Technology not the cause of job loss

Technology took our jobs! That is, according to Douglas Rushkoff, who declared in his article Are Jobs Obsolete? featured on CNN that, “New technologies are wreaking havoc on employment figures.”

That makes perfect sense, right? Technology often replaces manual labor; therefore, technology creates unemployment, or as Rushkoff put it, “Every new computer program is basically doing some task that a person used to do. But the computer usually does it faster, more accurately, for less money, and without any health insurance costs.” Voilà! Mystery solved. Now no explanation is necessary as to why Obama’s stimulus failed by its own unemployment benchmark of 8 percent. It was those tricksy computers all along.

But wait a minute; does Rushkoff’s claim actually have any logical consistency? The short answer is no, but exposing the fallacy remains a useful exercise.

On the face of it, if technology really did cause unemployment, then wouldn’t we except to see continuously higher unemployment than in years past?

If we examine the last 50 years alone, unemployment peaked in 1980 at 11 percent, and remained relatively low in the following three decades until the recession of 2008.

Certainly unemployment ought to be higher coming out of the recent recession, coupled with the fact that technology has advanced leaps and bounds since the late 70s and early 80s.

But one doesn’t have to start with the arbitrary date of 1950. If technology really did cause unemployment, then “primitive man must have started causing [unemployment] with the first efforts he made to save himself from needless toil and sweat,” as Henry Hazlitt concluded.

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The assertion doesn’t even pass the most basic test, but there are other reasons why it is so patently false.

While it is true that technology replaces workers of a certain skill set, it creates jobs in other industries. Take Microsoft for example. Much of the goods and services Microsoft currently provides didn’t even exist thirty years ago, and it is now the employer of roughly 130,000 people.

Or for those who complain that ATMs are replacing bank tellers, don’t forget that there are numerous others involved in the design, programming, and upkeep of ATMs. ATMs don’t materialize out of thin air, but are rather the product of the labor of hundreds, if not thousands of individuals.

And let’s not take our eye of the ball. ATMs, like other technologies, make our lives better. They allow us to use our time and resources more efficiently.

It is said that the economist Milton Friedman was once invited to tour a large scale government project where he observed thousands of construction workers using shovels to build a canal. He was curious as to why there were no mechanized earth-moving equipment on site. One of the officials in charge explained that this was in fact a “jobs” project, meaning productivity was only secondary. Friedman remarked: “Then why not use spoons instead of shovels?”

This oft told anecdote illustrates the shallowness of the opposing argument so clearly. While the workers obviously benefit from the employment, the economy as a whole does not. As an aggregate, we benefit far more from productivity and the advancement of technology.

To put it plainly, we could take $100 from taxpayers and pay a man to dig a hole and fill it back up on a daily basis. Without a doubt, the man benefits from the job, but society loses. The man is producing nothing of value in the economy. The government may as well pay him to stay home and do nothing.

There is an opportunity cost involved in protecting jobs at the expense of technological advancement. By coddling certain industries, we allow people to use their resources inefficiently, where in the market they could find work doing something people actually want.

The economy is clearly changing. Thanks largely to labor unions and our vast regulatory system; manufacturing jobs that Americans have traditionally enjoyed are moving overseas. Our labor force will either have to adjust to the changing landscape or risk being left behind.

But we can’t let the inevitable pain that comes with dying industries stifle technological progress, the same advancements that have increased our standard of living so dramatically over the past few centuries.

Where would we be if we wasted money subsidizing the horse and buggy industry after the advent of the car?  Technology doesn’t cause unemployment; but it will sometimes shift employment from one industry to another. Rather than complaining about the changes in the economy, it’s more prudent to take notice and invest in human capital in order to meet the new demands of the labor market.