Lower Labor Participation Rates Mean We Need More Robots, Not Less
Many complain that the shift from jobs that primarily require physical strength to those that require greater cognitive skills has left some at the wayside. They argue that declining labor force participation rates reflect discouraged workers, and necessitate the sheltering of semi-skilled jobs through protectionist trade policies and even taxes on new technologies. But declining labor force participation isn’t an argument against leveraging technology and other efficiencies. It is an argument for it.
Decline in labor force participation mainly stems from the aging of the population. Fewer hands on deck means each pair must be more efficient, making technology more important than ever. Over the past 50 years, U.S. GDP growth has averaged 3.3 percent – roughly half stemming from a growing labor force, and half from higher productivity. Improved technologies make the most of available workers by increasing productivity.
The composition of jobs in an economy is not an arbitrary choice to be made by government or even by employers. It depends on what tasks consumers need performed, and what technologies we deploy to perform them. Develop self-service gas stations, and you don’t need gas jockeys. Develop video streaming, and you don’t need video store employees.
The decline of agriculture as a mainstay of jobs didn’t make us poorer, or less capable of growing food. It made us wealthier, and multiplied food supply. In 1900, about 40 percent of Americans worked in agriculture. Now, only about 2 percent do. That decline didn’t take place simply because people felt a sudden hankering to leave the farm. Mechanical harvesting, hybrid corn, automation of the egg production process, and other technologies to bolster agricultural productivity increased the economic value of mental labor. A fertile mind became more important than a strong back. Similarly, as manufacturing increasingly becomes a sector driven by new technologies and people able to marshal them, fewer workers are needed to produce the same level of output. In effect, jobs are leaving the factories of the rust belt for the technology firms of the sun belt.
One can aspire to any job imaginable. But one shouldn’t expect to earn a living at it unless it provides people with something they need. You can be the best blacksmith in the world, but that doesn’t get you a job if no one needs a blacksmith. Nobody develops, invests in, or purchases a product in order to create jobs. We do it to obtain value. The jobs generated are a by-product of the wealth creation process, just as the jobs eliminated are a side effect of it. That isn’t a bug of capitalism, it’s a feature. It focuses the economy on doing what we want it to – create goods and services that people want or need, as efficiently as possible.
No doubt, a smaller percentage of adults are participating in the labor force than a couple of decades ago. But that isn’t so much because people are falling out of a more complex and skill-demanding economy as the fact that baby boomers are reaching retirement age. The labor force participation rate began to grow in the late 1970s, about the time baby boomers were entering the workforce. It started to decline early in this century, about when they began to reach retirement age. Baby boomers have been like a pig traveling through a python, causing bulges in the ranks first of elementary and high schools, then colleges and universities, then in the workforce. Now, baby boomers are retiring. The python has digested the pig.
In contrast, discouraged workers make up a relatively small part of labor force decline. The U.S. unemployment rate in August was just 4.4 percent. Labor Department statistics indicate that including discouraged workers and part-timers who would rather have full-time jobs would increase the rate only to 8.6 percent. That’s higher than the standard unemployment measure – but far lower than the levels of just a few years ago.
Rather than a large reserve army of unemployed demanding a chance to work, there are more jobs waiting to be filled. To fill that gap, we need new, improved and more widely disseminated technologies, more efficient production methods and wider supply chains. We need to pack more wealth-creating wallop per worker.
