Automation Transforming the U.S. Economy

Measuring the impact of automation involves a consideration of both macroeconomic and microeconomic measures; however, the critical measure of how automation impacts a regional economy is what regions will gain and lose jobs with this massive economic change.

The American economy has benefitted from technological advances. In 1870, almost 50% of American employees worked in agriculture and the advent of a range of technological advances now has agriculture employing less than 2% of American workers and American food production exceeds domestic demand.[xxvii] The main economic benefit of introducing workplace technology is it increases productivity by decreasing the number of labor hours needed to create a unit of output.[xxviii] Labor productivity increases generally translate into increases in average wages, giving workers the opportunity to cut back on work hours and to afford more goods and services.[xxix] Economists also point to the positive impact automation has on the productivity of the economy. Increasing productivity of the American economy through the industrial revolution has led to wage growth for worker but recent years have seen a slow-down in worker productivity. In the last decade, productivity growth has slowed in 30 of the 31 advanced economies, slowing in the United States from an average annual growth rate of 2.5 % in the decade after 1995 to only 1.0 % growth in the decade after 2005.[xxx] This lower productivity rates are blamed for lower wage rates and standard of living.

Robots have had a positive economic impact on the manufacturing industry and developing countries in particular. According to a recent White House Report, a 2015 study of robots in 17 countries found that they added an estimated 0.4 % point on average to those countries’ annual GDP growth between 1993 and 2007, accounting for just over one-tenth of those countries’ overall GDP growth during that time.[xxxi] Some of that growth can be attributed to the automation through the use of robots and not human workers to increase productivity and reducing the overall workforce.

While few can dispute the overall macroeconomic gains created by automation, substantial questions exist related to who will be most impacted by the job loss created by automation and whether this will lead to further income inequality. The success of the American economy over the past century has been the stability of the American middle class who has prospered in large part in the transition from an agrarian economy to a manufacturing economy. As the U.S. economy transitions to a technology driven economy the middle class is at risk. According to a recent White House report, 83 % of jobs making less than $20 per hour would come under pressure from automation, as compared to 31 % of jobs making between $20 and $40 per hour and 4 % of jobs making above $40 per hour.[xxxii] A European economic study estimates that less-educated workers are more likely to be replaced by automation than highly-educated ones and 44 % of American workers with less than a high school degree hold jobs made up of highly-automatable tasks while 1 % of people with a bachelor’s degree or higher hold such a job.[xxxiii] Automation will continue to eliminate low skill jobs out of the U.S. economy. Economist may point to Joseph Schumpeter’s theory from Capitalism, Socialism and Democracy of creative destruction where innovation deconstructs long-standing arrangements and frees resources to be deployed elsewhere—thus creating economic growth. Of course, Schumpeter’s economic theories may not mean too much to the worker displaced by a machine.

 

[xxvii]Bureau of Labor Statistics, “Employment Projections: Employment by major industry sector,” December 2015 (http://www.bls.gov/emp/ep_table_201.htm).

[xxviii] Ibid.

[xxix] Ibid.

[xxx] “Artificial Intelligence, Automation and the Economy”, The White House, December 20, 2016.

[xxxi] Ibid.

[xxxii] Ibid.

[xxxiii] Ibid.

Categories: Automation, ED Planning