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C00002 00002	%unempl.ess[w90,jmc]	Unemployment and technology
C00012 00003	\smallskip\centerline{Copyright \copyright\ 1990\ by John McCarthy}
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%unempl.ess[w90,jmc]	Unemployment and technology
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\title{Unemployment and Technology, for vtss 160}

	When a new technology is proposed, we are often asked to
look at its consequences for unemployment.  I want to argue that
mainly this is a bad idea.

	The general proposition is often advanced that new technology
that increases productivity leads to unemployment.  The argument
offered is that a certain amount of a particular good or service
is produced, and if it can be produced with less labor, then some
of the people engaged in producing it will be become unemployed.

	On the other hand if we examine history, we don't see
any correlation between the rate of advance of productivity and
the rate of unemployment.  When we compare different countries,
it is the countries with backward technology that tend to have
large amounts of unemployment.

	The resolution of the problem is that we never have been
and aren't now close to saturating human demands for goods and
services and for leisure.  Therefore, production of goods and
services have always grown to match productivity.

	This overall look at technology and employment isn't the
whole story.  Namely, particular industries and the workers in
these industries can be drastically affected over short times.
It can happen that an industry is put out of business, and all
its workers have to find other jobs.  They do find other jobs
but some of them might not find jobs that pay as well and suit them
otherwise as well as the jobs they lose.

	New technology isn't the only source of localized unemployment.
Foreign competition can do it.  Reduction in demand because of
changes in customer tastes can do it.  Industries tend to delay
adapting to changes in demand, so weak industries generally have
their crises at times of general slowdowns in demand.

	The crises are particularly acute when the industry
or firm has had some kind of monopoly that permitted rewards to
its owners, managers and workers in excess of the general level
of the economy.  Everyone will have made financial commitments
based on previous income levels and will be very unhappy when
there is no prospect of restoring them.

	There are two cases.  The first case is when the firm is
going to remain prosperous but needs fewer employees.  In that
case the employees can bargain for severance payments that ease
the shock of losing the jobs.  That's ok and can be regarded as
part of the capital cost of introducing the new technology.  They
can also bargain or use political power to prevent their layoff.
When this is successful it harms the whole economy.  Everyone will
be poorer.  However, it often happens, especially in countries
where socialist ideas are strong.  Italy, for example, has greatly
suffered from it.

	The second case is when the industry is wiped out or suffers
a serious decline.  Then the employers don't have the resources
to buy out the jobs or to continue the employment.  They can then
try politics to get the government to continue the industry at a
loss.  This has often been successful, and when it is very successful
it impoverishes the whole country.

	My own opinion is that buying out jobs and offering
unemployment insurance is ok, but doing more
is usually a mistake.  This is because the individual is in the end
the best judge of what he can work at.  When a union can impose
a certain increased hourly cost on its employers and the workers
have to choose whether to take it in increased wages or in some
kind of job security measure, American workers usually choose wages
often to the annoyance of union leaders.  Workers who are
confident of their ability to do different kinds of work
prefer cash.  The professional union leaders often have interests
at variance with those of their members.

	Here are some examples.  The number of underground coal
miners in this country went from 600,000 in the 1950s to less
than 100,000 today.  This produced severe local problems, because
mines are located wherever the coal is and there may not be
comparable jobs in the community to which a worker may have
strong ties.  They had to move and did.  Underground miners
today are paid very much more than their fathers got and have
much safer and more comfortable working conditions.  My own
opinion is that underground miners should be mostly eliminated
by remote control of robots from the surface.

	Another example is the printing industry where the
operation of linotype machines has been eliminated by direct
transfer of the text from the editorial room computer to the
presses.  In the U.S. the linotypist jobs were bought out
at very high prices.  In Britain the unions refused to be
bought out at any price, and the union labor was eventually
replaced.

	What has all this to do with the responsibility of the
inventors of new technology?  Here are the relevant points.

%not just ordinary workers

%technologists aren't competent and shouldn't try

	1. Technology has little effect on the general rate of
unemployment.  This is determined by general economic and
political phenomena.  General economic policy is moderately well
understood by economists these days, but its interaction with
special interests is not.  Tax and other relevant policies are
determined only to a small extent by considerations of keeping
the economy working well and more by compromises among
Congressional partisans of special interests.

	2. The temporary effect on specific groups of workers is
quite complicated and involves many factors besides technology.

	3. About the best that the technologists can do is to
estimate the total amount of labor that will have to find other
employment if the proposed technology is fully deployed.

	4. If the technology proposed will genuinely save labor,
the technologist can be reasonably assured that its introduction
will have a long term positive effect on the prosperity of the
country.  He will be unable to calculate the intermediate
effects, and the economists won't be much help.  He will,
however, hear many vociferous opinions from the speakers for
various interests, and these interests may try to hold his
industry up for payoffs in exchange for letting the technology
proceed.
\smallskip\centerline{Copyright \copyright\ 1990\ by John McCarthy}
\smallskip\noindent{\fiverm This draft of UNEMPL.ESS[W90,JMC]\ TEXed on \jmcdate\ at \theTime}
%File originated on 17-Jan-90
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