Economic growth no longer creates job opportunities

The Luddite movement failed in 19th century. Their arguments that technology destroy job places were fooled as they are called ‘Luddite fallacy’. There are compelling evidences that show advance in technology results in more robust economy, creating more job opportunities. So many economists firmly believe technology is one of the main factor of job creation.

“Indirect effects occur when technological improvements increase demand and lower the prices consumers pay their for goods and services, thereby giving them more purchasing power and stimulating growth in other sectors, which leads to a self-reinforcing economic expansion.” — Are Robots Taking Our Jobs, or Making Them?

It seemed that this claim holds true for a while. However, then comes a picture.

A picture is worth a thousand words. In above picture, it is clear that since 2000 employment has no longer increased while productivity has been at a record high. It shows that technological development now doesn’t mean expansion of job market anymore. Why this happens?

Some might say that this is because technology replaced people. Of course, it’s obvious that some technology takes the places where people used to work. However, technology also create new jobs. As a matter of fact, technology has created more jobs than it destroyed until 20 years ago, as the above picture shows. So, just saying that technology destroyed jobs cannot be an answer. Right question might be ‘What’s the differences between the past and today?’

Paul Krugman, a famous economist and columnist, answered this question with two terms — Robots and Robber Barons. Robots, automation, and software are substituting not only low-skilled workers, but also sophisticated, intellectual workers. For an example, Google is experimenting auto-driving cars, which can drive better than humans. This is very different trend from the age of Industrial Revolution, where technology displaced only physical and repetitive workers. As technology develops further, this phenomenon would become more serious.

Second, Monopoly power can be an huge factor of today’s unemployment, as Krugman said:

What about robber barons? We don’t talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.

To sum up, Technology has been spurring productivity, replacing job opportunities for people. Corporations have earned a lot of profits by introducing automation, at a labor’s expense. Now, technology no longer creates job opportunities and economic expanse doesn’t guarantee high employment anymore. We are in the age of ‘jobless growth’.