Real-World Numbers on Robots and Unemployment

Robot workers replace humans in the officeI have read or heard all the happy-slappy arguments about how robots and AI will create lots of new jobs. My readers frequently let me know they think I’m a pessimist or a Luddite.

Despite my concerns, I recognize the mandate for businesses to stay competitive regardless of the impact on employees. So I have been waiting for some hard numbers to confirm one side of the argument or the other.

Robots and Productivity

The first numbers on robots and unemployment have come in and they are not pretty.

To begin with, Evan Horowitz tells us in his Boston Globe article, “Why aren’t robots boosting economic productivity?” that “Not only are they displacing workers and taking manufacturing jobs, somehow robots are failing to boost output or make the economy more productive.”

Mr. Horowitz quotes this recent study:

Robots and Jobs: Evidence from U.S. Labor Markets

Daron AcemogluPascual Restrepo

NBER Working Paper No. 23285
Issued in March 2017
NBER Program(s):   EFG   LS

Claire Cain Miller in the New York Times (“Evidence that robots are winning the race for American jobs“) says it “appears to be the first study to quantify large, direct, negative effects of robots.”

Robots replacing workers on the production lineThe report tells us that for every robot per thousand workers, up to six workers lost their jobs and wages fell by as much as three-fourths of a percent. The report calculates that between 1990 and 2007 this added up to between 360,000 and 670,000 jobs lost.


Economic Fact and Fiction

Last year Mr. Acemoglu and Mr. Restrepo published a paper with a totally different conclusion. Back then the two researchers predicted that increased automation would create new and better jobs for those displaced by automation. Eventually, they surmised, employment and wages would return to their previous levels.

This is now, however, and things don’t appear to be working out that way.

How did the researchers go from a sunny view of the future to a more dystopian one? Well, that first study was a “conceptual exercise”—fiction in other words—while the March study is based on real-world data.

The Wizard Speaks

Warren Buffett, the chairman and CEO of Berkshire Hathaway, was asked what he thought about AI at a recent shareholders meeting. Mr. Buffet proclaimed that it would be “enormously disruptive” but eventually it would make the economy more efficient.

There’s that “eventually” again.

“I would certainly think [AI] would result in significantly less employment in certain areas,” he said. “It would be a good thing that would require enormous transformation in how people relate to each other, what they expect of government, all kinds of things.”

Robots buy nothing: empty Walmart StoreYeah, about that. While we see the disruptive part happening now, the increased efficiencies seem to be eluding us and no one knows how far we are from “eventually.”

According to Ms. Cain in @NYT,

“The researchers said they were surprised to see very little employment increase in other occupations to offset the job losses in manufacturing. That increase could still happen, they said, but for now there are large numbers of people out of work, with no clear path forward — especially blue-collar men without college degrees.”

Research and the Real World

I think they were surprised because they are researchers. In other words, they don’t live in the real world where CEOs and senior management will throw whole departments, functions, divisions, manufacturing units, and product lines off the island if that helps the bottom line.

In the real world, whole towns and even counties die when the corporate jobs that underlay their economy went away. In rural areas, no other jobs leaped out to replace them.

It also means the researchers really think that middle-aged blue-collar manufacturing workers with a high-school degree can be retrained to write code and design high tech robotic devices. Or go to medical school to become doctors or formulate new pharmaceutical medications.


The Slow Kiosk

On Saturday I straggled out of the rain and into a Panera Bread in Boston for a quick lunch before the Back Bay tour I was scheduled to give for Boston By Foot. Inside, the two order takers directed those of us standing in line to use one of the brand-new ordering kiosks that had been installed very recently.

Panera Bread order kioskCurious, I went to the kiosk where I found ordering to be complex and time consuming. The woman behind me in line finished her order with a human employee faster than I could navigate the automated device. Only later did I realize the kiosk had never prompted me to select either chips, bread or an apple as the woman would have done. Score 1 for Panera’s bottom line and 0 for my lunch.

Brave New World of Robots

So we have launched our economy into a brave new world that will be either bright with opportunity and new jobs or dark with more unemployment and slower productivity. How will it turn out—eventually?

I agree with Harris Gruman, the Massachusetts political director for the Service Employees International Union. He said,

“If you automate everything, and displaced workers have no new source of income, who is going to buy the products?”

I put it more simply: Robots buy nothing.