Donald Grimes

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Another reaction to the Pew Research Center report about labor and technology in the near-term, this one by Eric Reid at MSN Money, who focuses on one of the most essential questions: Will the Digital Age trump the patterns of the Industrial Age, whereby the rise of the machines lifted everyone, increasing production, creating new jobs and industries to replace the ones it disrupted? An excerpt:

“The traditional relationship between labor and technology has been a positive, if contentious, one. When new devices improve productivity, companies can maintain the same output with fewer people, so they lay some off. Although this leads to temporary unemployment, it also improves incomes for the remaining workers and management, who go out and spend their extra money. This creates jobs elsewhere, and the combined productivity of these new jobs along with the new technology means that the economy as a whole ends up both producing and consuming more overall.

In other words, the pie gets bigger and increases everyone’s slice with it. As Professor Donald Grimes, an economist with the University of Michigan, wrote:

‘Think of tractors and all of the other agricultural productivity gains. We are now producing far more output with a small fraction of the number of farmers that we used to have. Or of the productivity effect of the assembly line. And in terms of IT, think about how spreadsheet programs reduced the number of ‘book keepers.’ Or how the internet allowed people to buy their own airline tickets, thus eliminating lots of travel agency jobs.

‘In terms of the big picture these productivity gains raised the incomes of the people who continued to work in these professions, and/or made the owners of the machinery richer, or helped to make airline tickets cheaper. When people spent their extra money they created jobs in other industries and the people who lost their jobs were re-employed in new jobs. Over time these productivity gains raised our wages and our standard of living.’

This model makes two assumptions, however: First, that we all share in the profits of increasing productivity, and second, that laid-off workers will have other industries to move into. Both of these assumptions may be falling apart.”

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