Automation creates more jobs than it destroys, while also boosting wages

The labor market impact of technology is often viewed through the lens of job creation or job destruction. Economists — with near ubiquity — treat technology as being either labor displacing or labor reinstating. If technology displaces workers, jobs are lost. If technology creates (or reinstates) work, jobs are created. Under this dichotomy, the key question is whether technology creates more jobs than it destroys. The World Economic Forum  that by 2025, technology will create at least 12 million more jobs than it destroys, a sign that in the long run, automation will be a net positive for society.

Technology’s job boosting ability is often touted by tech advocates. Take Waymo, the Google backed startup developing driverless taxis. In recent years, the company’s sensor-laden, white minivans have become a common sight in some American suburbs. However, mobility sans driver raises concerns about job losses. What will otherwise would-be cab (or more likely Uber and Lyft) drivers now do?

3. Waymo’s response? Take up new jobs created by self-driving technology, gigs like self-driving fleet technicians, rider support operators, and software engineers. “We can be helpful as a company that creates jobs,” noted one Waymo exec.

Job creation isn’t everything, however. Equally important is what workers can earn for working those jobs. Do wages rise or fall owing to technological progress?

Bots Can Boost Wages

Wages — conventional economic theory posits — are dictated by supply and demand. When jobs require specialized skills, wages rise because fewer people can meet demand for these skills. Wages also rise when workers are — regardless of requisite skill — scarce because there are fewer people available to supply their labor. This explains why pilots earn more than plumbers, chemists more than cashiers. Pilots require more specialized skills than plumbers and chemists are (in part because of pricy education requirements) less plentiful than cashiers.

Work by the late Alan Krueger hinted at automation’s wage-boosting abilities. Krueger found that computer-savvy workers — laborers who worked alongside automation — commanded wage premiums of 10 to 15% more than their computer-illiterate counterparts. Economic historian James Bessen  that over the past two centuries, wages have risen 10-fold owing to technological progress. Bessen credits wage growth for many ordinary workers to new technology.