Wednesday, June 22, 2011

Technology Not The Correct Explanation For High U.S. Unemployment

When trying to explain the weak employment numbers in the United States, Obama argued that technology was at fault, using as an example the fact that we usually withdraw cash from ATM's rather than from bank tellers these days.

The "technological" excuse for his poor performance on jobs is quite pathetic given how other countries where technology has also advanced has not seen this drop in employment and given how in the past in the United States, technological progress has not been associated with falling employment.

Now, it clearly is true that new technology destroys some jobs. ATM's does reduce the number of bank tellers, just like industrial robots reduce the number of workers in factories.

However, as long as there are unsatisfied wants (and we are a very long way from achieving the utopia where this no longer exists), new jobs will arise. Some in creating new technology. Others in new jobs where a shortage of workers previously prevented the businesses from being created.

Thus, while in the transition process some temporary unemployment can be created by technological advances, it is not something that will in the foreseeable future create any kind of long term unemployment problem. And it is not the explanation for why the United States unlike many other nations at similar technological levels experience high unemployment. 


Blogger Marcus said...

Well, one could perhaps argue that new technical solutions tend to replace low qualified labor more than it replaces highly qualified labor. So that the temporarily unemployed are people of a skill level that will become even less in demand as more and more technical solutions are diffused. If those newly unemployed are unable, for various reasons, to perform the more qualified (old or new) jobs that are demanded after the technological change, I suppose they risk being permanently unemployed.

This effect is, of course, highly dependent on the cost of labor of these workers. But the lowest cost of labor is, for various social and economic reasons, probably not as flexible or easy to decrease via (new or removed) formal regulation as an economist may at first think. At least not without causing major changes in the social welfare system most citizens in developed countries seem to have a preference for.

I believe that Tyler Cowens idea about the emerging class of zero marginal productivity workers is quite in line with what I'm trying to say. If that helps?

10:48 AM  
Blogger stefankarlsson said...

Marcus, there's plenty of tasks around for people with low skills. That's why low skilled workers in other countries have low unemployment.

10:20 PM  
Blogger Brandon Adams said...

Employers are known to avoid layoffs in order to keep from damaging the morale of all their workers.

However, a lot of employers were forced to layoff their workers in 2008-2009 because there just wasn't enough demand to keep the company afloat and employ those workers.

It's possible that as demand returned, employers realized the didn't need to rehire as many workers as they'd laid off, thanks to advances in automation that may have already been in place prior to the layoffs.

These workers may persist in competing for the now smaller pool of jobs. They know the jobs exist and they have the experience to perform them, but due to automation labor supply has become far greater than labor demand, so they go unemployed until they either get their job back or resign to the idea of a career change.

I don't know if that's actually what's going on, but I also don't know if there's evidence to dismiss the idea.

5:32 PM  
Blogger McSpin said...

You wrote: "When trying to explain the weak employment numbers in the United States, Obama argued that technology was at fault, using as an example the fact that we usually withdraw cash from ATM's rather than from bank tellers these days."

Where, exactly, in the 66 words the president said about efficiency, technology and unemployment is this "argument" you speak of? Frankly, I think you've misrepresented what is on the surface a rather generic comment as some kind of a belief of policy he does not support and then devoted an entire blog post to arguing against it. If anyone is arguing here, it is you. And you're doing everyone a disservice to claim otherwise.

12:25 AM  

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