KRWG

Robots are slowly replacing us

Jul 7, 2019

Commentary: The robots are here. A new study shows that firms that adopt robots see large increases in productivity and displace less innovative firms.

But there is a problem. Robots are different from other types of capital investments. They perform tasks without direct or constant human interaction. Thus, robots can replace humans in the production process. Some studies suggest that as much as 47% of total U.S. employment could be automated. The question is this good or bad for workers.

Dating back to the beginning of the industrial revolution, the fear has been that labor-saving innovation will destroy jobs and crash wages as workers compete for those jobs that do remain. Meanwhile, the owners of capital see increased profits.

Up to now, this fear of lost jobs and worker impoverishment has not been realized. Machines do not replace worker, rather machines enhance worker productivity, thereby, increasing the demand for workers, creating jobs in the process.

Robots, many argue, are different from previous innovations. They don’t enhance human productivity; instead they replace workers. Others argue that robots don’t replace workers but create new high paying jobs for robot tenders.

One study, for example, looked the effect at robots at the firm level. It found that, at least for firms in the study, robot using firms increased productions by 25% and jobs by 10%. At the same time firms not adopting robot reduced their employment by 10%..

Another study by Daron Acemoglu of MIT and Pascual Restrepo of Yale found that a 1% increase in robot-usage reduced employment by about 2-tenths of one percent. Not much but not good, especially when compared with prior technologies that resulted in increased employment.

All this has important implications for society. The justification of capitalism is the enrichment of the masses. Otherwise the accumulation of wealth by capitalists is without moral justification. If the logic of capitalism drives businesses to replace labor with robot technology, even if this occurs very slowly, then is a need to adopt alternative means of allocating wealth.

Capitalism is an extremely effective means of allocating resources to their best uses. Replacing capitalism with some sort of government allocation of resources is—well—the Soviet Union. It will mean the end of economic progress. Besides, there are ways of allocating income without eliminating markets, and that is via taxes.

One such approach is a guaranteed minimum income, which can be administered via the IRS. In the short run, a guaranteed minimum income that replaced existing programs such as social security and TANIF, the additional cost would be very modest.

If the worse happens, and the evidence is that it will, and robots replace human workers. More and more workers will be reliant on guaranteed minimum income, so the cost of these programs will increase. The taxes on the rich will need to increase accordingly.

All this sounds rather dystopian but relying on wages fir income in the era of robots will mean impoverishment of large parts of the current middle class. To save both capitalism and the middle class, large income transfers will be necessary, and the guaranteed minimum wage is the way to achieve consistent with capitalism.  

Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. He is not a robot but does find the implications of robots for the structure of society fascinating. The opinions expressed may not be shared by the regents and administration of NMSU. Chris can be reached at chrerick@nmsu.edu.