The workers were livid. They believed that the introduction of new mechanical looms would jeopardize their jobs. In response, they broke into factories, seized the machinery, and set it on fire in the streets. Surprisingly, the public widely supported these actions, with even the authorities turning a blind eye. This event took place in 1675 and is just one example of a long history of workers fearing the potential harm to their livelihoods from labor-saving devices.
Centuries before, the adoption of the fulling mill caused outrage among workers who were forced to find new occupations. And around 60 years ago, Life magazine warned that automation would lead to job scarcity. However, instead of job losses, employment boomed.
Now, the launch of ChatGPT and other generative A.I. platforms has sparked a wave of exaggerated concerns about the fate of white-collar workers. People wonder if paralegals, or even a portion of lawyers, will become irrelevant. They question whether A.I. will be better than doctors at diagnosing certain medical conditions. And there are fears that machines could ghostwrite essays. The press has already started reporting on the first instances of job losses.
Unlike previous technological advancements, the emergence of A.I. has given rise to non-economic concerns as well, such as disinformation, privacy issues, and the fate of democracy. Some individuals even suggest that A.I. could have a more devastating impact on humanity than nuclear war. While these concerns are valid, I’ll leave it to others to delve into them. In terms of the economy, including jobs, history provides reassurance with a few cautionary signs. The current problem is not an excess of technology, but rather a lack of it.
We’ve had various forms of artificial intelligence for thousands of years. For instance, the abacus, believed to have been invented over 4,000 years ago, replaced more tedious mathematical calculation methods, saving time and reducing workload.
When I started my career in finance in the early 1980s, we relied only on handheld calculators to aid in numerical analysis. We painstakingly wrote calculations in pencil on large sheets of paper, which became known as spreadsheets, and they were then typed up by a secretarial pool. Any changes necessitated redoing the entire spreadsheet. Now, it’s as simple as clicking a mouse.
Less than three decades ago, research similar to what we do in libraries required hours of searching through dusty books. Today, it only takes a few keystrokes. Unsurprisingly, the number of librarians has remained stagnant since 1990, while total employment has grown by over 40 percent.
Numerous job categories have vanished. When was the last time you spoke to a telephone operator or rode in a manned elevator? These tasks have been replaced by new categories of work. According to a study co-authored by M.I.T. economist David Autor, around 60 percent of jobs in 2018 didn’t exist in 1940.
The Great American Jobs Machine continued to churn. In the decade after Life magazine’s alarm about robots, the United States created 20.2 million jobs. Today, the unemployment rate stands at 3.6 percent, just slightly above its 50-year low. The field of finance, despite the rise of computers and technologies like Excel, has seen a significant increase in employment due to enhanced productivity.
When worker productivity improves, it leads to higher wages and cheaper goods, which in turn boosts purchasing power and stimulates consumption. This, in the long run, prompts increased production and the creation of new jobs. Therefore, technology, whether in the form of looms, robots, or artificial intelligence, is vital to achieving lasting economic progress and improving living standards.
Generative A.I., as remarkable and unsettling as it can be due to its transformative potential, is simply another step in the ongoing journey of progress. Were our ancestors any less astonished when they witnessed inventions like the telephone or the light bulb?
From 1920 to 1970, the heyday of commercial innovation, productivity grew annually at a rate of 2.8 percent. Since then, apart from a brief acceleration period between 1995 and 2005 during the computer revolution, the average rate of growth has been a modest 1.6 percent. Pessimists interpret this as a sign that the most impactful technological advancements are in the past. However, I believe this should motivate us to fully embrace A.I.
The concept of “full speed ahead” remains to be seen. While some believe that A.I. will be revolutionary, others are skeptical about its game-changing potential. My personal estimate is that it will contribute to a modest increase in productivity, but not to the levels seen in the previous century.
It is worth noting that the benefits of productivity growth do not always reach workers as effectively as desired. In recent times, even the modest productivity growth hasn’t translated into significant wage increases for workers. Since 1990, labor efficiency has risen by 84 percent, but average real hourly compensation has only increased by 56 percent. Instead, much of the foregone worker compensation has gone into corporate profits, leading to a stock market boom and widening income inequality. Various factors contribute to this disconnect, such as declining union membership, imports, and anti-labor practices.
Government intervention can help alleviate these issues. For over a century, redistribution has been necessary to manage the consequences of industrial and technological progress. The progressive income tax, introduced in 1913, was implemented to counteract the immense income inequality of the Gilded Age. More factory improvements and increasing income inequality in the 1920s paved the way for New Deal policies, including enhanced labor protection and the introduction of Social Security.
Sadly, it is clear that the government has failed to fulfill its obligations in recent years. Frustrated white factory workers in the Midwest with stagnant or declining wages became supporters of Donald Trump, despite his policies favoring the wealthy. With only 22 percent of Americans believing that the country is on the right track, our nation feels politically and socially divided, unlike any time I’ve witnessed in my 70-year lifetime.
We did a poor job of preparing Americans for the transition from a manufacturing-based economy to one dominated by the service sector. We must do better this time around.
If artificial intelligence proves to be as transformative as its proponents suggest, we will require substantial improvements in education and training. The impact won’t only be felt by factory workers; it will affect people across various industries and at all employment levels, from financial analysts, coders, graphic designers, and customer service agents to call center workers.
According to a recent report from Goldman Sachs, one of the most optimistic voices on technology, A.I. has the potential to restore productivity growth to the levels of the mid-20th century. I sincerely hope that the Goldman report proves accurate and that A.I. ushers in a new era of technological and economic progress. However, it is crucial that we take the necessary steps to ensure that the benefits are shared widely.
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