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Making the case for more automation and artificial intelligence

Written By | Jul 17, 2019
AI, Artificial Intelligence, Economy, Automation, Workers, Robots, Michael Busler

Lead Image: Human – Robot – The Digital Artist  by Pete Linforth Free for commercial use  No attribution required

WASHINGTON: There has been much written about the negative impact that automation and artificial intelligence (AI) may have on labor markets.  Considering that in the not too distant future, there will be robots on most assembly lines, computers driving cars, buses and trucks and more computer-assisted learning, we may see millions of high paying jobs disappear.

There is the argument that automation will cause massive unemployment. (Will Technology Cause Massive Unemployment? The Lessons Of History)

There will be no more truck drivers or bus drivers or even Uber drivers and no more assembly line factory workers.  Even in some professional fields like teaching or engineering, we may need fewer workers to get the same amount of output.

While many are viewing automation negatively, it is really an extremely positive event that will likely catapult the US economy.  There will be some structural unemployment problems in the short term, but our policy should be to encourage this transformation.

Without automation and AI, the US would experience a growth stifling labor shortage.  That’s a result of a few things:  the massive number of baby boomers that are retiring and leaving the workforce, the Gen-Xers and the millennials that have very low birth rates and the workers who are virtually unemployable in this and the future economy.

Workers will become more productive.

Automation and artificial intelligence will allow workers to become much more productive.  For instance, in a labor-intensive factory, there may be 100 workers using simple tools and producing 100 units per day or 1 unit per worker each day. (The Future of Artificial Intelligence In The Workplace)

Now with robots on the assembly line and AI running the factory, only ten workers are needed to produce the 100 units per day, which is 10 units per worker.

Each worker’s productivity has increased from 1 per day to 10 per day by switching from labor-intensive manufacturing to capital intensive manufacturing using robots and AI.  This huge increase in productivity is what will be needed to grow the economy in an environment of looming labor shortages.

The worry is that if the factory needs only ten of the original
100 workers, what happens to the other 90?
Increased productivity is critical for growth.

Doctors already are using robotics during surgery allowing them to perform more surgeries in shorter time periods while improving the quality of the outcomes.  (How AI-Assisted Surgery Is Improving Surgical Outcomes)

There is also teleconferencing, allowing doctors to examine patients from a distance.  This means doctors can examine many more patients per day.

AI, Artificial Intelligence, Economy, Automation, Workers, Robots, Michael Busler

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The increased productivity for physicians is very important since the country is moving toward policies that will provide insurance coverage and health care services to an additional 30 million currently uninsured Americans.  Since there is no plan to increase the number of physicians and other medical professionals, severe healthcare shortages will result. Making using technology to increase productivity vital.

Currently, the US economy is attempting to break out of a 10 year economic stagnation period. From 2006 to 2016, economic growth averaged about 2% annually.  However, since the second quarter of 2017, growth has averaged about 3%.  A pending labor shortage could prevent growth from reaching the 4% range, which would be closer to true economic prosperity.

The US hasn’t seen 4% annual growth in nearly 20 years.

That’s the longest period of slow growth on record. This time period produced fewer opportunities for Americans which does, incidentally, explain the appeal of Socialism to millennials. Because of the lack of opportunity, many millennials feel left behind.  They have never experienced true American style, economic prosperity.

The employment figures for the first half of this year indicate that the number of jobs created is decreasing from more than 200,000 per month to just over 160,000.  However, the economy continues to grow at a 3% rate, although the current quarter will likely dip below that.

That’s because productivity increased by 3.6%.

Since the unemployment rate is at a historical low and since there are currently about 1 million more job openings then there are unemployed people, the labor market can not provide sufficient numbers to allow the economy to grow.

A poor economy effects on birth rates

In addition, the poor economy of the past 20 years has significantly reduced birth rates. So there will not be large numbers of new entrants into the workforce. The only way we can have a shortage of labor and a high growth economy is that each worker must become much more productive, which is exactly what automation and AI will do.

The sooner artificial intelligence technology becomes mainstream, the better for the US economy.

As for the 90 workers above, they will become unemployed.  Many will re-train and find jobs related to utilizing automation and AI. Others will be \unemployed. Meaning the skills they have do not meet the skills needed in the high technology economy.  Some workers will be difficult to re-train.  Especially those workers who are close to retirement age. This is a problem and a solution will have to be found.

But the solution is not to discourage automation.

Fortunately, President Trump’s 2018 tax cut encourages capital formation so that the economy will have sufficient resources as more automation and AI are implemented.  From a policy standpoint, we should encourage this as quickly as possible.


Lead Image: Human – Robot – The Digital Artist  by Pete Linforth

Michael Busler

Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years.