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Walter E. Williams
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Job Destruction Makes Us Richer

Comment

Here's what President Barack Obama said about our high rate of unemployment in an interview with NBC's Ann Curry: "The other thing that happened, though — and this goes to the point you were just making — is there are some structural issues with our economy, where a lot of businesses have learned to become much more efficient with a lot fewer workers," adding that "you see it when you go to a bank and you use an ATM; you don't go to a bank teller. Or you go to the airport and you're using a kiosk instead of checking in at the gate." The president's statements suggest that he sees labor-saving technological innovation as a contributor to today's high rate of unemployment. That's unmitigated nonsense. Let's see whether technological innovation causes unemployment.

In 1790, farmers were 90 percent, out of a population of nearly 3 million, of the U.S. labor force. By 1900, only about 41 percent of our labor force was employed in agriculture. By 2008, fewer than 3 percent of Americans were employed in agriculture. Through labor-saving technological advances and machinery, our farmers are the world's most productive. As a result, Americans are better off.

In 1970, the telecommunications industry employed 421,000 workers as switchboard operators, annually handling 9.8 billion long-distance calls. Today the telecommunications industry employs only 78,000 operators. That's a tremendous 80 percent job loss. What happened? The answer: There have been spectacular labor-saving advances in telecommunications. Today more than 100 billion long-distance calls a year require only 78,000 switchboard operators. What's more is the cost of making a long-distance call is a tiny fraction of what it was in 1970. Can we say these technological innovations made the nation worse off?

Professor Russell Roberts, my George Mason University colleague, gives other examples in his Wall Street Journal article (6/22/2011) "Obama vs. ATM's: Why Technology Doesn't Destroy Jobs." He says that today just a couple of workers can manage the egg-laying operation of nearly a million chickens laying 240 million eggs a year, through a highly mechanized and computerized process.

Thousands of toll collectors are replaced by E-ZPass machines. Autoworkers are replaced by robots. Fifty years ago, a typical textile worker operated five machines capable of running thread through a loom 100 times a minute. Today machines run six times as fast, and one worker can oversee 100 of them.

You say, "Williams, certain jobs are destroyed by technology." You're right, but many more are created. Think about it. If 90 percent of Americans still had been farmers in 1900, where in the world would we have gotten workers to produce all those goods that were not even heard of in 1790, such as telephones, steamships and oil wells? We need not go back that far. If there hadn't been the kind of labor-saving technical innovation we've had since the 1950s — in the auto, construction, telephone industries and many others — where in the world would we have gotten workers to produce things that weren't heard of in the '50s, such as desktop computers, cellphones, HDTVs, digital cameras, MRI machines, pharmaceuticals and myriad other goods and services?

What technological innovation does is reduce the value of some jobs, raise the value of others and create many more jobs. Some workers are made better off through greater employment opportunities. Others are made worse off by having to accept less attractive employment opportunities, an adjustment process that can be painful. Since technological progress makes goods and services cheaper, and of higher quality, to stand in its way, in the name of saving jobs, will make us a poorer nation. What we're witnessing in our economy is what economic historian Joseph Schumpeter termed "creative destruction," the process in which something new replaces something older.

By the way, we can always count upon an infinite number of potential jobs. The reason is that human wants are insatiable. People always want more of something. That want will create jobs for someone else.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

COPYRIGHT 2011 CREATORS.COM



Comments

4 Comments | Post Comment
This article gets at one of the central flaws of J. M. Keynes: That government (or anyone else for that matter) needs to create demand. Demand will simply emerge. It is organic. Manufactured demand is a waste of resources, it generally restricts freedom and is nowhere near as efficient. If we can produce more for cheaper, people can move on to their next desire and someone will create the supply for the new market. So much of the technology we have today could be easily described as unneccessary but we voluntarily spend our capital on it anyway. Jobs will be created first and foremost by potential employees who want to seek work. People who want to work will find something to accomplish that pleases their fellowman and people who need workers as they create new products or services to fill new human desires will hire them.
Comment: #1
Posted by: Zack
Wed Jul 27, 2011 9:34 AM
Just to count the number of factory farmers who receive government subsidies and then say that these government farmers are but a small percentage of the work force is misleading. What about the taxpayers that work to pay for the farm bills and other subsidies embedded in transportation, energy, and export policy. Then there are the environmental and human health costs not internalized in the costs of centralized industrial farming. What about the smaller but more dispersed and efficient farmers, both here and in other lands, who are forced off the land because of government intervention and the ensuing loss of a level farming field
I agree with you that constructive job destruction makes us richer, but as you know, government intervention distorts price signals with a countervailing tendency to make us all poorer in the long run. This may not matter to a Keynesian, because he shrugged it off flippantly with we'll all be dead in the long run. But I am currently dead Ernest in saying you gored my ox, being that I grew up on a small farm in northern Wisconsin that never explicitly received government handouts, but found it difficult to compete, not in a free market, but in a shameful freebie market that farming has become since the New Deal. It is definitely not a level farming field.
Comment: #2
Posted by: Ernest Martinson
Thu Jul 28, 2011 8:52 AM
The problem with compromise is that eventually, all the good points regarding our constitution have been neutralized.
Comment: #3
Posted by: John C. Davidson
Mon Aug 1, 2011 7:53 AM
i have been aware of Walter Williams for along time.... i think I am going to enjoy his email newsletter
Comment: #4
Posted by: charles braly
Tue Aug 9, 2011 7:50 PM
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