Making sense of Structural Unemployment and the Luddite Fallacy

Making sense of technology and science has been a preoccupation of Western culture since the advent of the enlightenment. There are numerous views on the effects of automation on employment rates. Automation of employment involves the replacement of human labor by an automated system.

When John Maynard Keynes wrote his essay ”Economic Possibilities for our Grandchildren” he never at any point suggested that his economic model did not involve dangers.  Keynes stated that there was a: “new disease”: “technological unemployment…due to our discovery of means of economizing the use of labor, outrunning the pace at which we can find new uses for labor.”  

There are three types of unemployment recognized by economists.

Frictional unemployment is when people make career moves between jobs or change career tracks from one type of job to another. It is a sign that the economy is working to maximize utility even though time is usually required to match people with new industry. Structural unemployment occurs when there is an Industry change in technology use. The development of ATM’s is often cited as an example, but ATM’s also serve consumer after normal banking hours and are not the best example because they serve ends other than mere replacing of workers. A standalone kiosk at a grocery store and placing orders for goods and services online is another example.  

Cyclical unemployment is the real boogeyman. It results from a decline in demand for goods and service and is based on the business cycle.

President Obama suggested that technology and automation were in part responsible for the U.S. economy’s sluggish job growth in a 2011 interview with NBC’s Ann Curry. The President stated: “There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.” The idea that technology automation leads to structural unemployment as described by the President is derided by Industry and Economists alike as the Luddite Fallacy. But it’s not as if the so called Luddites are all suffering from logical delusions or in need of mental health care. Structural unemployment IS the result of fundamental shifts in an economy at the organizational level. Structural unemployment is defined as a form of industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand. It is doom and gloom at its most prescient and requires systemic efforts to root out. Keynes never said his economic model did not involve societal or systemic societal risk.

The internet is a primary example of why the cautionary comments of economists like Keynes have shaped the President’s views. The internet has facilitated the efficient outsourcing of jobs so proficiently those whole swaths of the workforce and economy have been devastated and at present, the economic system has yet to consistently ensure a method of replacing these jobs with new ones quickly enough to maintain the previous success rates that produced the forward momentum that typified the economic gains of the 1950’s for all elements of society. In the United States real wages have barely moved in over four decades and in countries in Europe, while employment is on the rise, wages have been static for the previous ten years. History in this sense works against the reasoning of economists. The history of rising wages and living standards that resulted from the Industrial Revolution over the long term belies the often violent and dirty history of industrial relations. It is therefore not surprising that old anarchist discourses were recycled in the days after September 11th 2001. Anarcho-Capitalism became a buzzword in Europe if not the mainstream US and is now a full-fledged movement that in some quarters has allied itself to religion. A quick glance at Facebook shows a number of “Christian Market Anarchism” groups have steadily grown over the past decade.

Farming has experienced a revolution in technology that has hit both domestic and international workers hard. Typically middle class manufacturing jobs have been and continue to be thoroughly stereotyped as bearing the brunt of globalization. The service sector has been positioned to try and blunt the force of the impact of loss of jobs due to technological innovation in fields such as beauty, tourism, health, recreation and alternative medicine. Arguably, not all of these industries have produced infrastructure growth quickly enough or on the scale necessary to fully absorb the technology revolution depending on which industry is being discussed.

As society emerges into the 21st century, the challenge of dealing with technological automation requires outside the box thinking. The Luddite fallacy that is cited as a rebuttal to claims of structural unemployment loses all value if industry and consumers do not rise to the challenge.

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