Could robots really replace our jobs and what would be the economic consequences?

Hello readers, welcome back to rsira-economics.com. Last time, I shared my essay that I had been working on which discussed the idea of implementing ‘a large and extended tax on carbon’ and how this option would “Trump” the obvious alternatives such as CCS and Carbon Cap & Trade. If you didn’t get a chance to read it but are keen to learn more about this topic, I highly recommend that you give it a read, even if you don’t understand all the economics behind it. Climate change, I believe along with millions of others, is an important issue and unless we realize this, there is only going to be more adverse effects on future generations. Already we have witnessed 2016 as being the hottest year in history and if we can’t accept that global warming will have significant consequences environmentally, socially and economically then we will have to wait and let time tell us, the hard way.

 

In this post, however, I will be going back to discussing interesting economics news stories and have decided to focus on something quite abstract, yet relevant to all of us. Could robots replace our workforce and what would happen to the economy if they do? I will consider whether our economy will transform into a more efficient one as a result of the increase in productivity or if it would do the reverse and lead to worldwide unemployment, and a further increase inequality. Now, this may sound like another essay title in itself, although, I will keep the arguments short and to the point, as well as leave you with a few things to keep your mind active before my next post. It is important to remember that this topic has strong moral arguments as well as economic impacts. I will briefly touch upon these, although I will mainly be looking at the underlying economics behind this issue since this is strictly an economics blog.

Feel free to leave any thoughts you may have below. Like with the carbon tax, this is a very controversial topic and many people have different rationales as to why robots are good or bad for our economy, as outlined below. At this point, you might be thinking that economics is a bit of a ‘soft subject’, full of theories which some people follow and others completely disagree. Admittedly it’s not a ‘hard’ science like physics where we can follow Newton’s laws of motion and its not like psychology where we study the mind, rather it’s somewhere between the two. Later in the year, I hope to do a post on ‘why we should study economics’, to address some of these claims, and presumptions that people have about economics. How I like to think of it, is that economic fuels our lives, it’s all around us and helps us to manage the dynamic, ever-changing world in which we live in. Everything we do from the cup of coffee we buy in the morning to the houses we buy, to the goods/services we consume, to how much we earn or the currency we use is all related to economics and it is essential that we understand everything that is going on around us.

Economic theories and potential consequences of robots:

The general thesis that we have about the topic of jobs and robots, is that ‘robots will steal all our jobs and will replace our workforce’. However, whether this is possible or not has been discussed and debated amongst leading economics professors in the world and they still haven’t made up their mind. Below are a few of the main arguments out there.

According to Professor Moshe Vardi, in a report by the telegraph, within the next 30 years, we could see the rise of robots which will lead to unemployment rates greater than 50%. Vardi fundamentally argues that, “We are approaching a time when machines will be able to outperform humans at almost any task”, and that, “Robots are doing more and more jobs that people used to do.”. She poses the question that if machines are capable of doing pretty much everything that humans can do, what will humans do all day?

It is clear that she is one of those people who believe the use of robots will take our jobs and will have negative consequences associated with it. She is particularly concerned about the fact that human labour, something which is essential to human well-being could become obsolete and that unemployment rates of 50% would be extremely damaging.

Supporting this is a 2013 study by the University of Oxford which identified that almost half of those currently employed in the United States are at risk of being put out of work by automation in the next decade or two. Most vulnerable were transportation, logistics, and administrative occupations.

Rodney Brooks, the chief executive of Rethink Robotics, speaking at the Quartz event-The Next Billion in San Francisco has a different idea. Although he says that there are no tools better than human hands and discusses the logistics and practicality issues that, “We still have not made much progress on making dexterous hands for robots”, he still thinks robots are important and will bring with them many economic benefits. To illustrate this he uses the example of China who has around five workers for every retiree. By 2040, that ratio will be approximately 1.6 to one. The number of people older than 65 in China will rise from around 100 million in 2005 to 329 million in 2050. “That’s where domestic robots can play a part”, he said. They will be able to provide assistance to increasingly frail humans, whether that’s a driverless car taking them to the hospital or a smart machine that can help with lifting and other tasks around the home. In addition, he says that people may even prefer these robots to human helpers as robots respect privacy completely.

