This is a grim prediction. But it's not nearly as far-fetched as it sounds. Economist Paul Krugman recently remarked that our long-standing belief in skills and education as the keys to financial success may well be outdated. In a blog post titled "Rise of the Robots," he reviewed some recent economic data and predicted that we're entering an era where the prime cause of income inequality will be something else entirely: capital vs. labor.
Until a decade ago, the share of total national income going to workers was pretty stable at around 70 percent, while the share going to capital—mainly corporate profits and returns on financial investments—made up the other 30 percent. More recently, though, those shares have started to change. Slowly but steadily, labor's share of total national income has gone down, while the share going to capital owners has gone up. The most obvious effect of this is the skyrocketing wealth of the top 1 percent, due mostly to huge increases in capital gains and investment income.
In the economics literature, the increase in the share of income going to capital owners is known as capital-biased technological change. Let's take a layman's look at what that means.
The question we want to answer is simple: If CBTC is already happening—not a lot, but just a little bit—what trends would we expect to see? What are the signs of a computer-driven economy? First and most obviously, if automation were displacing labor, we'd expect to see a steady decline in the share of the population that's employed.Second, we'd expect to see fewer job openings than in the past. Third, as more people compete for fewer jobs, we'd expect to see middle-class incomes flatten in a race to the bottom. Fourth, with consumption stagnant, we'd expect to see corporations stockpile more cash and, fearing weaker sales, invest less in new products and new factories. Fifth, as a result of all this, we'd expect to see labor's share of national income decline and capital's share rise.
These trends are the five horsemen of the robotic apocalypse, and guess what? We're already seeing them, and not just because of the crash of 2008. They started showing up in the statistics more than a decade ago. For a while, though, they were masked by the dot-com and housing bubbles, so when the financial crisis hit, years' worth of decline was compressed into 24 months. The trend lines dropped off the cliff.
How alarmed should we be by this? In one sense, a bit of circumspection is in order. The modern economy is complex, and most of these trends have multiple causes. The decline in the share of workers who are employed, for example, is partly caused by the aging of the population. What's more, the financial crisis has magnified many of these trends. Labor's share of income will probably recover a bit once the economy finally turns up.
But in another sense, we should be very alarmed. It's one thing to suggest that robots are going to cause mass unemployment starting in 2030 or so. We'd have some time to come to grips with that. But the evidence suggests that—slowly, haltingly—it's happening already, and we're simply not prepared for it.
by Kevin Drum, Mother Jones | Read more:
Illustration by Roberto Parada
