An Oxford University study back in 2013 concluded that 47% of American jobs are at high risk of automation within two decades. A McKinsey Global Institute analysis came to the same conclusion according to an article in The Week back in September 2019.
Stories about the future are often scarier than what actually comes about. A recent book by Robert Shiller, Narrative Economics: How Stories Go Viral and Drive Major Economic Events, highlights how a trend can pick up momentum and take on an outsized, scary life. ‘Automation’ and ‘Robots’ are examples today. The fear is we are all going to lose our jobs and will need Andrew Yang’s Universal Basic Income of $1,000 a month just to survive.
But remember change is a constant and we have survived and adapted to change for centuries. The steam engine helped convert the economy from agrarian to urban. Electrification brought major leaps in manufacturing productivity. More recently computers and the internet have brought disruptions. Today the disruptors are Artificial Intelligence (AI) and Robots. The New York Times wrote back in 1979 that our anxiety “is fed by growing doubts about society’s ability to rein in the seemingly runaway forces of technology.” Sound familiar? We can find similar stories today.
I show below the history of Vermont’s median inflation-adjusted family income compiled by Art Woolf, a former Economics Professor at the University of Vermont and former publisher of The Vermont Economy Newsletter. Vermont is no hotbed of economic activity. It is small and old (only Maine has an older population), it’s liberal, has high taxes and is usually at the end of the economic pipeline. And yet median family income has steadily increased and the same I imagine goes for other parts of the country. I am not discounting the problems of stagnant wages for some, but most Americans have a better living standard today than they did 20, 30 or 40 years ago. And this is with all the technological disruptions.
But technological change will require a better trained workforce in the future. Many people will have to change jobs or careers. Amazon is in the midst of re-training one third of its U.S. workforce, spending $700 million over a number of years to prepare for advanced software and new types of work.
Our worst fears and greatest hopes never seem to come about. We end up somewhere in between. Jobs will be eliminated but history argues for optimism. We will transition. Warren Buffett pointed this out in a Time article in January 2018. If the U.S. population grows just 0.8% a year, which is slower than in the past, and if productivity increases just a little over 1%, again lower than in the past, then real GDP per capita will grow between 1 and 1½ %, which over 25 years bumps GDP per capita from $59,000 to $79,000.
Don’t get hysterical about the major changes we are facing. We have faced them before. If history is any guide, the effects of change will come slower than we fear and we will make the changes necessary to adapt. It won’t be seamless. There will be winners and losers but we will manage.