What does innovation mean for the workforce?
On one hand, innovation makes everyone’s lives better, creating new jobs and putting new products on the market. Improvements in medicine, transportation, and communication have made the impossible possible and have created whole new sectors of jobs.
Economist John Maynard Keynes predicted this increase in the quality of life. However, according to an article in The Economist,
One of the worries Keynes admitted was a “new disease”: “technological 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.”
There’s no doubt that innovation will drive change in the workforce. But will such change harm or help workers? Will it create or destroy jobs as more and more machines do the work that people once did?
To answer the question, The Economist launches into a history of the last hundred or so years of labor. It finds that historically, innovation has improved both the lives and jobs of workers. But that overall upward trend doesn’t come without some difficult transition times. And, of course, past trends do not always predict future trends.
Can public policy solutions such as education programs or welfare help us through the difficult times as technological innovation drives change in the workforce? The Economist suggests that they can and have improved lives of workers in the past.
But the article warns that if we are not careful, such solutions can be ineffective or even have negative and unintended consequences. For instance, welfare programs could diminish job opportunities in the long run:
The “reservation wage”—the wage below which a worker will not accept a job—is now high in historical terms. If governments refuse to allow jobless workers to fall too far below the average standard of living, then this reservation wage will rise steadily, and ever more workers may find work unattractive. And the higher it rises, the greater the incentive to invest in capital that replaces labour.
In other words, while policies may prove beneficial, it is also helpful to use them with caution and to think carefully about possible repercussions.
How will the workplace change in the near future? Which public policy solutions are appropriate in addressing possible change? Read the entire article or read Tyler Cowen’s book, Average is Over, to find out. And to find out more about the benefits of markets and innovation, hit the “Learn More” button.
Leave your comments here.
Photo taken from IFWE’s new video, “Freedom to Flourish.” Watch the full video here.
