rise of the robots

Technological change in general is a good thing. After all, it means that we can produce more output with fewer hours of work, giving us more leisure and more goods to consume. Nonetheless, for some individuals, the change can be stressful. Workers may find themselves unemployed, or underemployed, unable to adjust to a changing job market. Leisure is not very pleasant when it comes in the form of involuntary unemployment with less income.

Noah Smith, a PhD Candidate in Economics at the University of Michigan, explains. Click on the link below to read the full article, which is not gated.

Human capital — the value of a worker’s accumulated skill set — is a valuable asset, especially in the modern economy. But technological change can suddenly make human capital obsolete. Suppose you’re a financial adviser who helps wealthy clients diversify their investments. But then in the space of a few years, the invention of online trading, exchange-traded funds, robo-advisers and other financial technology makes your interpersonal skills suddenly less valuable (keep in mind that this is just a hypothetical). Your human capital has been abruptly devalued by technological change.

What do you do? You can either invest the time and effort to learn to work with the new technologies — to “race with the machine,” as economist Erik Brynjolffson likes to say — or you can try to retrain for a new occupation. Either way, it’s going to be a lot of time and effort, and there’s a risk your income at the end of the process won’t be as high as what you’re used to.

When the pace and direction of technological change is highly uncertain, this creates risks across the whole economy — risks for which there is no insurance policy you can buy. It’s a personal catastrophe to work for years learning a trade, only to see it made obsolete overnight by a fancy new app. At age 25 or 30, the thought of retraining for a new, potentially better job can be a fun, exciting challenge, but for a 50-year-old worker with a mortgage and kids in college, it can be a nightmare.

Noah Smith, “Most Workers Have Held Off the Machines So Far“, Bloomberg View, 21 April 2017.

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