Robots Do Not Destroy Employment, Politicians DoTags The EntrepreneurLabor and Wages
I’m not worried about artificial intelligence, I’m terrified of human stupidity.
The debate about technology and its role in society that we need to have is being used to deceive citizens and scare them about the future so they accept to submit to politicians who cannot nor will protect us from the challenges of robotization.
However, there are many studies that tell us that in 50 years the vast majority of work will be done by robots. What can we do?
We have lived the fallacies of dystopian estimates for decades.
I always explain to my students that, if we believed the fifty-year-forward studies of the past, it has been seventeen years since we have run out of water, oil, and jobs. Fifty-year estimates always suffer from the same mistakes. First, presentism. Take the current situation and exaggerate it. Second, sweeten the past. No, no past time was better. Third, always estimate an impossible and negative future by ignoring the evidence of human ingenuity and innovation.
The reality is that today, the world population has grown to 7.5 billion, and we have more work despite the technology revolution. Global unemployment is at historic lows, 5%, global poverty has fallen to unprecedented levels, from 80% in 1820 to 10% today. Infant mortality has been reduced to less than half, from 64.8 deaths per thousand births in 1990 to 30.5 in 2016.
We have plenty of natural resources, proven oil reserves have grown and we have more diversified sources of supply. All this has happened with -and thanks to- the greatest technological revolution ever seen.
More than half of the jobs that exist today were not even known twenty years ago. The empirical demonstration is that data from more than 140 years shows that technology creates much more employment than it destroys and that it is a lie that low-skilled jobs disappear forever. Others are created. A study by Ian Stewart, Debapratim De, and Alex Cole shows clearly that technology displaces the most boring, dangerous and hard jobs, that is, those that we do not want anyway, and creates many more jobs in service sectors, human knowledge, and interaction.
In fact, Deloitte studies, Ernst / Young, and others also foresee that we will need many more jobs in the future in support tasks and services adjacent to the new technology activities. What the prophets of doom always forget is that as long as the customer is human, the experience and interaction with other humans is not reduced. It increases.
The most robotized societies do not suffer more unemployment, they have much less. According to data from the OECD of 2016, South Korea, Singapore, Japan, and Germany have the highest rates of robotization of work functions (530, 400, 305 and 301 robots per 1,000 employees respectively) and unemployment is less than 3.9%. Meanwhile, countries that subsidize low-productivity sectors and place the State as a “protective” agent have higher unemployment rates. France, which has less than half the robots of South Korea or Singapore (127 per thousand employees), has almost a three times higher unemployment rate than highly robotized countries. Spain has less still, 60% fewer robots than the leaders, and five times higher unemployment rate. McKinsey estimates that almost half of the competitiveness gain of the next 50 years will be explained by digitization and automation. This means higher salaries in all sectors, even lower-skilled labor.
I am sure that, as in the past, those estimates will fall short, both in the improvement of productivity and quality of life and in the advance of creative robotization. It will create many more and better jobs. Even for the sectors with low qualification, because they move to services and support.
The most representative companies in this phenomenon are denominated under the union of their initials: FAANG (Facebook, Amazon, Apple, Netflix, and Google). The spectacular development of these companies has not reduced employment. Unemployment in the United States has been reduced to the lowest level since 1968 while the companies that were supposed to lose due to technological progress have been strengthened by having to compete.
In the world, unemployment has continued to decline despite the fact that these companies were growing to be 27% of the joint capitalization of the US S&P 500, with business models that have created services and jobs that did not exist only a few decades ago. These companies have created many more indirect jobs than they have “destroyed.”
The excuse of “what happens with less qualified jobs?” hides the fallacy of interventionism.
Protectionism, subsidies, and welfare assistance neither protect nor create those positions in obsolescent sectors. The way to adapt low-skilled workers to technology is with training, but real training, at work. Technology has created up to 40% more unskilled jobs in addition to those it destroys, as we have seen in California, Texas, or Illinois and in Asian countries.
A first positive impact on the use of digitalization is caused directly by these companies, which together employ more than 800,000 people worldwide, with a productivity level that is clearly superior to the companies in traditional sectors, and with better salaries.
Companies like Facebook and Google have more than 27,000 and 88,000 workers on their payroll, respectively, and pay more than 50% on top of the average salary of industrial sectors. Their business model is based mainly on advertising in digital media, a market that did not exist until a few years ago. Another 115,000 net creation of jobs came from new technologies in the US. Amazon, meanwhile, with a 44% share in the e-commerce market, is one of the main groups responsible for the creation of the more than 400,000 jobs generated by e-commerce companies in the United States, according to Michael Mandel. In addition, in the case of this company, the impact has to be extended to sectors close to electronic commerce, such as logistics, parcels, electronic payments, etc.
In Asia, a continent where robotization is a usual element in companies and production methods, they already know the positive effects of this phenomenon. According to the Asian Development Bank, the greater economic dynamism generated by robotization in 12 Asian developing economies between 2005 and 2015 has compensated for the destruction of employment derived from the implementation of automation processes and has created more additional employment. This transformation has led to the creation of 134 million jobs a year, a figure clearly higher than the 104 million jobs a year “transformed” by the substitution effect of labor due to automated processes. Between 43% and 57% of the new jobs created in India, Malaysia, and the Philippines during the last 10 years come from the technology sector. But the most important thing is that the increase in employment in services, tourism, hotels and adjacent sectors has doubled.
Never bet against human ingenuity. The greatest enemy of the prophets of the apocalypse is an engineer.