Technology change and artificial intelligence has disrupted the labor market. One main concern is that it will displace jobs and lead to higher unemployment. Explain two factors that can lessen the impact of these changes on unemployment.
There is no credible economist who would disagree with the premise of new technologies displacing workers. Historical evidence supports the conclusion of economists, and it also may provide a clue to mitigating the impacts of technological change. Technology replacing workers is not a new phenomenon. The unique feature in the present is the speed at which it occurs. The rapidity of the evolution of technology does not allow for workers to prepare or adjust for the new reality produced by change.
Technology does not bear all the blame for unemployment. Globalization plays a significant role in shifting traditional manufacturing employment to other, less expensive labor markets. The erosion of manufacturing in the United States is beneficial to countries in Asia. However, at some point in the not-too-distant future, the nations who benefited from the technological revolution shifting labor-intensive production to their shores will face the same dilemma. How to deal with large segments of the population being unemployed will be a critical issue for every nation on the globe.
The two factors most often cited to mitigate the impact on the change are education (training) and expanding the social safety net. These solutions seem almost too simplistic and too common sense not to be implemented. History demonstrates education always lags behind the technology. The social safety net is expensive, and with high employment, there are fewer people paying and more people drawing from the limited resources. So, what other viable options are there to cushion the change?
One solution is to make the innovators of change and the beneficiaries of the profits (global corporations) to bear a larger share of the social costs. For example, let’s say a new technology replaces 1000 workers. Rather than send the workers home with a final check and directions to the unemployment office, the corporation should have to assume a portion of the costs to retrain the workers and financially support them for a predetermined length of time. As it stands currently, a corporation can terminate employees with little expenses. This form of cost-shifting to the government benefits investors but dramatically raises the cost to the government and taxpayers. Global corporations might then rethink or at least act more responsible in how laborers are treated.
A second solution is personal responsibility. Historical evidence demonstrates that during the Industrial Revolution and the Great Depression, many people prospered. Both of these were precipitated by technological change. The people who did well were those who kept their skills ahead of the current trend of the day. They were open to moving to other parts of the country where opportunities existed and, most importantly, they took personal responsibility for their economic well-being. They were frugal and had a long-term view. In modern society, it is far too easy to get caught believing things will not change. There will always be a place for innovators and people with multiple talents. Here is a good piece of advice: surfers prepare for the next wave, not the one they are riding!
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