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Workers: Fear Not the Robot Apocalypse (wsj.com)
An anonymous reader shares a report: For retailers, the robot apocalypse isn't a science-fiction movie. As digital giants swallow a growing share of shoppers' spending, thousands of stores have closed and tens of thousands of workers have lost their jobs. The brick-and-mortar retail swoon has been accompanied by a less headline-grabbing e-commerce boom that has created more jobs in the U.S. than traditional stores have cut. Those jobs, in turn, pay better, because its workers are so much more productive. This demonstrates something routinely overlooked in the anxiety about the job-destroying potential of robots, artificial intelligence and other forms of automation. Throughout history, automation commonly creates more, and better-paying, jobs than it destroys. The reason: Companies don't use automation simply to produce the same thing more cheaply. Instead, they find ways to offer entirely new, improved products. As customers flock to these new offerings, companies have to hire more people.
Workers are hired until the marginal value of their labor equals the marginal cost of that labor. You hire Alice at $50,000 salary because she'll bring in $100,000. Bob, because of diminishing returns, will only bring in $75,000, but at $50K hiring him is still a no-brainer. But if Carol will only bring in $50,000, you won't hire her unless you can get her for less than that.
What this means is there is no general economic law that connects changes in worker productivity to a particular kind of change in employment levels. It depends on what you do with that productivity.
Imagine a world in which computers were laboriously assembled by workers on breadboards using prototyping techniques. Let's say it costs you $10,000 to assemble a computer this way. In that case you'd only sell a small number of computers because they'd be highly specialized machines. Now suppose you introduce modern assembly techniques, with printed circuit boards and wave soldering. Now the computer which cost you ten thousand dollars to assemble can be made for well under $100.
If you continue to sell a very small number of computers at high prices, you'll lay off most of your workforce. On the other hand if you start selling your computers for $180, you'll end up adding to your workforce. Both scenarios turn increased worker productivity into increased profit, but in different ways.
Now let's imagine an entirely different scenario: a fast food restaurant. It's hard to imagine selling a lot more Big Macs because you drop the price. Nonetheless the same principle applies. If you can find a way to make money off the newly surplus labor, employment wont' go down. If you can't, you'll let people go.
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Actually, the top 10% lost way more than everyone else during the crash. However, they have made it all back and then some. Plus they could afford to lose it ("Oh no!! I can only buy 18 Ferraris this year instead of 20!")
The bottom 90% lost less money in the crash itself, but have not made the money back.