Labor Revisited, Part Two: A Different World

Nowadays, fewer people are required behind the desk of an airline. Much of the work is still physical – someone still has to take your luggage and put it on the belt – but much manual labor has vanished into the digital world of sensing, digital communication, and intelligent response. Physical jobs are disappearing into the second economy, and I believe this effect is dwarfing the much more publicized effect of jobs disappearing to places like India and China.

There are parallels with what has happened before. In the early 20th century, farm jobs became mechanized and there was less need for farm labor, and decades later manufacturing jobs became mechanized and there was less need for factory labor. Now business processes, many in the service sector, are becoming “mechanized” and fewer people are needed. And this is exerting systematic downward pressure on jobs.

We simply don’t have paralegals in the numbers we used to. Or draftsmen, telephone operators, typists, or bookkeeping people. A lot of that work is now done digitally. We do have police and teachers and doctors, because there is still a need for human judgment and human interaction. But the primary cause of all of the downsizing we’ve had since the mid-1990s is that a lot of human jobs are disappearing into the second economy. Not to reappear.

Seeing things this way, it’s not surprising we are still working our way out of the bad 2008–09 recession with a great deal of joblessness. There’s a larger lesson to be drawn from this.

The second economy will certainly be the engine of growth and the provider of prosperity for the rest of this century and beyond, but it may not provide jobs, so there may be prosperity without full access for many. This suggests to me that the main challenge of the economy is shifting from producing prosperity to distributing prosperity. The second economy will produce wealth no matter what we do. Distributing that wealth has become the main problem.

For centuries, wealth has traditionally been apportioned in the West through jobs, and jobs have always been forthcoming. When farm jobs disappeared, we still had manufacturing jobs, and when these disappeared we migrated to service jobs. With this digital transformation, this last repository of jobs is shrinking – fewer of us in the future may have white-collar business process jobs – and we face a problem.

The system will adjust, of course, though I can’t yet say exactly how. Perhaps some new part of the economy will come forward and generate a whole new set of jobs. Perhaps we will have short workweeks and long vacations so there will be more jobs to go around. Perhaps we will have to subsidize job creation. Perhaps the very idea of a job and of being productive will change over the next two or three decades. The problem is by no means insoluble. The good news is that if we do solve it we may at last have the freedom to invest our energies in creative acts.

ECONOMIC POSSIBILITIES FOR OUR GRANDCHILDREN
In 1930 Keynes wrote a famous essay, “Economic possibilities for our grandchildren.” Reading it now, in the era of those grandchildren, I am surprised just how accurate it is. Keynes predicts that “the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is today.” He rightly warns of “technological unemployment,” but dares to surmise that “the economic problem [of producing enough goods] may be solved.”

If we had asked him and his contemporaries how all this might come about, they might have imagined lots of factories with lots of machines, possibly even with robots, with the workers in these factories gradually being replaced by machines and by individual robots. But that is not quite how things have developed.

We do have sophisticated machines, but in the place of personal automation (robots) we have a collective automation. Underneath the physical economy, with its physical people and physical tasks, lies a second economy that is automatic and neurally intelligent, with no upper limit to its buildout. The prosperity we enjoy and the difficulties with jobs would not have surprised Keynes, but the means of achieving that prosperity would have.

This second economy that is silently forming – vast, interconnected, and extraordinarily productive – is creating for us a new economic world. How we will fare in this world, how we will adapt to it, how we will profit from it and share its benefits, is very much up to us. – W. Brian Arthur

After thinking through all of this, I have to wonder what manufacturing will look like in 15 years, and what sort of economic possibilities it holds for my grandchildren. It’s all very exciting. A bit scary, too.

W. Brian Arthur is a visiting researcher with the Intelligent System Lab at the Palo Alto Research Center (PARC) and an external professor at the Santa Fe Institute. He is an economist and technology thinker and a pioneer in the science of complexity. His 1994 book, “Increasing Returns and Path Dependence in the Economy” (University of Michigan Press, December 1994), contains several of his seminal papers. More recently, Arthur was the author of “The Nature of Technology: What it is and How it Evolves” (Free Press, August 2009).