According to recent reports, nearly half of the jobs in existence today will be automated in two decades. Computers, robots, and other machines will be taking our jobs away.
Much of the discussion I have seen about this topic views the story in a negative light. Some people see more automation, especially to this extent, as a detriment because it means we will lose our jobs.
The problem here is that people are viewing economics in the wrong way. They look at having a job as the final goal. From an individual perspective, this is somewhat true in that you need a job or some form of income in order to live, or at least live relatively well.
But the measure of wealth in society has little to do with employment. Most people worked 200 years ago, yet our standard of living today is vastly greater than it was then. In fact, most people back then worked a lot more and a lot harder than the average person does today, especially those living in the U.S. It was common for farmers to work from sunrise to sunset, and it wasn’t easy work.
Therefore, a high standard of living doesn’t just depend on having people employed — it depends on what is being produced.
You can work all month knitting a blanket, but when it is done, the value of the blanket is the same whether it took you a month or an hour to make.
It may have more sentimental value to you personally if it took you so long to knit. But that won’t matter much to a person buying it unless the extra time also equates to a higher quality.
Government and Unemployment
One of the main reasons people obsess over jobs is because so many people struggle to find decent ones.
But if we lived in a truly free market, unemployment would not be a problem. There might be a tiny fraction of the population that is unemployed in between jobs. There might also be very few people who are too severely handicapped to do any kind of work. But overall, most people who want a job would have a job in a free market without government interference.
The government either causes or encourages unemployment in numerous ways. Unemployment benefits obviously encourage some people to stay unemployed, but there are many other factors. Taxation itself affects employment, as it either requires employees to accept lower earnings or employers to pay more.
If two people come to an agreement that person A will wash the car of person B for $10, then person A is employed for that one job. Both parties deem themselves better off. Person A is willing to give up his time and energy to wash a car in exchange for $10, and person B is willing to give up $10 in exchange for more leisure time and a clean car.
Now enters the government, which imposes an income tax of 20% on the transaction. But it is not worth the time for person A to only get $8 instead of $10. And it is not worth having a clean car or extra time for person B if he has to pay over $12. So with the imposition of the income tax, the parties determine the transaction isn’t worth it. The income tax has resulted in one less job.
The same applies for regulations. An easy current example is Obamacare. If the law makes it more expensive for an employer to hire someone, then employers will hire fewer people on the margin.
However, it isn’t just Obamacare that does this. There are tens of thousands of rules and regulations that have some kind of an effect, even if marginally.
Of course, minimum wage laws dramatically affect employment, particularly when the minimum wage is higher than the market-clearing rate for lower-skilled workers.
This is why it is common to see teenagers and those with fewer skills as the higher proportion of the unemployed.
If there were no minimum wage, almost anybody could work at some price. They may not like the price and may choose to refuse the work, but it would be available.
It is understandable that a former executive with a high net worth would refuse a job for $5 per hour, even though he is still looking for work. But anyone who needs to put food on the table could take a low-paying job just to get a paycheck until he finds something better.
If there were no minimum wage, nearly everyone could find a job at some price.
What if Computers Could Do Everything?
While it seems rational for people to be worried about losing work to machines, it also seems rather silly when we look back in time. How many jobs exist today that didn’t exist 100 years ago?
A hundred years ago, there were no commercial airline pilots, no IT technicians, no air conditioning repairmen, no website designers, no cell phone salesmen. The list could go on forever. Of course, a lot of jobs that existed then have also gone away. They have either been replaced by machines or the industry itself has been replaced.
We live in a world of scarce resources, and I expect it will stay this way forever. There are always needs and desires that human beings want fulfilled. For this reason, there will always be work to do. There will always be jobs, even if they are jobs we can’t foresee right now.
If we ever do live in a world where computers and machines do everything — if we have everything provided for us — then I suppose there would be no need to work.
If you could just press a button and have a robot gather your food, prepare your dinner, do your laundry, build an extension on your home, construct you a car, and sew you new clothes, then you would really have little need to work or make an income, assuming the robot is self-sustaining.
The point is we shouldn’t fear automation. It may cause lost jobs in the long run, but there are always new jobs to replace the old. Overall, automation increases our standard of living and makes our lives easier.
Jobs That Won’t Be Replaced
This is not to say that you should take your job for granted and not plan for the future. You may very well be in a job that will soon be taken over by machinery.
If you are just starting your career or if you have many more years left to work, my best suggestion is to learn a skill that is not easily replaceable by machines.
Machines and robots can do a lot of things, and the technology keeps getting better. But there are certain things robots simply can’t do as well as humans, if at all.
Robots can’t have a real conversation with someone. They can’t make a movie or play sports. Robots still can’t analyze a lot of information if it isn’t related to math, and they can’t sell things. I’m sure you can think of many other things a robot can’t and likely won’t ever be able to do.
Meanwhile, we should embrace automation and be thankful for how much easier our lives are because of it.
Until next time,
Geoffrey Pike for Wealth Daily
