a livable income.

Moore’s Law has come about, in part, because of university-led research funded by the National Science Foundation. The Semiconductor Industry Association, the industry’s political action committee, actively lobbies for increased federal research dollars. Today’s computer technology exists in some measure because millions of middle-class taxpayers supported federal funding for basic research in the decades following World War II.

Elance

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As an IBM document describing the Watson technology points out: “We have noses that run, and feet that smell. How can a slim chance and a fat chance be the same, but a wise man and a wise guy are opposites? How can a house burn up as it burns down? Why do we fill in a form by filling it out?”15 A Jeopardy! computer would have to successfully navigate routine language ambiguities of that type while also exhibiting a level of general understanding far beyond what you’d typically find in computer algorithms designed to delve into mountains of text and retrieve relevant answers. As an example, consider the clue “Sink it & you’ve scratched.” That clue was presented in a show televised in July 2000 and appeared on the top row of the game board—meaning that it was considered to be very easy. Try searching for that phrase using Google, and you’ll get page after page of links to web pages about removing scratches from stainless-steel kitchen sinks. (That’s assuming you exclude the exact match on a website about past Jeopardy! matches.) The correct response—“What is the cue ball?”—completely eludes Google’s keyword-based search algorithm.

In 2011, the Washington Post’s Michael Rosenwald reported that a colossal, billion-dollar data center built by Apple, Inc., in the town of Maiden, North Carolina, had created only fifty full-time positions.

Koza has isolated at least seventy-six cases where genetic algorithms have produced designs that are competitive with the work of human engineers and scientists in a variety of fields, including electric circuit design, mechanical systems, optics, software repair, and civil engineering.

Harvard professor N. Gregory Mankiw, for example, while serving as George W. Bush’s chairman of the White House Council of Economic Advisers, said in 2004 that offshoring is “the latest manifestation of the gains from trade that economists have talked about at least since Adam Smith.”47 Abundant evidence argues to the contrary. Trade in tangible goods creates a great many peripheral jobs in areas like shipping, distribution, and retail. There are also natural forces that tend to mitigate the impact of globalization to some degree; for example, a company that chooses to move a factory to China incurs both shipping costs and a significant delay before completed products reach consumer markets. Electronic offshoring, in contrast, is almost completely frictionless and subject to none of these penalties. Jobs are moved to low-wage locations instantly and at minimal cost. If peripheral jobs are created, it is much more likely to be in the country where the workers reside.

I find it somewhat ironic that many conservatives in the United States are adamant about securing the border against immigrants who will likely take jobs that few Americans want, while at the same time expressing little concern that the virtual border is left completely open to higher-skill workers who take jobs that Americans definitely do want.

far the most efficient portion of our health care system. As Brill writes, “Unless you are protected by Medicare, the health care market is not a market at all. It’s a crapshoot.”

A single-payer system is, in practice, always assumed to be run by the government, but in theory this does not have to be the case. Another approach might be to merge all private insurance companies into a single national corporation, which would then be heavily regulated. The model would be the original AT&T before it was broken up in the 1980s. The central idea here is that health care is in many ways akin to the telecommunications system: it is, in essence, a utility. Like water and sanitation systems or the nation’s electrical infrastructure, the health care system does not stand alone—it is a systemic industry whose efficient operation is critical to both the economy and society. In many cases, the provision of a utility service leads to natural monopoly scenarios. In other words, it is most efficient if only a single firm operates in the market.

All-payer systems vary in the specifics of their implementation; the rates may be set through collective negotiation between providers and payers, or they might be established by a regulating commission after an analysis of actual costs at particular hospitals.

seems to me that a much simpler approach that might produce immediate savings would be to set an all-payer ceiling rather than a specific price. For instance, suppose the ceiling were set at the Medicare rate plus 50 percent. In one example from Brill’s article, a blood test that Medicare says is worth $14 might then be priced at any amount up to $21—but it could never reach anything like $200.

The three years between 2006 and 2009 saw a 68 percent increase in the rate of “prescription abandonment” in the United States.34 This happens when patients request that a prescription be filled, but then walk away when they find out the cost.

In 1992, the top 5 percent of US households in terms of income were responsible for about 27 percent of total consumer spending. By 2012, that percentage had risen to 38 percent. Over the same two decades, the share of spending attributed to the bottom 80 percent of American consumers fell from about 47 percent to 39 percent.

