Hal Varian (Google Chief Economist) – Bots & Tots (Sep 2018)


Chapters

00:00:06 Bots and Cots: The Impact of Automation and Demographics on the Labor Market
00:02:35 Robots and the Future of Jobs
00:09:45 Machines and Automation: The Limits of Human Replication
00:12:16 Assessing the Future Impact of Automation on Employment
00:14:29 Exploring Work and Education Trends in the Digital Age
00:17:37 Demographic Shifts and Labor Force Implications
00:24:21 Petra Moser: Economic Impact of Demographic Shifts: Mechanization and Immigration
00:29:49 Petra Moser: Economic History and Technological Change

Abstract

The Future of Work: Automation, Demographics, and the Shifting Landscape of Labor

Abstract

This article explores the dynamic interplay between automation, demographics, and labor markets. Utilizing an inverted pyramid structure, it highlights the most critical points at the outset: the impact of automation and demographic shifts on labor demand and supply, the task-centric view of the labor market, and the varying implications of automating tasks across different sectors. Additionally, it discusses the influence of demographics on labor force growth and the potential of automation in mitigating demographic challenges. The article concludes by examining the broader social and economic implications of these trends.



Introduction

In an ever-evolving world, the nature of work is undergoing profound transformations, driven by two primary forces: automation and demographic changes. These forces are reshaping the labor market, altering job roles, and redefining the balance between human and machine labor. This article delves into the multifaceted relationship between these elements, offering insights into the future of work.



Automation and the Labor Market

Automation, led by advancements in robotics and artificial intelligence, has significantly impacted the labor market. Technological advancements in automation and robotics are rapidly evolving, creating apprehensions about job displacement, similar to concerns raised in the early 1800s. Hal Varian, a prominent economist, emphasizes that while automation may reduce the demand for human labor, it is crucial to consider its interaction with demographic trends. The automation of tasks, rather than entire jobs, is a key theme. For instance, while certain roles like elevator operators have persisted despite automation, the tasks they perform have evolved. The effectiveness of robots is most pronounced in standardized environments with repetitive tasks, as seen in industries like automobile manufacturing and agriculture. However, challenges arise in unpredictable or complex environments, such as autonomous vehicles navigating human behavior or robotic housekeepers handling diverse housekeeping tasks.

Elon Musk emphasizes the continued importance of humans in jobs that require diverse and complex skills, which machines currently struggle with. In heterogeneous environments, today’s robots often encounter difficulties adapting and performing effectively.



Demographics and Labor Supply

Demographic shifts are equally critical in shaping the labor market. Demography, with its ability to forecast societal changes over decades, indicates significant transformations in labor supply. The United States, among other countries, is experiencing a slowdown in labor force growth due to aging populations and stagnating participation rates, particularly among women. These demographic changes have direct implications for the labor market, including potential worker shortages and increased dependence ratios. Automation is seen as a possible countermeasure to these demographic challenges, especially in countries with severe aging populations and shrinking labor forces.

The U.S. is currently experiencing its lowest labor force growth since records began, largely due to retiring baby boomers and saturated female participation. The labor force growth rate is half that of the population growth, indicating a potential shortage of workers to meet consumer demand. Without immigration, countries like the U.S. and Canada would face a shrinking labor force.

Comments by Petra Moser:

Changing Dependency Ratios:

Speaker compares dependency ratios across countries, including US, Canada, Mexico, China, India, France, and Germany. Europe shows a particularly concerning trend with an aging population.

Hometown Case Study:

Speaker’s hometown in Germany has seen a significant population decline and aging population. Traditional industries, such as agriculture and gemstone cutting, have been replaced by mechanization and globalized production.

Mechanization and Skill Displacement:

Mechanization has eliminated highly skilled jobs in gemstone cutting, leading to job losses and migration from rural areas.

* Training programs in developing countries, such as Afghanistan, now teach simplified gemstone cutting techniques using machines.

Immigration and Melting Pot:

The speaker’s hometown has experienced a significant influx of immigrants, primarily from foreign countries. These immigrants fill essential jobs left vacant by the departure of younger locals.

Impact of Natural Disasters:

A recent flood in the speaker’s hometown has exacerbated labor shortages. Skilled workers are in high demand, but there is a lack of availability, leading to challenges in providing basic services like heating and running water.



The Interplay of Automation and Demographics

The interaction between automation and demographic changes is complex. While automation can address certain gaps created by demographic shifts, it also introduces new challenges. For instance, the potential full automation of roles like cashiers due to electronic payment systems highlights how technology can supplant certain job functions. However, demographic trends suggest a more significant impact on labor supply than automation on labor demand. This interplay has implications for the future, with potential worker shortages and the need for innovative solutions to address the challenges posed by an aging population. Labor shortages have been observed in recent years, attributed to both macroeconomic factors and long-term demographic effects. However, the economy has demonstrated resilience in absorbing significant shocks to the labor market, as seen with the entry of the baby boom generation into the labor market in the 1960s and 1970s, as well as the increased participation of women in the workforce during the same period.

Estimates of job loss due to automation vary widely, with no clear consensus. However, the 10 largest occupations in the U.S., which comprise 21 percent of employment and include service jobs like retail salesperson, cashier, food prep, and registered nurse, have varying levels of automatability. Some tasks within these occupations may be automated, while others require human interaction and judgment.

Social and Economic Implications

The convergence of these trends has profound social and economic implications. The changing nature of jobs and tasks, the potential for job losses in various sectors, and the impact on service roles are crucial considerations. Moreover, the role of technology in providing cognitive assistance and altering skill requirements, as seen with the widespread use of how-to videos and educational content, is reshaping the workforce. Economic factors influencing birth rates and labor force participation also play a pivotal role in determining the future of labor markets.

Trust plays a significant role in the interaction between humans and automated systems. Humans’ ability to discern truthfulness and provide a trustworthy experience remains a crucial element in many service jobs.

Economic History and Technological Change:

* The speaker expresses skepticism about YouTube videos, particularly those related to DIY projects, as they can be misleading and lead to unsuccessful outcomes.

* Economic history can shed light on the relationship between demographics and technology. In the United States, a severe labor shortage during the 19th century spurred the development of mechanization as a solution.

* The Bracero Program brought unskilled workers from Mexico to the United States, creating a labor surplus. When the program ended, states that were highly dependent on the program did not experience a wage increase as expected. Research suggests that the lack of wage increase may be due to increased mechanization in response to the labor shortage caused by the program’s termination.

* Empirical evidence is needed to disentangle the complex relationship between trade, migration, and technological change. Economic history offers a valuable framework for conducting such research, providing insights into the historical patterns and dynamics of these factors.



Conclusion

In conclusion, the interplay between automation, demographics, and labor markets is reshaping the future of work in significant ways. The impact of these forces is not only limited to the labor market but also extends to broader societal and economic fields. Understanding this dynamic is crucial for policymakers, businesses, and individuals as they navigate the challenges and opportunities of the changing landscape of work. The need for continuous research and innovative solutions is paramount to address these ongoing transformations effectively.


Notes by: OracleOfEntropy