We are a long way from the Luddite riots of 19th century England, when protesters smashed the trappings of progress. But worries about the rise of the machines are still with us, and for good reason. Will the machines take our good-paying jobs?
Many economists offer a quick no. Today, real wages and per capita income are both enormously higher in the West than they were when the Luddites were destroying labor-saving machines during the Industrial Revolution, and to date the machines have not eliminated the need for human workers. Why would a technological revolution today have a different outcome than the Industrial Revolution? No need to worry, argue many economists.
This dismissal is too flip.
Even if the standard economist’s answer is correct when comparing the 21st century to the 19th, it omits the fact that living through this period of transformation was wrenching. Many economic historians believe that the British working class had to endure decades of hard labor with little improvement in their quality of life before they were able to enjoy the benefits of the new economy. Real wages fell dramatically for some occupations. Many who held those occupations couldn’t be retrained to compete in the new economy.
Lives were shattered. Some families suffered across generations. People flocked from the countryside to dirty, disease-infested cities. For decades there was deep social unrest. British society was shaken to its core.
Marx and Engels, responding to these developments, thought it was self-evident that “constantly revolutionizing the instruments of production” caused changes in “the whole relations of society.” As they famously put it, “All that is solid melts into air.” This could be taken to be descriptive rather than speculative.
The economist Joseph Schumpeter thought “creative destruction” was “the essential fact about capitalism.” Today, it is tempting to think of creative destruction as a relatively benign thing — Starbucks replacing mom-and-pop coffee shops, or companies going out of business from time to time. In reality, creative destruction can be a massive, painful force. It certainly was during the Industrial Revolution. So will another technological revolution change the face of the West? Should we fear the rise of the machines?
There is no question that technology is already having a major impact on the labor market. Over the last several decades, employment in Western economies grew in both low- and high-skill occupations, but fell in middle-skill occupations. That’s because middle-skill, middle-class occupations are those that can be most easily replaced by technology. (Think of a 1970s-era bank that employed a president, a bank teller, and a custodian. Today, it’s the bank teller who’s gone, replaced by an ATM.)
Without middle-class jobs, many male workers have taken low-skill, low-wage jobs. And many men have simply chosen not to participate in the labor force — employment rates for less-skilled men in the U.S. have dropped significantly over the past three decades. This has coincided with a decline in real hourly wages for men without a college degree.
Men without jobs or with low-paying jobs are less “marriageable,” so it is no surprise that these economic forces are having a significant effect outside of the marketplace that perpetuates across generations, as many children grow up in homes without fathers.
Needless to say, if these trends continue then we’re in for a different world. If income for those at the top increases massively — those who can use the machines to increase their productivity, or those who own the machines — while good employment opportunities erode for the majority of Americans, it’s unclear whether society be able to function. Extreme inequality could conceivably lead to riots in the streets and political revolution. We’ve never yet gone so far down this road, so nobody knows what will happen.
And if the market can’t sustain adequate wages for a large share of the population, should the government step in with large wage subsidies to fill the gap? It could be necessary to keep the peace. We may end up in a world where the federal government pays over half of the salary for workers in some occupations. Is that political economy sustainable?
Will the machines eventually be able to eliminate scarcity, producing all the goods and services we want to consume? If so, will we enter a kind of “Star Trek” future, where people get out of bed in the morning not to earn money but instead to better themselves? Or will we fall to the darker angels of our nature, with unoccupied time leading to a dystopian nightmare of crime, squalor, corruption, and hedonism?
Of course, I don’t have the definitive answers to these questions. But even if the optimists are right and we have a utopian future to look forward to, the lessons of the Industrial Revolution suggest that the transition could last quite a while and could be very painful. And utopia is always a bad bet. I am worried.
More immediately, how should policy respond to changing technology? Here we need a guiding principle: Work is good. Fighting the rise of the machines may be shouting at the rain, but public policy should encourage and support work nonetheless. Figuring out how to do so is a great and underappreciated challenge facing our nation, and will be the subject of some of my future columns.