IntroductionSince the dawn of the industrial age, a recurrent fear has been that technological change will spawn mass unemployment. Neoclassical economists predicted that this would not happen, because people would find other jobs, albeit possibly after a long period of painful adjustment. By and large, that prediction has proven to be correct.
Two hundred years of breathtaking innovation since the dawn of the industrial age have produced rising living standards for ordinary people in much of the world, with no sharply rising trend for unemployment. Yes, there have been many problems, notably bouts of staggering inequality and increasingly horrific wars. On balance, however, throughout much of the world, people live longer, work much fewer hours, and lead generally healthier lives.
But there is no denying that technological change nowadays has accelerated, potentially leading to deeper and more profound dislocations. In a much-cited 1983 article, the great economist Wassily Leontief worried that the pace of modern technological change is so rapid that many workers, unable to adjust, will simply become obsolete, like horses after the rise of the automobile. Are millions of workers headed for the glue factory?
As Asian wages rise, factory managers are already looking for opportunities to replace employees with robots, even in China. As the advent of cheap smartphones fuels a boom in Internet access, online purchases will eliminate a vast number of retail jobs. Back-of-the-envelope calculations suggest that, worldwide, technological change could easily lead to the loss of 5-10 million jobs each year. Fortunately, until now, market economies have proved stunningly flexible in absorbing the impact of these changes.
Of course, this time technological change could be different, and one should be careful in extrapolating the experience of the last two centuries to the next two. For one thing, mankind will be confronted with more complex economic and moral questions as technology accelerates. Still, even as technological change accelerates, nothing suggests a massive upward shift in unemployment over the next few decades.
Of course, some increase in unemployment as a result of more rapid technological change is certainly likely, especially in places like Europe, where a plethora of rigidities inhibit smooth adjustment. For now, however, the high unemployment of the past several years should be mainly attributed to the financial crisis, and should ultimately retreat toward historical benchmark levels.