The Myth of Technological Unemployment

A blog about business and economics.
Jan. 15 2013 2:03 PM

The Myth of Technological Unemployment

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In 2012, a lot of firms employed a lot of new labor-saving technology in order to increase profits. That's true. But the same happened in 1992 and 1972 and 1952 and, for that matter, 1852. But whenever you have a prolonged labor market downturn, the salience of this fact increases and you start hearing more and more talk about how there isn't as much need for workers anymore because of mechanization. In the contemporary context, people often use the word robots in this context because mechanization is obviously a trend that's been going on for more than 200 years so robots makes it sound more plausible that something new has happened recently. 

But above I have a chart of real output in the United States over the past 10 years compared to aggregate hours worked by nonsupervisory workers over the past 10 years. Both are indexed to 2001 levels. What you can see is that productivity increases are real (i.e., the red line of output grows faster than the blue line of hours worked) but that there's tremendous co-variance between these series. The big rise and fall and rise again in output is caused by a big rise and fall and rise again in the amount of time people put on the job. Or alternatively, the big rise and fall and rise again in working time is caused by a big rise and fall and rise again in the amount of demand for goods and services.

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Machines are replacing workers, in other words, but they've been doing so since the cotton gin and the spinning jenny. Over the long run this leads to higher incomes and more leisure. But across short spans of time, the ups and downs in the level of employment and the number of hours available to people who want to earn more money is driven by the ups and downs of the business cycle.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.