If there’s digital revolution happening, the Democratic presidential candidates seem mostly unaware – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise

29th June 2019 Off By binary
If there’s digital revolution happening, the Democratic presidential candidates seem mostly unaware – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise
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Plenty of American had probably never heard of Andrew Yang before last night’s Democratic presidential debate. Many were also probably unfamiliar with Yang’s big idea to pay a “universal basic income” to all Americans. And as he explained during the debate, “…this is the move we have to make particularly as technology is now automating away millions of American’s jobs.” 

REUTERS/Issei Kato

Actually the automation threat is worse than that. Automation will affect something like, I dunno, 100% of jobs — at least in some way or another. Of course, this doesn’t necessarily mean mass unemployment. Just ask Oxford academic Carl Benedikt Frey. His research with colleague Michael Osborne seemed to suggest that that nearly half — 47% to be precise — of American jobs are at high risk of automation by the mid-2030s. 

But Frey now tells The Economist that his work has been badly misinterpreted. Just because a job is highly susceptible to automation doesn’t mean it will be automated away. No doom-and-gloomer, Frey is closer to the idea, as framed by The Economist, that this time isn’t different, that technology will create more jobs that it destroys “though the short term is likely to be bumpy, as it was during the Industrial Revolution, unless governments take action to smooth the transition.” 

Now many other researchers were always skeptical of the notion of a tech-driven jobs depression. An OECD analysis suggested that only 9% of US jobs face a “high automatibility.” Or take a PricewaterhouseCoopers study that found more than a third of US jobs were at risk. But the firm also offered a caveat “that these new automated technologies will boost productivity considerably over time” resulting in “broadly similar overall rates of employment for human workers” and “higher average real income levels across the country as a whole due to higher overall productivity.” 

Along the same lines, economists Daron Acemoglu and Pascual Restrepo find that technological change also generates a “reinstatement effect,” whereby new jobs for workers are created even as others are automated away. To boost that effect, the researchers suggest more public research investment and “critical complementary inputs” such as the education and training needed to capitalize on the new tasks created by AI and other technologies. And to make sure it’s not just elite superstar companies and their workers benefitting, Seth Benzell and Erik Brynjolfsson in “Digital Abundance and Scarce Genius: Implications for Wages, Interest Rates, and Growth” suggest policies that increase the number and productivity of top-percentile workers. This could be done “by encouraging high-skill immigration, encouraging creative skills in education or widening access to top universities.”

As for Frey’s ideas to make sure this new industrial revolution goes as smoothly as possible: 

Mr Frey argues, today’s policymakers should take advantage of the fact that this time around it is possible to see how things might play out, and manage the transition accordingly. In particular that means making greater use of wage insurance, to compensate workers who have to move to jobs with a lower salary; reforming education systems to boost early-childhood education and support retraining and lifelong learning; extending income tax credit to improve incentives to work and reduce inequality; removing regulations that hinder job-switching; providing “mobility vouchers” to subsidize relocation as the distribution of jobs changes; and changing zoning rules to allow more people to live in the cities where jobs are being created.

I’m no fan of a UBI, at least not yet, but at least Yang is trying to think through the potential impacts and policy responses to ongoing technological change. More candidates should.

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