US Labor Market Experiencing Unprecedented Calm
The prevailing narrative that the US labor market is experiencing an unprecedented rate of technology-driven disruption couldn’t be further from the truth, according to a new analysis examining 165 years of Census data.
In reality, the level of job churn—the rate at which some occupations expand while others contract—is now at a historic low, according to a study by the Information Technology and Innovation Foundation (ITIF). ITIF, a tech-policy think tank, warns that this misperception risks leading policymakers and the public to be wary of technological innovation and progress when they should instead be encouraging more of it to accelerate productivity, grow the economy, and improve living standards.
“It has become an article of faith that workers in advanced economies are facing unprecedented levels of labor-market disruption and insecurity,” said Robert D. Atkinson, ITIF’s president and the report’s lead author. “But that assumption turns out to be completely wrong. People see Uber disrupting the taxi market, robots assembling cars, and artificial intelligence reviewing legal documents, and they assume no occupation is safe. But when you look at the data, you find we are actually in a period of relative tranquility. If opinion leaders continue suggesting we are in unchartered economic territory and warn that just about anyone’s occupation can be thrown on the scrap heap of history, then the public is likely to sour on technological progress and the policies that support it that will lead to more shared prosperity.”
The ITIF report reviews US occupational trends from 1850 to 2015, comparing the mix of occupations in the economy from decade to decade as reflected in Census data compiled by the University of Minnesota’s Minnesota Population Center. ITIF also assessed each occupation to judge whether increases or decreases in employment in a given decade were likely due to technological progress or to other factors.
Among the findings that emerge from the analysis, the rate of occupational churn in recent decades—tech-driven or otherwise—is at its lowest level in 165 years. Occupational churn peaked at over 50 percent in the two decades from 1850 to 1870, and it fell to its lowest levels in the last 15 years—to around 10 percent. The levels of churn in the last 20 years—a period encompassing the dot-com crash, the financial crisis, the subsequent Great Recession, and the emergence of new technologies that are purported to be more powerfully disruptive than anything in the past—have been just 38 percent of the levels from 1950 to 2000, and 42 percent of the levels from 1850 to 2000.
Relative to the jobs technology is creating, technology is eliminating fewer jobs now than in any decade since World War II. The period from 2010 to 2015 saw approximately six technology-related jobs created for every 10 lost—the lowest ratio of jobs lost to technology of any period since 1950 to 1960.
New, productivity-enhancing innovations are more likely to grow jobs in existing occupations than in newly created ones. In no decade has technology directly created more jobs than it has eliminated. Yet, throughout most of the period from 1850 to present, the US economy has created jobs at a robust rate, and unemployment generally has been low. This is because, aside from population growth, most job creation has stemmed from productivity-driven increases in purchasing power for consumers and businesses. Innovation allows workers and firms to produce more, so wages go up and prices go down. This increases spending, which in turn creates more jobs in existing occupations (from cashiers to nurses and doctors). Atkinson says there is simply no reason to believe that this dynamic will change in the future for the simple reason that consumers’ wants are far from satisfied.
ITIF’s report also enumerates methodological flaws in previous research that has helped drive the false narrative suggesting we will soon see an unprecedented rate of technology-driven labor disruption. For example, a frequently cited Oxford University study concluded that 47 percent of US employment is at risk of computerization, but it included fashion models, manicurists, barbers, and school bus drivers as potentially automatable jobs. Atkinson suggests these are unlikely positions for automation, quipping, “Does anyone really want to let their middle school child ride an autonomous school bus without an adult present?”
ITIF’s findings do not mean there is no need to help workers who are displaced, said Atkinson. “Policymakers should do more to improve labor-market transitions for workers who lose their jobs, regardless of the rate of churn or whether we are trying to speed it up or slow it down,” he explained. “From ensuring workers can receive unemployment benefits while they are in training for new jobs to establishing more support for lifelong learning, we must help people who lose jobs through no fault of their own. But that is true whether the job loss stems from short-term business-cycle downturns or from trends that lead to natural labor-market churn.”
Overall though, Atkinson makes it clear that ratcheting down technological progress, by such ill-advised schemes as taxing robots, is not the answer. “Labor market disruption is not abnormally high,” he said. “It’s at an all-time low. And predictions that human labor is just one high-tech unicorn away from redundancy are likely vastly overstated, as they always have been. If there is any risk for the future, it is that technological change and resulting productivity growth will be too slow—not too fast—to raise living standards at the rate we want.”