This is part of a series of articles in the Economist’s recent edition on the oft discussed risks to jobs from AI. Whilst most articles show that there is yet little evidence of job losses directly attributable to AI, the world – people and their governments should prepare for such an eventuality. However, this specific piece looks at historical precedents of technological disruptions to employment. The good news is that there is no evidence – humanity has indeed sailed through historical tech disruptions.
It begins by saying there isn’t a jobs challenge just yet: “The labour market certainly is not cracking yet. The share of the OECD’s working-age population with a job keeps breaking records (see chart 1), unemployment across the club of mostly rich countries is just 5%, and America employs more people than ever in “AI-exposed” industries like law. American graduates have been struggling since before OpenAI launched ChatGPT in late 2022.”
Then it makes the point about why mass employment from tech is unprecedented in history. “Historical data suggest that technological diffusion always proceeds slowly. In a paper published in 2012 Robert Gordon of Northwestern University found that since 1300, growth of GDP per person at whatever was the world’s most sophisticated economy of its time has never exceeded about 2.5% a year. When other countries grew faster than this, they did so by catching up with a richer place that, almost by definition, sparked earlier wealth-creating technological progress. And the fact that growth at the frontier of innovation was slower meant that so was the pace of any job destruction.”
But the instance most doomsayers point to is the industrial revolution: “James Watt’s inventions in the 1760-1780s made steam engines efficient enough to power factories. This led to a period of blistering economic growth that appeared to coincide with stagnation in inflation-adjusted wages. Between 1790 and 1840 these barely budged, even as capitalists earned vast profits.”
This stagnation often referred to as the Engels pause, named after “Friedrich Engels, a capitalist-heir-turned-communist who described it in “The Condition of the Working Class in England”, his account of Manchester’s slums in the 1840s.”
However, the Economist argues that this was a case of corelation being mistaken for causation: “The composition of British employment saw little churn until the 1850s, and then only as much as it does today (see chart 2). Moreover, if technology destroyed jobs, it created plenty more. Between 1760 and 1860 the number of Britons in work ballooned from 4.5m to 12m. Unemployment generally remained modest (see chart 3)… The average employer paid workers reasonably fairly after selling his wares and deducting the cost of materials. He did not profit from exploiting his staff, as Engels supposed. The problem for labourers was less unfair pay than sharp rises in the cost of living. Food prices rose steadily, and sometimes soared, because of war and high tariffs on grain imports. The villains of the Industrial Revolution were politicians, not machines.
…Nicholas Crafts, an economic historian, summed it up neatly. The Industrial Revolution, he wrote, is “not a template” for “technological change that [boosts] productivity at the expense of a significant …decline in labour’s share of national income”. In short, those warning of AI-driven mass unemployment are predicting something that has never happened before.
That does not mean it can never happen at all. The first signs would be sharply rising productivity combined with weak real-wage growth in America, the world’s frontier economy. This would show up as an increase in GDP per person, above Mr Gordon’s ceiling of 2.5%, and a simultaneous jump in corporate profits, reflecting the gains from higher output flowing to capital, not labour.”
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