The robust jobs reports in recent months should help tamp down talk that technology puts people out of work. These types of dire predictions have been around for at least two hundred years, when the followers of Ned Ludd smashed the mechanical weaving looms in England because they feared that the machines would put people out of work. They were wrong. The Industrial Revolution made England richer. There were four times as many jobs in England’s cloth industry in 1900 as there were in 1830.
We now hear predictions from Latter Day Luddites that computers and thinking machines put people out of work. It’s true that technology can be disruptive: it can eliminate some jobs, from weavers to buggy-whip makers to checkout clerks to legal researchers. But the Luddite fallacy presumes that there is only a set amount of goods and services people want. If technology permits those things to be produced more efficiently, Luddites argue, there will be less work for people to do. In reality, the adoption of technology leads to an increase in productivity, cheaper goods and more personal expendable wealth. As the recent employment reports show, that in turn leads to increased demand for a wider variety of goods and services and thus more jobs.
If new technologies reduced the total number of jobs, we’d all be out of work by now. But the opposite is the case. The periods of technological advance are the periods of the greatest job growth. And the countries with the greatest adoption of technology, such as the U.S., witness the greatest growth in jobs and wages.
Last year, as whole new waves of robotic systems were introduced, the U.S. had its best year for hiring in fifteen years. It created 3,116,000 new jobs, the highest number in any year since 1999. The gains spread across all sectors. This January alone, there were 46,000 new jobs in retail trade, 39,000 in construction, 38,000 in health care, 35,000 in food service, 33,000 in professional and technical roles, 26,000 in financial services and even 22,000 in manufacturing. The unemployment rate hit a six-year low. New York City, the heart of technologies disrupting everything from journalism to taxis, has created more private sector jobs in the past five years than any five-year period for half a century.
Even average hourly earnings are rising, creating more opportunities for lower-paid workers. Wal-Mart Stores plan to boost its minimum pay for its U.S. employees to $10 an hour by next year, 38% higher than the federal minimum wage. That follows similar recent raises at Starbucks, Aetna and the Gap.
Since technology displaces some workers, what causes overall employment to grow? As in each decade of the past two centuries, technology creates new types of jobs and enables new forms of commerce.
The “App Economy” is one example. It began in 2008 when Steve Jobs yielded to the advice of his team at Apple and decided to let outside developers create apps for the iPhone and then the iPad. The global app economy for Apple and Android devices was $100 billion last year, far surpassing the film industry. The Apple app store alone created 627,000 jobs. This is an industry that did not exist seven years ago.
Apps and other advances in technology create a “sharing economy” that enterprising folks can rent out rooms on Air BnB and provide rides on Uber and Lyft. Likewise, app stores and online marketplaces such as Amazon and eBay enable a rise in the types of artisans and makers that existed in the pre-industrial age. If you have a good recipe or can make a cool product or service, it’s now possible to find customers. If you create a book or song, you now have ways to self-publish and distribute. If you dream up a new specialty, such as an ethical hacker, pet psychologist or a nutrition coach, you have a chance of finding takers.
Technology even helps to grow long-established local companies that make specialty products – such as ones from my own home state of Louisiana like Dr. Tichenor’s toothpaste or Tabasco hot sauce or Zatarain’s food spice – by helping them find customers in every nook of the planet. More than 600,000 people nowadays earn a living by selling on Amazon and eBay.
A more fundamental shift, technology permits the rise of “on-demand” or “on-tap” workers. Do you need a housekeeper or handyman or a car repairman or air conditioning specialist? Or do you have any of those skills and want to put them to use? Technology now allows such transactions to occur on a peer-to-peer basis, rather that through a company. It’s a trend that reaches professionals as well: there are apps and online services for lawyers, doctors, accountants, software programmers, management consultants and almost any task you can imagine.
This represents, in some ways, a return to the way the economy worked before the Industrial Revolution two centuries ago. Until then, individual tradesmen, artisans, practitioners and professionals did most of the work. But the Industrial Revolution led to the rise of big manufacturing enterprises, industrial companies, corporate entities and professional firms that helped organize the way people worked. Shifting back to an economy based more on individual initiative may be a burden to those who like the stability, security and nine-to-five structure of a firm. But it will be a boon for those who are entrepreneurial, desire flexibility in their lives, want the freedom to dabble in various endeavors, or are eager to break into the job market. As The Economist recently reported: “Now technology makes the idea of a ‘firm’ less necessary. That has some benefits for workers and some drawbacks. But it doesn’t mean fewer workers.”
Technology can even help create more traditional jobs. One of the greatest technological advances in the past decade is a physical rather than digital one: the development of fracking techniques that permit new ways to extract oil and gas. That has led to a boom in energy and manufacturing jobs. Likewise, new robotic technology causes some companies to move factories back from countries with low-cost and low-skilled workers. Countries that embrace tech fastest will win in job growth.
The benefits of technology will not happen automatically. As in all previous eras of technological advance, it will require smart policies, such as making health-care coverage more portable and available to individuals. When the U.S. moved from an agricultural to an industrial economy that required more knowledge, it decided to make high school free and available to all citizens. In that spirit, the shift to a knowledge-based economy has prompted President Obama to propose making the first two years of college free and universally available. Similarly, we must make sure that every kid has access to broadband networks, computers and summer internships that develop 21st-century skills. Instead of fretting about the advance of technology, we should focus on ways that train people to become part of the workforce of the future.
This article was written by Walter Isaacson, CEO of the Aspen Institute.