Markets and Economy

Rise of the Machines

Technologies like self-driving cars, self-service retail and machine learning could make millions of American workers obsolete. Will the rise of robotics create a permanent labor surplus?

Jim Glassman, HEAD ECONOMIST, COMMERCIAL BANKING
September 28, 2016

The idea of robots in the workplace can be unsettling: Fifty years of blockbusters have cast robots as evil machines locked in a perpetual conflict with humanity, and now, autonomous machines are really displacing human workers at an accelerating rate. However, technological advances have been transforming work since the dawn of the industrial revolution, and today’s robots should benefit the American workforce—not destroy it.

The Robot Menace

For decades, automation has been making great strides on the nation’s assembly lines. Manufacturing robotics has allowed America’s factories to steadily increase output and build higher-quality products, even while trimming their human workforce. Now, autonomous technology appears ready to move outside the factory floor, with robots poised to take control of everything from delivery trucks to retail cash registers. The financial industry has seen something similar, with much of the manual effort involved in trading and back-office systems replaced by computers.

How will the economy survive when new technologies replace a massive segment of the workforce?

Automation will undoubtedly reshape entire industries. Self-driving vehicles are on the cusp of displacing 3.4 million American truck, taxi and bus drivers, and “machine learning,” the software that allows self-driving vehicles to navigate new landscapes, has the potential to revolutionize lines of work far beyond transportation. Computers that learn by observation may soon master common white-collar tasks, such as drafting legal briefs or manning customer service hotlines.

We’ve Been Here Before

In fact, autonomous machines aren't that different from the previous waves of technology that have displaced workers and reshaped the economy in the past. Self-driving vehicles may seem futuristic and unprecedented—for example, the latest vintage of motor vehicles includes crash avoidance technologies that are a big step towards automated driving—but they will not be the first invention to destroy a profession.

One hundred years ago, farmers and agricultural laborers made up one-third of the American workforce. In the 1920s, however, the introduction of the combine harvester allowed a single farmer to do the work of dozens of horse-drawn threshers. Mechanized farm equipment decimated the demand for labor in the nation’s wheat fields, and agricultural jobs began to fall steadily as a proportion of the workforce. Today, fewer than 2 percent of Americans work on farms.

If you were to take a worker from decades past and show them virtually any modern workplace—from empty wheat fields to automated telephone switchboards to a “lights-out” manufacturing floor—the time traveler would likely assume that there are few jobs left for human workers. But they would probably be surprised to learn that the unemployment rate still moves in cycles, with periods of full employment punctuated by recession.

The Persistence of Demand

Mechanization destroyed countless jobs in the 20th century, but displaced workers have always found new opportunities. In fact, past technology shocks haven't really influenced the nation’s overall unemployment level. Certain types of work may decline and never recover—hence the ghost towns that dot the Great Plains today—but the nation’s aggregate demand for labor has always bounced back, creating an abundance of new jobs at the peak of the business cycle.

Will today’s wave of automation produce a permanent labor glut? If so, it would be unprecedented. We may not be able to imagine the new professions that will arise in an automated world—or the workplaces that the next generation will inhabit—but aggregate demand for labor has always proven resilient, even in times of rapid change.

A Case for Optimism

Past technological innovations made workers more productive and society more prosperous. The benefits of autonomous vehicles are obvious—they will make the roads safer and less congested, and transportation cheaper. Just as advances in autopilot made air travel safer and more efficient, self-driving cars will create a more productive workforce—a human driver remotely guiding a convoy of automated trucks will likely be several times more efficient than a team of drivers on the road.

The historical record tells us that climbing worker productivity will lead to higher wages and a growing economy. This link can be distorted by shifts in bargaining power and the erosion of protected industries, but the overall trend connecting productivity with larger paychecks is obvious from any international comparison—more productive, better educated workforces universally command higher real incomes than their developing world counterparts.

As autonomous machines begin appearing in our daily lives, we should see them not as a threat to our livelihood, but as an opportunity that will open the door to more productive and rewarding work.

 

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