Will new technology create or destroy jobs in the future?
Fear of automation and technology is running high. According to Pew Research[1], 72% of Americans are worried about a future where robots and computers are capable of performing many human jobs. 75% anticipate that the economy will not create many new, better-paying jobs for those human workers who lose their jobs to machines. Multiple studies showed a similar picture in other Western economies.
Such wide-spread fears about the future of work are not good for individuals, as they increase the level of stress and replace optimism with a pessimistic worldview. These fears are also not good for the societies. The society in which a majority fear the future is not a positive and optimistic society, which can innovate, grow and adapt to new realities. It is even worse if these fears end up being irrational and unjustified. And many researchers seem to think that these fears are indeed irrational.
After the shocking findings that 47% of jobs in the United States are at high risk of being automated[2], many other studies looked from various perspectives and concluded that the figure is much smaller — perhaps somewhere around 15%. For example, a report[3] by the Organisation for Economic Cooperation and Development (OECD) estimates that only 14% of jobs are at risk of automation.
Moreover, this even does not try to estimate how many totally new sectors and professions will emerge, creating new jobs. Some economists argue that in contrast to our irrational fear of technology, history shows that technology has ended up creating even more jobs than it destroyed. So, how does new technology and automation impact jobs?
The most obvious effects of new tech that we tend to think about is either to destroy jobs or to create totally new ones. But, as we will see, the impact of technology and automation is more complex than that. Automation competes for the existing jobs, destroys some, but then creates the offsetting effect. There are 5 different ways in which new tech and automation affects jobs.
1. Technology destroys jobs: Yes, in some cases automation and technology reduced the demand for certain jobs. Think of agriculture. Today only around 2–3% of population in developed countries is employed in agriculture, much less than before. In 1900, 41 percent of the US workforce was employed in agriculture; by 2000, that share had fallen to 2 percent.
2. Technology creates totally new jobs and professions: Fifty years ago, our parents could not have imagines that their kids will be software engineers or App developers, or social media strategists.
3. Technology often increases employment in the same sector, but the jobs are redefined: In the health care sector, for example, technology and automation have led to dramatic increase in demand and in the numbers of employed in this sector. But the jobs are often redefined. In the health sector we saw the proliferation of specialised doctors (e.g. endocrinologists, neurosurgeons) or specialists able to conduct technology-based medical tests (e.g. MRI and others).
4. Technology in one sector sometimes creates jobs in other sectors: Think of times when passenger cars displaced equestrian travel and the myriad occupations that supported it in the 1920s. Jobs were created in car manufacturing. Many jobs were eliminated. But in return several new sectors have emerged to serve the increasing numbers of the “motoring public” — roadside motel, gas stations and fast food industries rose up.
5. Technology sometimes has indirect effect on jobs: The advancement in technology in some sectors like agriculture, freed part of our income from buying food (in the past, a larger share of our incomes went on buying food) to buy other things. It also contributed to raising overall incomes. Rising income and a larger share of income available for spending on something else rather than just essentials spurred demand for activities that have nothing to do with technology or automation. We saw massive growth in sectors like the production of restaurant meals, cleaning services, haircare, and personal fitness. All the new jobs in these sectors became possible due to the technology impact on other sectors, like agriculture.
As we can see, the effects of new technology and automation on jobs is not as linear and simple as we might tend to think — it does not just destroy jobs or create new professions. Its impact is much more subtle and diverse.
It is perhaps this that makes it difficult for people to intuitively grasp the effect of new technology on jobs, creating unnecessary and irrational fears.
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And here are several stories of how automation worked in a subtler way, ending up creating more jobs.
Story of ATMs
One interesting story shows surprising complementarities between technology and number of jobs in banking[4]. Automated teller machines (ATMs) were introduced in the 1970s and were expected to spell doom for people employed as bank tellers by taking over their jobs. But US bank teller employment actually rose modestly from 500,000 to approximately 550,000 over the 30-year period from 1980 to 2010.
With the growth of ATMs, what are all these tellers doing? First, introduction of ATMs reduced the cost of running a bank branch, allowing banks to open more branches in response to customer demand. The number of urban bank branches rose by 43% over the same period, so the total number of employees increased. Second, as the routine cash-handling tasks of bank tellers were reduced, technology also enabled a broader range of bank personnel to become involved in “relationship banking.” Increasingly, banks recognized the value of tellers enabled by technology, not primarily as checkout clerks, but as salespersons, forging relationships with customers and introducing them to additional bank services like credit cards, loans, and investment products.
So, rather than destroying jobs, ATMs changed bank employees’ work mix, away from routine tasks and towards things like sales and customer service that machines could not do.
Story of legal professionals and Artificial Intelligence
So far, the same seems to be true of fields where AI is being deployed. For example, the introduction of software capable of analysing large volumes of legal documents might have been expected to reduce the number of legal clerks and paralegals, who act as human search engines during the “discovery” phase of a case; in fact, automation has reduced the cost of discovery and increased demand for it. “Judges are more willing to allow discovery now, because it’s cheaper and easier,” says Mr Bessen. The number of legal clerks in America increased by 1.1% a year between 2000 and 2013.
[1][1] http://www.pewresearch.org/fact-tank/2017/10/04/6-key-findings-on-how-americans-see-the-rise-of-automation/
[2] Frey, C. B., & Osborne, M. (2013). The future of employment. How susceptible are jobs to computerisation.
[3] https://www.oecd-ilibrary.org/docserver/2e2f4eea-en.pdf?expires=1534152309&id=id&accname=guest&checksum=A53DA6D5E2C6618F26920F351064F0BE
[4] How Computer Automation Affects Occupations: Technology, jobs, and skills; James Bessen, Boston University School of Law, 2015
