[Marxism] The End of Labor: How to Protect Workers From the Rise of Robots

Louis Proyect lnp3 at panix.com
Wed Jan 16 16:38:46 MST 2013


The End of Labor: How to Protect Workers From the Rise of Robots
By Noah Smith

Technology used to make us better at our jobs. Now it's making many of 
us obsolete, as the share of income going to workers is crashing, all 
over the world. What do we do now?

Here's a scene that will be familiar to anyone who's ever taken an 
introductory economics course. The professor has just finished 
explaining that in economics, "efficiency" means that there are no 
possible gains from trade. Then some loudmouth kid in the back raises 
his hand and asks: "Wait, so if one person has everything, and everyone 
else has nothing and just dies, is that an 'efficient' outcome?" The 
professor, looking a little chagrined, responds: "Well, yes, it is." And 
the whole class rolls their eyes and thinks: Economists.

For most of modern history, inequality has been a manageable problem. 
The reason is that no matter how unequal things get, most people are 
born with something valuable: the ability to work, to learn, and to earn 
money. In economist-ese, people are born with an "endowment of human 
capital." It's just not possible for one person to have everything, as 
in the nightmare example in Econ 101.

For most of modern history, two-thirds of the income of most rich 
nations has gone to pay salaries and wages for people who work, while 
one-third has gone to pay dividends, capital gains, interest, rent, etc. 
to the people who own capital. This two-thirds/one-third division was so 
stable that people began to believe it would last forever. But in the 
past ten years, something has changed. Labor's share of income has 
steadily declined, falling by several percentage points since 2000. It 
now sits at around 60% or lower. The fall of labor income, and the rise 
of capital income, has contributed to America's growing inequality.


What can explain this shift? One hypothesis is: China. The recent entry 
of China into the global trading system basically doubled the labor 
force available to multinational companies. When labor becomes more 
plentiful, the return to labor goes down. In a world flooded with cheap 
Chinese labor, capital becomes relatively scarce, and its share of 
income goes up. As China develops, this effect should go away, as China 
builds up its own capital stock. This is probably already happening.

But there is another, more sinister explanation for the change. In past 
times, technological change always augmented the abilities of human 
beings. A worker with a machine saw was much more productive than a 
worker with a hand saw. The fears of "Luddites," who tried to prevent 
the spread of technology out of fear of losing their jobs, proved 
unfounded. But that was then, and this is now. Recent technological 
advances in the area of computers and automation have begun to do some 
higher cognitive tasks - think of robots building cars, stocking 
groceries, doing your taxes.

Once human cognition is replaced, what else have we got? For the 
ultimate extreme example, imagine a robot that costs $5 to manufacture 
and can do everything you do, only better. You would be as obsolete as a 

Now, humans will never be completely replaced, like horses were. Horses 
have no property rights or reproductive rights, nor the intelligence to 
enter into contracts. There will always be something for humans to do 
for money. But it is quite possible that workers' share of what society 
produces will continue to go down and down, as our economy becomes more 
and more capital-intensive. This possibility is increasingly the subject 
of discussion among economists. Erik Brynjolfsson has written a book 
about it, and economists like Paul Krugman and Tyler Cowen are talking 
about it more and more (for those of you who are interested, here is a 
huge collection of links, courtesy of blogger Izabella Kaminska). In the 
academic literature, the theory goes by the name of "capital-biased 
technological change."

The big question is: What do we do if and when our old mechanisms for 
coping with inequality break down? If the "endowment of human capital" 
with which people are born gets less and less valuable, we'll get closer 
and closer to that Econ 101 example of a world in which the capital 
owners get everything. A society with cheap robot labor would be an 
incredibly prosperous one, but we will need to find some way for the 
vast majority of human beings to share in that prosperity, or we risk 
the kinds of dystopian outcomes that now exist only in science fiction.


How do we fairly distribute income and wealth in the age of the robots?

The standard answer is to do more income redistribution through the 
typical government channels - Earned Income Tax Credit, welfare, etc. 
That might work as a stopgap, but if things become more severe, we'll 
run into a lot of political problems if we lean too heavily on those 
tools. In a world where capital earns most of the income, we will have 
to get more creative.

First of all, it should be easier for the common people to own their own 
capital - their own private army of robots. That will mean making "small 
business owner" a much more common occupation than it is today (some 
would argue that with the rise of freelancing, this is already 
happening). Small businesses should be very easy to start, and 
regulation should continue to favor them. It's a bit odd to think of 
small businesses as a tool of wealth redistribution, but strange times 
require strange measures.

Of course, not all businesses can be small businesses. More families 
would benefit from owning stock in big companies. Right now, America is 
going in exactly the opposite direction, with companies going private 
instead of making their stock available for public ownership. All large 
firms should be given incentives to list publicly. This will definitely 
mean reforming regulations like Sarbanes-Oxley that make it risky and 
difficult to go public; it may also mean tax incentives.

And then there are more extreme measures. Everyone is born with an 
endowment of labor; why not also an endowment of capital? What if, when 
each citizen turns 18, the government bought him or her a diversified 
portfolio of equity? Of course, some people would want to sell it 
immediately, cash out, and party, but this could be prevented with some 
fairly light paternalism, like temporary "lock-up" provisions. This 
portfolio of capital ownership would act as an insurance policy for each 
human worker; if technological improvements reduced the value of that 
person's labor, he or she would reap compensating benefits through 
increased dividends and capital gains. This would essentially be like 
the kind of socialist land reforms proposed in highly unequal Latin 
American countries, only redistributing stock instead of land.

Now of course this is an extreme measure, for an extreme hypothetical 
case. It may turn out that the "rise of the robots" ends up augmenting 
human labor instead of replacing it. It may be that technology never 
exceeds our mental capacity. It may be that the fall in labor's income 
share has really been due to the great Chinese Labor Dump, and not to 
robots after all, and that labor will make a comeback as soon as China 
catches up to the West.

But if not - if the age of mass human labor is about to permanently end 
- then we need to think fast. Extreme inequality may be "efficient" in 
the Econ 101 sense, but in the real world it always leads to disaster.

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