The analysts argued that the United States was evolving into a “plutonomy”—a top-heavy economic system where growth is driven primarily by a tiny, prosperous elite who consume an ever larger fraction of everything the economy produces.

Between 1989 and 2007 the ratio of debt to income for this vast majority roughly doubled from just over 80 percent to a peak of nearly 160 percent. Among the wealthiest 5 percent, the same ratio remained relatively constant at around 60 percent.

My key point here is that professional economists—all of whom have access to the same objective data—are completely unable to agree on what I would characterize as an extraordinarily fundamental economic question: Is a demand shortfall holding back economic growth, and if so, is income inequality an important contributor to the problem? I suspect that the lack of consensus on this question offers a pretty good preview of what we can expect from the economics profession as the technological disruption I’ve been describing in these pages unfolds. While it’s certainly possible that two “scientists” may look at the same data and interpret it differently, in the field of economics the opinions all too often break cleanly along predefined political lines. Knowing the ideological predisposition of a particular economist is often a better predictor of what that individual is likely to say than anything contained in the data under examination. In other words, if you’re waiting for the economists to deliver some sort of definitive verdict on the impact that advancing technology is having on the economy, you may have a very long wait.

The thing that sets successful economies apart is the duration of the growth spells. The economists found that higher inequality was strongly correlated with shorter periods of economic growth. Indeed, a 10-percentage-point decrease in inequality was associated with growth spells that lasted 50 percent longer. Writing on the IMF’s blog, the economists warned that extreme income inequality in the United States has clear implications for the country’s future growth prospects: “Some dismiss inequality and focus instead on overall growth—arguing, in effect, that a rising tide lifts all boats.” However, “when a handful of yachts become ocean liners while the rest

remain lowly canoes, something is seriously amiss.”22

If you know that prices will be lower

in the future, why buy now? Consumers hold back, waiting for even lower prices, and that in turn forces even more price cuts as well as reduced production of goods and services. Another problem is that, in practice, it’s often difficult for employers to actually lower wages. Instead, they are more likely to cut workers, so deflation is typically associated with soaring unemployment, and again, that eventually leads to a lot of consumers with no income at all.

The 2013 movie Elysium, in which the plutocrats migrate to an Eden-like artificial world in Earth orbit, does a pretty good job of bringing this dystopian vision of the future to life. Even some economists have started to worry about this scenario. Noah Smith, a popular economics blogger, warned in a 2014 post of a possible future in which “a teeming, ragged mass of lumpen humanity teeters on the edge of starvation” outside the gates that protect the elite, and that “unlike the tyrannies of Stalin and Mao, robot-enforced tyranny will be robust to shifts in popular opinion. The rabble may think whatever they please, but the Robot Lords will have the guns. Forever.”25 Even coming from a practitioner of the dismal science, that’s pretty bleak.*

The lack of a social safety net for older citizens is probably one important driver of China’s astonishingly high savings rate, which has been estimated to be as much as 40 percent. The high cost of real estate relative to incomes is another important factor. Many workers routinely save more than half their incomes in the hope of someday putting together the down payment for a home.

All the technology I’ve described thus far—robots that move boxes or make hamburgers, algorithms that create music, write reports, or trade on Wall Street—employ what is categorized as specialized or “narrow” artificial intelligence. Even IBM’s Watson, perhaps the most impressive demonstration of machine intelligence to date, doesn’t come close to anything that might reasonably be compared to general, human-like intelligence. Indeed, outside the realm of science fiction, all functional artificial intelligence technology is, in fact, narrow AI.

The reality is that awarding more college degrees does not increase the fraction of the workforce engaged in the professional, technical, and managerial jobs that most graduates would like to land. Instead, the result very often is credential inflation; many occupations that once required only a high school diploma are now open only to those with a four-year college degree, the master’s becomes the new bachelor’s, and degrees from nonelite schools are devalued. We are running up against a fundamental limit both in terms of the capabilities of the people being herded into colleges and the number of high-skill jobs that will be available for them if they manage to graduate. The problem is that the skills ladder is not really a ladder at all: it is a pyramid, and there is only so much room at the top.

The conservative argument for a basic income centers on the fact that it provides a safety net coupled with individual freedom of choice. Rather than having government intrude into personal economic decisions, or get into the business of directly providing products and services, the idea is to give everyone the means to go out and participate in the market. It is fundamentally a market-oriented approach to providing a minimal safety net, and its implementation would make other less efficient mechanisms—the minimum wage, food stamps, welfare, and housing assistance—unnecessary.

A conservation argument for a UBI