The main question is why is automation associated with unemployment today when it wasn’t in the past. To answer, you have to consider the kinds of jobs created by and lost to automation and the determinants of workers incomes in the jobs.
Most of the industrial revolution is associated an increasing number of workers in manufacturing and fewer in farming. The industrial work force grew primarily at the expense of the peasants or farmers. Today, automation is causing manufacturing jobs to be replaced by service jobs. Farming jobs were the first to go because our need for foodstuffs is limited. Manufacturing jobs went next because manufacturing is easier to automate than services.
But manufacturing jobs paid better than farming jobs; service-industry jobs pay worse than manufacturing jobs. If the jobs pay better, there are also more of them, because well-paid citizens create greater aggregate demand. So today we have manufacturing jobs declining relative to service-industry jobs with the result that the workforce is poorer, which means fewer workers can be employed.
The explanation lies in whatever causes some jobs to be paid considerably more than others. It could be status. Manufacturing jobs are higher status than farming jobs because the city is high status compared to the sticks. And service industry is low status because of the low status of servitude. Groups of workers with higher status get paid better. It probably makes a greater difference than we realize.
The main question is why is automation associated with unemployment today when it wasn’t in the past.
It was, or at least has been at some points. Our word “Luddite” originally referred to members of an an anti-automation movement active in the early 19th century, which believed that powered looms and similar devices would lead to unemployment among the artisan classes.
In actual fact the Industrial Revolution ended up creating more jobs than it destroyed, thanks to lower prices for manufactured goods expanding the customer base, but the jobs that it created did demand less skill and were lower-paying than their predecessors, at least until the labor movement caught up. The analogy to the service sector’s expansion at the expense of the manufacturing sector isn’t perfect, but I think it’s closer than you’re giving it credit for.
In comparing the skills of just the manufacturing jobs created and lost, you ignore the seismic and dominating change in the urban/rural ratio. The process can be seen at an accelerated rate today in China: peasants transformed into workers and getting paid higher income as the result, thus expanding the economy. Peasants to workers is a much weightier trend than skilled workers to unskilled workers.
Ah. I think we may be working from different senses of “associate”. I took it to indicate perceptions, not real economic changes. You are of course right that the Industrial Revolution led to a larger economy and that the urban/rural shift had a lot to do with that.
“Groups of workers with higher status get paid better.”
True. But what is the main direction of causation here?
According to basic economics, workers will get paid their marginal product (how much you add to production).
This is a pretty good first approximation.
Of course, you can get paid in many ways- money, flexible hours, even status.
The higher the status of a job the less it needs to pay to attract workers; this is called a compensating differential. High-level politicians are very high-status but don’t make that much.
Conversely, very low-status jobs (like janitor or garbageman) have to pay a bit more in money wages to get people to work.
The main question is why is automation associated with unemployment today when it wasn’t in the past. To answer, you have to consider the kinds of jobs created by and lost to automation and the determinants of workers incomes in the jobs.
Most of the industrial revolution is associated an increasing number of workers in manufacturing and fewer in farming. The industrial work force grew primarily at the expense of the peasants or farmers. Today, automation is causing manufacturing jobs to be replaced by service jobs. Farming jobs were the first to go because our need for foodstuffs is limited. Manufacturing jobs went next because manufacturing is easier to automate than services.
But manufacturing jobs paid better than farming jobs; service-industry jobs pay worse than manufacturing jobs. If the jobs pay better, there are also more of them, because well-paid citizens create greater aggregate demand. So today we have manufacturing jobs declining relative to service-industry jobs with the result that the workforce is poorer, which means fewer workers can be employed.
The explanation lies in whatever causes some jobs to be paid considerably more than others. It could be status. Manufacturing jobs are higher status than farming jobs because the city is high status compared to the sticks. And service industry is low status because of the low status of servitude. Groups of workers with higher status get paid better. It probably makes a greater difference than we realize.
It was, or at least has been at some points. Our word “Luddite” originally referred to members of an an anti-automation movement active in the early 19th century, which believed that powered looms and similar devices would lead to unemployment among the artisan classes.
In actual fact the Industrial Revolution ended up creating more jobs than it destroyed, thanks to lower prices for manufactured goods expanding the customer base, but the jobs that it created did demand less skill and were lower-paying than their predecessors, at least until the labor movement caught up. The analogy to the service sector’s expansion at the expense of the manufacturing sector isn’t perfect, but I think it’s closer than you’re giving it credit for.
In comparing the skills of just the manufacturing jobs created and lost, you ignore the seismic and dominating change in the urban/rural ratio. The process can be seen at an accelerated rate today in China: peasants transformed into workers and getting paid higher income as the result, thus expanding the economy. Peasants to workers is a much weightier trend than skilled workers to unskilled workers.
Ah. I think we may be working from different senses of “associate”. I took it to indicate perceptions, not real economic changes. You are of course right that the Industrial Revolution led to a larger economy and that the urban/rural shift had a lot to do with that.
“Groups of workers with higher status get paid better.” True. But what is the main direction of causation here?
According to basic economics, workers will get paid their marginal product (how much you add to production). This is a pretty good first approximation. Of course, you can get paid in many ways- money, flexible hours, even status. The higher the status of a job the less it needs to pay to attract workers; this is called a compensating differential. High-level politicians are very high-status but don’t make that much. Conversely, very low-status jobs (like janitor or garbageman) have to pay a bit more in money wages to get people to work.