April 19, 2015
The NYT gave us yet another account of how the machines are taking our jobs. This one carries the warning that they are taking the jobs of highly educated workers as well, not just less-educated workers. This story apparently carries lot of appeal among elite types (i.e. people who write for the NYT) even if it has little basis in reality.
We have a very good way to measure the extent to which machines are taking our jobs. It’s called “productivity growth.” It means the extent to which we can produce more output with the same amount of human labor. If the machines are taking our jobs, productivity growth should be very fast.
It isn’t. Productivity growth was very fast in the years from 1947-73. It grew at a pace of roughly 3.0 percent annually. This was a period of strong wage growth and low unemployment. It then fell to around 1.5 percent annually from 1973-1995. There was then a pick-up to close to 3.0 percent annually in the years from 1995 to 2005. (For some technical reasons, like a faster pace of depreciation in the more recent period, the 1947-73 productivity growth was much stronger.) Since 2005 productivity growth has fallen to an average rate of about 1.5 percent. In the last two years it has been under 1.0 percent.
While it is likely that the weak productivity growth is at least partly due to the weak growth of the economy, it is clear that rapid productivity growth is not the cause of weak labor demand. In other words, the machines are only taking our jobs in the NYT, this is not a problem in the economy.
This point matters because if machines our taking our jobs then the problem of high unemployment and stagnant wage growth is a technology story. If the story is not machines then it implies the problem is bad economic policy. For example, bad macroeconomic policy has limited demand, trade policy has been designed to put downward pressure on the wages of middle income workers while protecting highly educated professionals, and the government subsidizes the Wall Street boys and girls with bailouts and tax favors. The evidence supports the policy view but the NYT and other major news outlets continue to promote the technology story anyhow.
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