Two years ago, the leading economic historian Joel Mokyr published an article together with various co-authors titled “The History of Technological Anxiety and the Future of Economic Growth: Is This Time Different?” in the prestigious Journal of Economic Perspectives describing the three most prominent forms of anxiety over technology. The most common concern is that technological progress will cause widespread substitution of machines for labor, which in turn could lead to technological unemployment and a further increase in inequality in the short run, even if the long-run effects are beneficial. Second, there has been anxiety over the moral implications of technological process for human welfare. In the case of the Industrial Revolution, the worry was about the dehumanizing effects of work, particularly the routinized nature of factory labor. In modern times, the elimination of work itself could be the source of dehumanization. The third concern cuts in the opposite direction, suggesting that the epoch of major technological progress is behind us. Pessimists such as U.S. growth theorist Robert Gordon have argued that the greatest worry should be economic and productivity growth that will be too slow, because of, insufficient technological progress in the face of “headwinds” facing western economies. These headwinds include among slow productivity and population growth, also rising inequality, the interaction between globalisation and information technology, poor education, the consequences of environmental regulations and taxes and the overhang of consumer and government debt.
Labor-saving technology and social unrest
Historically, new labor-saving technology could be very disruptive in economic, social and political terms. For example, less than 200 years ago, labor-saving technology played a key role in one of the most dramatic cases of labor unrest in recent history – the Swing riots in England during the 1830s.
Between the summer of 1830 and the summer of 1832, riots swept through the English countryside. Over no more than two years, 2,000 riots broke out – by far the largest case of popular unrest in England since 1700. During the riots, rural laborers burned down farmhouses, expelled overseers of the poor, and sent threatening letters to landlords and farmers signed by the imaginary ‘Captain Swing’. Most of all, workers attacked and destroyed threshing machines. Threshing machines were used to thresh grain, especially wheat. Until the end of the 1700s, threshing grain was done manually and it was the principal form of employment in the countryside during the winter months. Steam threshers could finish in a matter of weeks a task that would have normally kept workers busy for months.
To see if the adoption of labor-saving technology played an important role in fanning the flames of discontent, economists collected data on the adoption of threshing machines by examining farm advertisements in local English newspapers. These adverts listed in great detail all the relevant characteristics of the property, from the size of the plot to the farmhouse and any machinery that went with it – including threshing machines.
In places where no advertisements for farms with threshing machines were published, the probability of a riot was 13 %; in places with threshing machines it was 20 %, or about 1.5 times higher. Hence, new technology had a large effect on social instability. To improve the identification of the causal effect, the authors control for a number of confounding factors. It could for example be that areas with more newspapers carried more adverts for threshing machines, and also had better coverage of riots. However, proximity to a newspaper appears not to be a good predictor of firm advertisement. In addition, parish’s soil suitability for wheat is exploited to control for other factors that could have directly influenced unrest. For example, landlords could have feared unrest, and consequently introduced fewer machines. However, no other set of economic factors could simultaneously have driven technology adoption and unrest – it was the use of new machines to save labour in threshing wheat that directly led to more riots, more farms torched, farmers threatened, and capital equipment broken.
While the past may not be an accurate guide to future upheavals, evidence from the days of ‘Captain Swing’ serve as a reminder of how disruptive new, labour-saving technologies can be in economic, social, and political terms.
A sequence of three industrial revolutions is often described to understand the pace of growth and innovation since 1750. The first (IR1) with its main inventions between 1750 and 1830 created steam engines, cotton spinning, and railroads. The second (IR2) was the most important, with its three central inventions of electricity, the internal combustion engine, and running water with indoor plumbing between 1870 to 1900. The computerization, the subsequent invention of the internet and related developments in information technology and communications (ICT) are often referred to as the third wave (IR3) of technological innovation that already began in the 1960s.
Computerization and jobs
Economists have developed some understanding of how computerization – the most recent wave of disruptive technological change – altered job skills demand. Computers substituted for workers in performing a limited and well-defined set of cognitive and manual tasks that can be accomplished by following explicit rules (“routine tasks”) and complement workers in performing problem-solving and complex communications tasks (“non-routine tasks”). This caused significant changes in the composition of job tasks. Computerization is associated with reduced labor input of routine manual and routine cognitive tasks and increased labor input on non-routine cognitive tasks. Hence, labor (education) demand shifted to favouring college-educated labor during the 1970 and 1998 in the United States. Coincided by the precipitous real price decline in computer technology, industries and occupations that are initially intensive in labor input of routine tasks make relatively larger investments in computer capital. These industries reduce labor input of routine tasks, for which computer capital substitutes, and increase demand for non-routine task input, which computer capital complements. In net, these forces raise relative demand for highly educated workers, who hold comparative advantage in non-routine versus routine tasks.
Robots and jobs
Plenty of media articles, commentators and research speculate on what might happen when the robots arrive. Robots and other computer-assisted technologies take over tasks previously performed by labor raising concern about the future of jobs and wages.
Industrial robots are defined by the The International Federation of Robotics (IFR) as “automatically controlled, reprogrammable, and multipurpose machines”. Industrial robots are autonomous machines that can be programmed to perform several manual tasks such as welding, painting, assembling, handling materials, or packaging. The IFR estimates that there are currently between 1.5 and 7.75 million industrial robots in operation in the United States.
Estimates range from around 10 % to 50 % of all jobs being susceptible to automation in the next 20 years. However, many workers will specialize in tasks that cannot be automated easily. There is no guarantee that firms will replace workers with robots. Instead, it will also depend on the costs of automation. Even if an industry introduces robots to do specific jobs, productivity improvements may create new jobs in the firm, or other occupations might be able to expand.
Recent empirical evidence from the U.S. shows that industrial robots reduced employment and wages already between 1990 and 2007. The estimates suggest that an extra robot per 1,000 workers reduces the employment to population ratio by 0.18-0.34 percentage points and wages by 0.25-0.5 %. In total, the number of jobs lost due to robots adds up to between 360,000 and 670.000 jobs in the author’s estimates. The employment effect is strongest for routine manual, blue collar, assembly and related occupations and for workers with less than college education. Additionally, there are only small offsetting employment increases in other industries and occupations.
According to data from the IFR, the annual global supply for industrial robots increased from 81,000 in 2003 to 254,000 in 2015 (Figure 1). From 2013-15 the annual supply of robots rose on average by 17.0 %.
For example, the Boston Consulting Group (BCG) estimated that in an ‘aggressive scenario’ the number of robots could quadruple until 2025. In the above estimated model, this would imply a 0.95-1.76 percentage points lower employment to population ratio. Even under the most aggressive scenario, this would be a small fraction of employment in the U.S. economy being affected by robots. Acemoglu and Restrepo (2017) conclude that “there is nothing here to support the view that new technologies will make most jobs disappear and humans largely redundant.”