DRAFT-- What is the effect of advances in technology on worker benefits?

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DRAFT-- May 29, 2023  

QUESTION: It has been well documented and well publicized that advances in technology have the benefit to industry of lowering the total cost of labor per unit of output, and that at the same time it increases overall employment and wages paid out. What are historical examples of this being true? 

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The claim that advances in technology lower the total cost of labor per unit of output while simultaneously increasing overall employment and wages paid out is not a universally applicable pattern throughout history. While technology has undoubtedly brought significant benefits to various industries, the impact on employment and wages can vary depending on the specific circumstances and context. It is important to consider the complexities and nuances of economic dynamics when examining historical examples.

That being said, there have been instances where technological advancements have resulted in increased productivity, economic growth, and improved living standards for society as a whole. Here are a few examples:

1. Industrial Revolution: The Industrial Revolution, which began in the late 18th century, witnessed the mechanization of many manual labor-intensive processes. The introduction of steam power, machinery, and the factory system significantly increased productivity and lowered production costs. While some traditional jobs were displaced, new jobs were created in manufacturing, transportation, and related industries. Over time, the increased productivity led to higher wages and improved living conditions for many workers.
2. Agricultural Mechanization: The adoption of agricultural machinery, such as tractors, harvesters, and other modern farming equipment, has led to significant improvements in productivity in the agricultural sector. This increased efficiency has allowed farmers to produce more with fewer workers, leading to a shift of labor from agriculture to other sectors of the economy. While the total number of agricultural jobs declined, productivity gains contributed to overall economic growth and higher wages in non-agricultural sectors.
3. Information Technology Revolution: The rise of information technology and the digital age has had transformative effects on various industries. Technological advancements in computing power, telecommunications, and software development have increased productivity and created new job opportunities in sectors like software engineering, data analysis, and digital marketing. While some traditional jobs were automated or eliminated, the demand for skilled workers in technology-related fields has surged, resulting in higher wages for those with relevant skills.
4. Automation in Manufacturing: Although automation in manufacturing can lead to job displacements in certain areas, it has also driven productivity gains and cost reductions, making businesses more competitive. Lower production costs can enable companies to expand their operations, create new jobs in research and development, design, marketing, and other higher-skilled positions. Furthermore, as new industries and technologies emerge, additional employment opportunities can arise.

While these examples suggest a positive correlation between technology, productivity, and economic growth, it's important to note that the impact can vary across different industries, regions, and time periods. Technological advancements can disrupt certain sectors and lead to short-term job losses or wage stagnation for specific groups of workers. The overall effects depend on various factors, including the pace of technological change, the availability of complementary skills, the nature of labor markets, and policy responses to address potential disruptions and promote inclusive growth.

QUESTION: Right now labor costs in supermarkets are being slashed by eliminating 10 or 12 checkers and replacing them with self-checking equipment. Where are those checkers across the country going? Some may be employed to supervise the self-checking, some may go to work for the equipment manufactures, but where do the others go? What does economic theory tell us? 

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The transition from traditional checkout lanes to self-checkout systems in supermarkets can indeed result in job displacements for cashiers. The affected workers may find alternative employment opportunities within the supermarket, in other industries, or face challenges in the job market. Economic theory provides several perspectives on how these displaced workers might be absorbed into the labor market:

1. Job Reallocation: One theory suggests that as technology replaces certain tasks, it also creates new jobs in other sectors or occupations. When workers are displaced from one industry, they may transition to other sectors that are experiencing growth. For example, they might find employment in industries like customer service, logistics, or hospitality. The assumption is that technological advancements generate overall economic growth, leading to a net increase in employment opportunities.
2. Skill Upgrading: Another perspective emphasizes the importance of acquiring new skills and adapting to changing job requirements. Technological advancements often create demand for workers with specialized skills in operating and maintaining new equipment. Therefore, some displaced workers may choose to undergo training or education programs to upgrade their skills, enabling them to secure employment in emerging sectors or occupations.
3. Entrepreneurship and Innovation: Displaced workers may also explore entrepreneurial opportunities or engage in innovative ventures. With their industry experience and knowledge, some individuals may identify gaps or niches in the market and establish their own businesses. This can contribute to job creation and economic growth.
4. Short-Term Disruptions: In the short term, job displacements caused by technological changes can lead to unemployment or underemployment for affected workers. This can be particularly challenging for individuals who have specific skills or experience tied to the industry undergoing automation. In such cases, supportive policies, such as retraining programs, job placement services, and unemployment benefits, can play a crucial role in facilitating the transition and mitigating the negative impacts.

It's important to note that the outcomes for displaced workers can vary significantly depending on factors such as the local job market, the availability of alternative employment opportunities, the adaptability of workers to new roles, and the pace and extent of technological change. The impact of automation on employment and the overall economy is a complex issue, and it requires a multifaceted approach involving policy interventions, investment in education and training, and a focus on creating new job opportunities to ensure a smooth transition for workers.

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