Many other professors are also in the middle and identify that we are neither headed toward a rise of the machine world nor a utopia where no one works anymore. Humans will still be necessary for the economy of the future, even if we can’t predict what we will be doing and that although technology will increase, humans will still be the basis of evolution. They also say that job losses in some occupations will certainly continue, but it will be accompanied by gains in different fields, just as in the past.

I was recently at an economics conference at the University of Warwick and one of the speakers was actually discussing this exact dilemma. His idea was that robots will play a part but they won’t take over the world and their economic consequences won’t be as bad as others predict. He started off by discussing that computing power without a doubt, is increasing exponentially. For example in 1948 Harvard developed a computer which cost 100 million dollars and that was less powerful than a $1.50 pocket calculator you can buy today. He then said that despite this we are not heading towards self-conscious intelligence, but instead we are aiming to produce smarter machines, which do not ‘think’. He suggests from his research that 80% of all jobs that exist will disappear but new jobs that don’t yet exist will be created. Another idea that emerged from this discussion was that no one would own a car in the future. Instead, they would all be automated and you will be able to call one up like an Uber. Not only would this cause an increase in efficiency but it would virtually eliminate the need for parking which is extremely valuable in urban areas. Further, in terms of manufacturing everything would eventually become cheaper and cheaper as the marginal cost of production would drastically fall (however this would take time to establish and a sharp decline in growth in the short run would not be unexpected).

The final idea was that actually creating jobs are a cost. For example, take the example of a factory which states that it will create “4000” jobs. The inference is that we are building a factory to get jobs when actually we want the factory for the output e.g. cars. Jobs are a cost to get the cars and the ideal situation he proposes would be getting the cars without having the jobs.

So there you have it. Some people are completely against the use of robots and believe that they will only eliminate jobs that people need, not just to earn a living but because humans were born to work. On the flipside, other economists think that we are not quite there in terms of the technology and that even when the technology does improve and robots replace our existing jobs, new jobs will inevitably be created.

Other implications to consider:

  • The robotics industry is worth around $135 billion. Clearly, this new technology, which could revolutionize society, comes at a huge cost which only the super rich will be able to afford, leading to greater disparities in inequality. According to Oxfam, the world’s 8 richest men have the same wealth as nearly 4 billion people.
  • If robots are going to replace our jobs, how will regular people earn a living?
  • Technology fundamentally fails. We’ve all been there when your trying to do something really important and the computer decides that now is the best time for it to play up. Admittedly these are small issues but if we are going to transform our whole workforce into robots and they just happened to go wrong one day, there would be severe economic implications. If we are at a stage where we are fully dependent on robots then society could simply ‘freeze’ overnight.

Bit worried about your job?

Check out the link below from the BBC, which allows you to find out your ‘automation risk’ and how soon your job could be replaced by essentially what is a circuit board and some aluminum.

http://www.bbc.co.uk/news/technology-34066941

What do I think?

I follow the argument that robots will become more encoded in our society at some stage in the future. We already have fully automated car factories and personal assistant on our smartphones and it’s only a matter of time before the technology improves further. Secondly, even if they were to replace jobs, I think overall the gains in productivity and efficiency would offset some of the social issues discussed and new jobs, which we don’t even know exist, will emerge. The issue is without a doubt complex and there are so many different routes to follow on this topic. Below are a few Questions for you to think about? (there are no right or wrong answers!):

  1. If humans were made redundant by robots what would humans do all day?
  1. Having read the potential economic implications would you argue for or against having robots in our society?
  1. What kind of jobs will definitely disappear and which ones are irreplaceable no matter how good the technology is?

Sources used:

http://www.telegraph.co.uk/news/science/science-news/12155808/Robots-will-take-over-most-jobs-within-30-years-experts-warn.html

https://www.theguardian.com/technology/2016/oct/14/robots-taking-jobs-rethink-robotics-baxter-sawyer

https://www.washingtonpost.com/posteverything/wp/2016/02/17/yes-the-robots-will-steal-our-jobs-and-thats-fine/?utm_term=.b7ed3726ecf7

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