The Paradox of Automation: How Labor-Saving Technology Can Create More Jobs

Much of our lives is spent in pursuit of convenience and acquiring the tools to reduce our labor.  But, do we ever seem to be less busy?  When you think about it, it does seem strange that so many labor-saving devices do not seem to save us much labor overall.  Why not?

John Maynard Keynes’ [In]famous Prediction

In the field of economics, few names are more famous than John Maynard Keynes, the famous Brit who created Keynesian economics.  During the Great Depression, Keynes argued that market economies were not returning to full employment in a reasonable time frame and could be assisted by government spending.  Government, Keynes explained, could boost aggregate demand through spending and reduce unemployment without causing inflation.  Keynesian principles were credited with helping save Western economies during the Depression.

Today, thanks to Keynes, we are much more accepting of deficit spending to maintain economic output (i.e., employment).  His 1936 book, The General Theory of Employment, Interest, and Money, is a classic in the field.  By the 1960s, Keynes’ beliefs in the importance of government spending, and even deficit spending, were so widespread that it coined the phrase “We’re all Keynesians now”.  Famously, Republican U.S. president Richard Nixon used this phrase in 1971, surprising observers who had previously considered him a fiscal conservative.

But before his fame as a deficit spender, Keynes was noteworthy for another prediction.  In 1930, the economist predicted that technology would significantly reduce the amount of work each person had to do and, effectively, solve the problem of scarcity.  More objectively, the intellectual Englishman predicted that his grandchildren would only have a fifteen-hour work week.

Why No Fifteen Hour Work Week?

Do we have fifteen hour work weeks, despite it being the era of Keynes’ great-grandchildren?  Of course not!  Even including part-time workers, the average work week in the United States hovers at about 34 hours.  So, did Keynes’ predictions about technological advancement not come true?

It’s probably not the lack of tech, as there have been tremendous advancements in nearly all fields of endeavor since 1930.  We have video cameras, jet propulsion, near-universal electrification, the Internet, smartphones, and even 3-D printers.  Today’s technology could almost certainly make short work of the demanded tasks of 1930.  So, why aren’t we able to work only fifteen hours per week?

Consumerism

One reason is obvious: we demand many more things than we did in 1930.  After World War II, consumerism became common in Western societies.  Previous generations had praised thrift and saving, which fell out of favor during the economic booms of the 1950s.  Among the middle class, new products were often shown off as status symbols.  

A longitudinal study found that Americans spent about 80 percent of their non-rent expenditures on food in 1901, but that had fallen to about 50 percent a hundred years laters.  This reveals that consumers are buying proportionally more goods, such as household appliances, versus food and utilities, than in previous generations.  Consumerism provides a rationale for people wanting to spend more, even on the same items: Veblen goods.

There are some classes of products that are actually demanded more simply as the price rises.  These are typically luxury goods, and their appeal is partially based on scarcity rather than productivity.  Some consumers value the exclusivity (scarcity) of a particular product or brand of products, increasing their demand.  Thus, they will actually buy more expensive products, regardless of need, because they receive utility (satisfaction) from being able to tell or show others that they own them.  

Planned Obsolescence

Automation allowed us to make more stuff, consumerism made us want more stuff, and planned obsolescence made it necessary for us to buy more stuff.  This phenomenon began in the 1950s along with consumerism, with both influenced by Westerners’ rapidly increasing real income.  People had lots more money and were eager to spend in the aftermath of the Great Depression (1930-39) and World War II (1939-45).  But many of the original appliances they had purchased in the 1920s and 1930s, before wartime rationing, were durable goods that were long-lasting.  There was no need for new appliances…or was there?

Since the 1930s, some companies making durable goods like refrigerators had been introducing the concept of model years for their appliances.  Even though the goods were still in good working order, advertising was tailored to make them seem inferior to new goods.  Consumers desired new models of their durable goods, from kitchen appliances to cars, frequently in order to appear fashionable and high-earning to their peers.  Over time, they purchased many more products than they needed to, or would have in previous generations, due to advertisers telling them that their older models were obsolete.

Automation is Not Fully Automatic

Producing goods with machines is commonly known as automation.  Periodically, there has been worker resistance to the introduction of new capital like factory machinery on the grounds that such automation would remove jobs.  Indeed, this often happened: a new factory robot could do the assembly work of multiple laborers.  But, quickly, those workers were needed elsewhere.  Research has found that new technology actually creates more jobs than it destroys.

New equipment may produce or assemble goods faster than manual laborers, but it will need new workers to program it, operate it, provide maintenance, and repair it.  Even if some of these tasks can be done by one worker, the additional output from the equipment will require more workers than before to manage that output: organize it, wrap or box it, and transport it.  Training laid-off workers to handle new tasks created by new technology is frequently known as reskilling.

Transition from Industrial Economy to Service Economy

Even if automation is reducing total jobs in manufacturing, construction, and other heavy industries, consumers have increased their demands for services like entertainment, education, health care, and eating out.  In addition to buying more appliances and durable goods than before, thanks to consumerism and planned obsolescence, we also demand more things to occupy our “free time”.  For example, many consumers are streaming some form of electronic entertainment during virtually all waking hours.

Instead of one record or cassette tape, we demand a hundred streamable and downloadable songs.  Instead of one VHS tape, we demand a digital library of hundreds of movies.  We may not eat more fast food than before, but we will pay extra to have it delivered to our doorstep by a driver.  This has shifted workers from automation-vulnerable industries like manufacturing to service industries that rely on human content creators.

Was Keynes Off by a Century?  The Rise of AI

Thanks to the increase in free trade after World War II, many manufacturing jobs were outsourced from developed Western nations to developing countries with lower costs of production, especially lower wages.  They were replaced by service industry jobs, and these jobs were considered protected from automation.  But with the rise of artificial intelligence (AI) software, many wonder if even service industry jobs, including white collar jobs, can be automated.

If they can be automated, John Maynard Keynes may end up being correct - just a century off.  When virtually all jobs are being automated, governments may be pressured to implement programs like universal basic income systems to prevent mass unrest by unemployed workers.  The machines can produce goods and services faster and cheaper than human workers, who are paid monthly stipends to cover their needs.  Keynes’ utopian vision of the 1930s may be realized by the 2030s…but this is still unlikely.