Another in a series of posts about the technology tsunami rapidly transforming the labor force.
The Washington Post this week has a couple of interesting reports on jobs affected by the Technology Revolution, and the economic disruption it is having on society.
The number is stunning on the face of it, and many have interpreted the study as an indictment of technological change — a sign that “robots are winning the race for American jobs” (Clair Cain Miller, The Upshot at The New York Times). But the bigger takeaway is that the nation has been ill-equipped to deal with the upheaval caused by automation.
[T]he new findings bolster the conclusion that these economic dislocations are not brief setbacks, but can hurt areas for an entire generation.
Everyone has heard the old anecdote about the frog in a pot of water. If the temperature is raised slowly, the frog won’t react, eventually allowing itself to get boiled. That’s where we’re heading as a country when it comes to technological advances and the threat they pose to millions of jobs.
Seemingly every day there are new stories in the media about artificial intelligence, data and robotics — and the jobs they threaten in retail, transportation, carrier transport and even the legal profession. Yet no one is jumping out of the pot.
As reported in Recode, a new study by the research firm PwC found that nearly 4 out of 10 jobs in the United States could be “vulnerable to replacement by robots in the next fifteen years.” Many of those will be truckers, among the most common jobs in states across the country.
Yet when President Trump hosted truck drivers at the White House last week, he dedicated his remarks to the threat of health care without uttering a word about the advanced driverless semi fleets that will soon replace them. His Treasury Secretary Steven Mnuchin shockingly said in an interview last week that we’re “50 to 100 years” away from artificial intelligence threatening jobs.
It’s easy for sensationalist headlines about A.I. to dominate, like those about Elon Musk’s warning that it poses an existential threat. Yet the attention of people such as Musk, Bill Gates and Stephen Hawking should be a signal to Trump and Mnuchin that A.I. and related robotics and automation are moving at a far faster clip than they are acknowledging. It should be on the administration’s radar screen, and they should be jumping out of the boiling water.
Solutions won’t come easy. Already some experts suggest a Universal Basic Income will be necessary to offset the job losses. We also have to transition our workforce. Educational institutions such as Miami-Dade College and Harvard University have introduced advanced programming courses that take students from zero to six programming languages on a fast track. More needs to be done. This should be the most innovative decade in human history, and it has to be if we’re going to avoid a Mad Max dystopia in favor of a Star Trek future.
Technological advances could greatly reduce the cost of living, make housing more affordable and solve some of the biggest challenges whether in energy or long-term care, an issue painfully familiar to so many families. It may also help improve quality of life in the long term, as men and women gain greater flexibility to spend time with loved ones rather than dedicating 40 or more hours a week to working and so many others commuting.
In the near-term, however, the job losses that are possible could inflict tremendous economic pain. We are far from where we need to be. That will continue to be the case until policymakers, educators and innovators come together to address the reality before us. We won’t solve this overnight, but we can’t afford to wait until it’s too late.
Our elected leaders are not even addressing this complicated issue. They are either unaware, uninformed, or uninterested in addressing jobs affected by the Technology Revolution, and the economic disruption it has on society.
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Kansas had a 2 percentile point decrease in taxation – almost meaningless. The high productivity people who would have responded to the Kansas tax reduction would have seen a marginal change of perhaps 4%.
The United States experienced a 44 percentile decrease in taxation under Reagan. the high productivity people responding to that change would have experienced a 50% change in marginal taxation.
Plus, there were huge joint productivity effects to the Reagan change – synergy.
If you dig down into the different paths that France and the US followed, you find that the tax reduction resulted in people working harder, working more hours per week, working more weeks per year and becoming more intelligent.
French workers who significantly outscore US workers at the age of 18 in international tests, score 20% lower on cognitive exams at the age of 57 , RAND. Higher taxes make you dumb. All of this results in the US having a stock market 22 trillion higher while France has a total stock market of 3 trillion.
Plus, the whole world started to flow towards the United States and the job storm that Reagan ignited.
Every aspect of how elasticity can express itself did so over the 37 years.
All of this is covered up with massive corruption in the research journals.
He lies and over 40 name economists swear to it. From Stiglitz to Diamond to Saez to Goolsbee. I have the entire list and all the journals they published in.
No, I’m holding you to your previous claims.
That two percentage point decrease in taxes, assuming that the elasticity of economic growth in response to changes in tax rates is 3, as you have repeatedly claimed without citation, and the effective tax rate on Kansas residents is about 30%, should lead to a 20% increase in economic growth above the baseline.
Show us the evidence that Kansas’s economy grew 20% faster than the rest of the country’s.
No, where would you find anything like that in the literature. The 3.0 comes from several studies on labor elasticity (Frisch elasticity) and growing body of literature that ignores labor supply and directly looks at the elasticity of net of tax yield with respect to taxation.
The elasticity equation numerator is the (change in net of tax yield in %) and the denominator is the (net of tax yield – at the margin). You have to put the whole package together – that’s all taxation: sales, personal income, state, federal, social security, medicare.
The Kansas tax changes were a mess. First, increasing sales taxes and then not allowing them to fall so that income taxes could be cut. It’s not clear that a tax cut even took place.
You earn to consume. A sales tax increase coupled with an income tax cut is meaningless. A one percent sales tax is the economic equivalent of a 1% income tax. That’s the lesson from Europe and their VAT.
The 3.0 elasticity is long run, not short run. I have repeatedly written that any state policy maker that expects a yield immediately following their tax reduction is fooling themselves.
However, it’s possible to get lucky. We were lucky in Arizona. We did a very large tax cut in 1993 and unbelievable growth quickly followed, enabling us to do more tax cuts. We just got into a roar, tax cut after tax cut year after year. Our top income tax rate fell from 8.1% to 4.6%. And, year after year, we got to the long run and kept fueling the fire.
It all came to an end when we did Everify. No more number one in the nation for us – ever again. However, we aren’t doing bad. For the last 5 quarters, we have averaged over 3.5% gdp year over year growth. Not the 8% of the 90’s, but pretty good.
Kansas has a gross domestic product of about 153 billion. Two points of that would eventually be a reduced load of 3 billion per year.
Kansas is not now nor has it ever been a low tax state, not even close.
The elasticity response to lowered tax rates takes time unless it is the very large decrease put in place by President Ronald Reagan. Reagan reduced income tax rates from 72% to 28% and quickly produced the largest growth quarter in recorded economic history: 8%. That one quarter alone changed the trajectory of the United States.
Since 1980, the United States has added 88 billion hours of work while France, which had almost identical labor supply characteristics as the United States, has had a net drop, a reduced supply, a reduced demand of 3 billion hours of work since 1980.
If you want to look at states and taxes, look at the decades since 1980.
Compare the low tax states, states who have been in the bottom ten of taxation every decade with the high tax states, states who have been in the top ten of taxation every decade since 1980.
The low tax states started out with less than half the jobs of the high tax states. They now have more jobs. Over 100 percentile points greater job creation.
Frugality in state policy makers is the single best contribution that they can make to the welfare of their children. Taxation does make a difference, a big difference, on job creation.
3. Minimum wage regulation is locking minorities and the poor out of the job market.
How’re those tax cuts working out for Kansas? You and Brownback were promising massive growth and job creation in response to their tax cuts. Instead, the public sector was completely hollowed out and a coalition of Dems and moderate Republicans are pushing for tax increases because government services have been cut well below bare bones.
I agree—the three points you make are nonsense!
It is strange you say “The elasticity response to lowered tax rates takes time…” except when it doesn’t. So why mention it?