It is common to hear in the media or in casual conversation stories about jobs being eliminated or destroyed by technology. This process is almost always seen in a negative light, as a destructive or tragic thing to happen to the country and its people. Instead the sensible response is to cheer every such announcement. Every time this happens, it is a sign of growing prosperity and economic advancement. To understand why we need to start by considering the source of our prosperity.
How do we achieve higher living standards?
Basic economic reality is very simple. Our living standards are determined by how much we produce. At the individual level government can interfere with this process to some degree using taxes, welfare, spending, and borrowing. The taxation part is sad for the man who was robbed of his own product. Meanwhile the spending allows someone to have a living standard higher than her production indicates. At the national level government action doesn’t change the reality that the total consumption of the people in a country cannot be different from the total output of the people of the country. All government can do is shift the output around a bit. Money is just a medium to ease the process of exchanging our production with others. It is fantastically beneficial because it makes the trading so much easier, but one downside is that it makes the simplicity of this law obscure. People produce things. They trade their product with others to acquire what they want for themselves, in the quantity their output allows. The more people produce, the more they can consume. This is true for individuals and it is true for countries.
What does it mean when jobs are eliminated by technology?
When an employer lays off workers because of technological change, it merely means that they were no longer needed to meet whatever need that production met. If an enterprise reduces output or closes because of technological change, it is because somewhere else the needs those products satisfied are being met in a cheaper or better manner. Either way, it is because somewhere, someone is producing more output with fewer people. That is a good thing for living standards and we should all celebrate. The consequence is that some or all of the workers are no longer adding enough to production to make it profitable to employ them. So the enterprise decides to end the employment relationship for those workers.
Why don’t workers just agree to work for less?
The most obvious alternative to job losses would be for workers to simply agree to work for less pay or lesser conditions. Once the pay was less than the amount those people added to output, the enterprise would happily agree to continue the employment relationship. In situations where workers are getting more than their labor is worth this sometimes happens, mostly though workers will not agree to reduced wages. The reason for this is very simple. Those workers refuse because they know their alternative use of time to be more valuable than the new rate of pay they could command. That’s right, people who are capable of producing don’t need to worry much about losing employment because they can simply find another place or way to produce.
Who does need to fear the elimination of jobs by technology?
Bargaining for wages is not a completely perfect process even in a free market. Some always manage to get a little more than they produce and some have to settle for a little less. In real life there are other, mostly government, processes which seek to take from a person who did produce and give it to someone who did not. Affirmative action, employment quotas, unionism, most government jobs, corruption, nepotism. These are all examples of situations where someone is seeking to enjoy someone else’s product. The workers who are simply getting what is their due will just wander off and find somewhere else to produce, someone else will be happy to employ them. People who are managing to drain away more than they produce are the ones who are hurt when their cozy deal is ruined by job losses. Those people know that they will struggle to find another such situation. They are the ones who squeal like pigs at job losses. Learn to enjoy that sound. It is the undeserving lamenting that they can’t live at your expense.
What should a man do about the situation?
Innovation, technology, and change are often seen as destructive and unwelcome disruptions of an otherwise comfortable stability. Don’t believe it, they are what drives a man and his society forwards. The man who has the able body, the skills and the knowledge to participate fully in this process has little to fear and everything to gain. Men should waste no time worrying and just make sure to have the able body, the skills, and knowledge seize new opportunities.
Published as a guest post on Return of Kings here