Friday, May 26, 2017

Technological progress is NOT the cause of unemployment and inequality

Or that is what the recent Economic Policy Institute (EPI) Report by Lawrence Mishel and Josh Bivens says. Their study is essentially a critique of a recent study by Acemoglu and a co-author that suggests that robotization would have a large effect on employment generation. Note that this is not a requirement in mainstream neoclassical (marginalist) theory. Actually, technological progress should generate higher real wages and higher employment in the conventional model of the labor market (which is fraught with logical problems; yep capital debates apply here).

The reason, I mean the probable underlying ideological reason, for the narrative about robotization is that one cannot blame unemployment and inequality (wage stagnation) on policy decision made by conservative (neoliberal)   policy makers. It's the result of the inevitable changes in technology that are dictated by competition. The argument is not very different from the idea that it was not trade, but skill biased technical changed that caused most of the disruptions related to globalization. At any rate, below you can see the growth in labor productivity has actually slowed down in the last decades, and capital investment that incorporates the new technologies slowdown in tandem with productivity.
As Mishel and Bivens note, if automation and robotization were behind lower growth of output and employment you would need an acceleration of those trends in the recent period. Actually, productivity and investment were higher in the 50s and 60s, the Golden Age of capitalism, when employment growth was relatively high. There are many reasons for that, and I would point to the Kaldor-Verdoorn Law as the relevant regularity that explains why productivity is structurally connected to economic growth and employment generation.

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