Improving Our Standard of Living (Wattpad Edition)

Chapter 53: Technological Unemployment

Technological unemployment is the replacement of jobs by machines. It doesn't require devices to be as smart as humans, only that productivity rise enough that fewer people are needed to produce the same number of goods as before.

Technological unemployment happened during the Industrial Revolution. In the 1300s, between two-thirds and three-fourths of the population was employed in farming. This figure fell rapidly after 1800. New machines allowed farmers to grow significantly more crops per acre than before, which meant fewer workers were needed to feed everyone.

In response to the perceived threat of unemployment during the Industrial Revolution, the Luddite movement was formed in England. Followers advocated the destruction of machines to keep people employed. This is similar to how some Americans today want to restrict trade with China to prevent the offshoring of manufacturing jobs.

The Luddite movement failed. While machines did cause unemployment in specific industries, such as agriculture, people found new types of jobs. Net employment remained the same.

This was good because it allowed for new forms of wealth to be created, which would've been impossible had humanity continued to be tied up in farming.

Technological unemployment happened again after the Personal Computer Revolution in the late 1970s. According to the Economic Policy Institute, manufacturing jobs in the United States have declined by 50% since 1980 [1]. Yet, according to the US Bureau of Labor Statistics, total manufacturing output since the 1980s has more than doubled [2].

The New York Times recently reported that manufacturing jobs began declining in France, Japan, Britain, Denmark, Sweden, the United States, and most other developed nations in the mid-to-late 20th century [3].

But here's what's more interesting: According to the same report, manufacturing jobs began declining in the early 21st century in developing countries including India, Indonesia, and China.

Manufacturing jobs are declining worldwide, yet total output continues to rise. We've seen this before with agriculture. Fewer people work on farms, yet we grow more food than ever. We are doing to the manufacturing industry what we did to the agricultural one.

As manufacturing employment has been falling, jobs in other industries have risen. A big one is "services." It may sound degrading, but no more than assembling the same thing repeatedly for nine hours. Services include many other sub-industries, not just fast-food. A lot of these jobs involve interacting with computers and are far more stimulating than working on an assembly line.

Has technological unemployment occurred? Absolutely, because of computers. The same happened with farming jobs due to the Industrial Revolution.

Did net unemployment go up? No.

Recall that the employment-to-population ratio is the percentage of working-age adults (15 to 64) that are employed. Unlike the traditional unemployment statistic, this one factors people that have stopped looking for work for long periods.

Throughout the 1950s and 60s, the percentage of working-age adults that had a job in the United States was 57% according to the Bureau of Labor Statistics [4]. Throughout the 70s and 80s, the percentage of working-age adults that were employed averaged 59%. Employment reached its peak in the 1990s and 2000s, averaging 62% among working-age adults. This fell to 58% after the 2007/2008 recession but bounced back to 60% as of 2017.

In other words, the United States has averaged an employment rate of around 60% for almost 70 years. That number may seem small, but according to the World Bank, most other countries have averaged an employment-to-population ratio of around 60% for decades [5]. The percentage of working-age people that have a job has always hovered at around 60%.