Friday, September 30, 2016

Labor Econ 18, Robots and job creation

More robots, more machines, mean more job displacement, more unemployment? Uhmm, No.

New industries always create new jobs, despite their initial job-displacing effect. For instance, when telegrams were replaced by paging devices, then by SMS and mobile phones, those who were displaced in the telegram industry did not go hungry, they simply changed jobs to higher skills category.

Long article here but my answer to this question, "Will robots kill the Asian Century?" is NO.

More robots, more machines mean more demand for people to manufacture, assemble, repair and upgrade bots and machines. Cars, trucks, robots, other machines, they can also get "sick", and humans come in.

Here's another pessimistic paper, "Rise of the Machines: The Future has Lots of Robots, Few Jobs for Humans", WIRED.COM|BY MARGUERITE MCNEAL,

Look around, there are few manual laundrymen and women, instead there are more washing and drying machines. There are more dishwashing machines in restos, car washing machines. In agriculture, there are more rice harvesting and threshing machines, rice drying machines, etc. And unemployment rate in many countries is falling.

Why? Because increase in productivity by people give them more income, more savings, and they purchase more things that they could only dream before. And this creates new demands, new production, new industries.
Before, very few people could afford to buy mobile phones, much less the "high tech" smart phones. As people used more machines, from agri to manufacturing to services, their productivity and income increased, they can afford to buy more mobile phones. From 1 M to 10 M to 100 M or more mobile phones in just one country, the demand for labor to (a) manufacture and assemble, (b) transport, market and sell, (c) repair and upgrade mobile phones, has significantly increased.

If people have low productivity because they do manual work all the time, their income is low. With more machines, people's productivity greatly increases. If they are poor, they can only afford the $0.10-30 coffee sachets in stores. If they are wealthier, they can afford the $2 coffee in fancy coffee and bake shops. And this creates/expands employment in new industries, like those fancy coffee shops, restos and bars.

Lesson: more machines, more jobs creation.

My car is old, so it goes to a repair shop often. My mechanic before works alone, no assistant, why -- because he has all the machines he needs. He does not slip on the floor to check what's wrong with the arms and bolts under the engine or beside the tires, he has 2 car lifters. He can check the engine and other moving parts from top to bottom while standing. He earns big of course, both from the shop owner and from tips of customers.

What does he do with his higher income? He spends more, he buys things that he could not buy before. More industries are created to supply his new needs and those of other people with higher productivity, higher income.

I went to Malaysia 2x last year, I was surprised that KLIA now is highly mechanized, people just go to the counters to drop their check in baggage, otherwise they just enter the airport and head straight to the immigration area, then departure lounge.

Does this displace airport workers? Temporarily yes, but faster and efficient check in also attracts more foreign visitors, and so more jobs in the tourism sector (hotels, tours, restos, bars, etc.) will be created.

In this article, a question to ask will be, "What to do with the 1.7 million truckers to be replaced by "self-driving" trucks?"

I think for every 1.7 M jobs/truckers to be replaced by self-driving trucks, there will be 1.7 to 2 M new jobs in the robots/machines manufacturing, transport, marketing/selling, repair, upgrades industries. Plus more restos, coffee shops, bake shops, hotels, etc. as people spend more from their higher income.

What can kill jobs are not machines and robots (they expand jobs actually), but govt heavy regulations of wages and benefits. Like mandatory high minimum wage.

This alarmism and negativism about the role of more robots, more machines in our lives, are supportive of the "inequality is wrong/evil" mantra. Only competitive capitalism and the free market system are capable of endless innovation, mechanization and robotics/tech modernization because the goal is to mass produce many things: mobile phones, shoes, clothes, cars, flat tv, etc. Let the robots and machines produce those things 24/7, no weekends and holidays if necessary -- like the airlines, hotels, bus lines, etc. The people who operate those robots and machines are paid 5x, 10x, 30x the minimum wage, these "workers" can be richer than any small-time capitalists around.

See also:

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