Technological Unemployment: Why Keynes Is More Relevant Than Ever

By Estela Souto and Christian Davepon

(image taken from the Institute for Ethics and Emerging Technologies)

Need we be afraid of job famine?” This title sounds like a popular and recent discussion, but it was the title of an article published in Nation’s Business in January 1927, whose focus was the danger of lack of employment due to the rapid adoption of new techniques of production.

Technological displacement of labour must date to man’s first use of the wheel, but as a problem of major interest to economists, the issue made its first appearance in the early 1800s, by David Ricardo[1], in the context of the Industrial Revolution, which may have first occurred in Britain, as explained by Robert C. Allen[2] and other economists, due to the higher wages offered to British workers than those applied in other countries. This made the costly invention and introduction of new technologies economically interesting in Great Britain.

The concept of “technological unemployment” was then further explored by John Maynard Keynes, who defined it as the “unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour”[3]; and according to who “the increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption”.

All of such discussions and debates have reached Walter Reuther[4], a well-known American union’s leader in the 1950ies, who used to share hopes that technological changes in the production process would increase the working class’s access to cultivated leisure, while seeing the thread of an increase of unemployment equivalently[5]. Reuther’s intention was not to resist automation but to manage its implementation through both collective bargaining and progressive political victories. The main achievements thereof may have been only possible due to his efforts to draw attention to consumer’s demand: automated abundance was desirable but possibly destructive, causing unwanted consequences for both workers and corporations[6].

However, in the 1950ies Detroit’s unemployment was at 8.3%, being automation the main suspect to cause that[7]. Union leaders therefore started trying to control the pace of technological changes while claiming for protections, such as for the “guaranteed annual wage” (GAW), a continued income that should be provided by companies for laid-off employees. The hope was that the GAW would encourage car manufacturers to wait and only introduce new technologies in periods of growth, when displaced employees could be absorbed into other jobs.

Although not being successful in most of his claims, some positive actions resulted from all of Reuther’s fights: in the beginning of 1955, Ford began contributing to a trust fund on which laid-off workers could draw for up to six months, later extended to a whole year[8].

Technological Unemployment more relevant as ever

In today’s world, technological unemployment is more than ever discussed. The current technological revolution is changing today’s world fundamentally. The recent achievements in technology cause strong fears among the population, especially related to negative impact on employment. Undoubtedly, this fear can be compared to the one earlier generations felt during technological revolutions. However, it might be ignorant to say that earlier generations were wrong with their dystopia of a jobless future and so are we today. The situation differs: Where in 20th century Detroit, low skilled workers temporarily lost their jobs, but were reintegrated into labour through education; the level of skills today does not guarantee employment anymore. Even so perceived high skilled jobs are or will soon be victims of the technological progress as artificial intelligence (AI) and machine learning have the potential to take over complex jobs. The fact that a couple of pepper robots took over a SoftBank cellphone shop in Tokyo[9] and replaced the entire sales personal, strengthens this point and shows that technological progress affects not only all levels of skills but concurrently all sectors, even the service sector.

What can be done about it?

The consequences of the described development will be manifold: Increasing unemployment, the consequential decrease of the budget available for consumption, challenged social systems in the industrial countries of the western world. An alternative way of perceiving work and organising what we call “unemployment” today is needed to overcome this major challenge. Discussions such like the one on Universal Basic Income (U.B.I.), which can very much relate to the GAW, also opens the debate on who should carry the burdens of the oncoming technological revolution — Companies? The state? Taxpayers? Moreover, when discussing these topics, one should consider the interests behind such debates. As Reuther once asked Ford — How are these machines going to buy your cars? — while supporting U.B.I.[10], Mark Zuckerberg puts emphasis on his answer to the question, acknowledging that machines are probably not going to buy products advertised on his platform.

[1] As mentioned by Gregory R. Woirol (1996) in The Technological Unemployment and Structural Debates, p. 25

[2] Allen, Robert (2007), The Industrial Revolution in Miniature: The Spinning Jenny in Britain, France, and India

[3] Keynes, John Maynard (1930), Economic Possibilities for our Grandchildren

[4] American labor union leader, who became president of the United Automobile Workers in 1946 and years later the head of the Congress of Industrial Organizations

[5] Steigerwald, David (2010), Walter Reuther, the UAW, and the dilemmas of automation, Ohio State University

[6] Idem

[7] Idem

[8] Idem