Is the Internet killing jobs?

Awhile back I wrote how the Internet is an incredible bargain.  I pointed out that we get high amounts of consumer surplus from the Internet.  In short, the Internet has been really good for consumers.

Job-destroying Technology

Yet, the other side of the Internet is that it inevitably destroys jobs.  For example, the ability to email PDFs across town for signatures probably caused some bike messengers to lose their jobs.

In fact, this isn’t just an issue with the Internet, it is an issue with all new technologies.  The car put a lot of buggy makers and blacksmiths out of work.  Then, several decades later, robots “took” auto assembly line workers’ jobs.  New, efficiency-enhancing technologies that make consumers’ lives better and lower costs tend to also destroy jobs.  At least since the Industrial Revolution, there have always been cries about job-destroying technologies.

First, let me say I am quite sympathetic to the plight of workers whose skills are superseded by new technologies.  A callous attitude claiming such workers should have been smarter about what field they trained for won’t do. (Very few people predicted the Internet 30 years ago.)  That doesn’t mean we should reject technological change from happening, but I am more willing to consider government help to these workers than most other areas.  (Of course, we need to be wise about how such help is administered.)

Yet, acknowledging that technology destroys jobs and stopping there is missing the forest for the trees.  Discussing this issue in my classes, I like to mention the agricultural industry in the US.  In 1900, approximately 38% of the U.S. labor force was employed in farming, but today only 2% farms.  Yet, despite this decline in farm employment, food is cheaper and more abundant in the U.S. than ever.  In 100 years, we went from over a third of our population being needed to supply the nation with food to only one fiftieth (1/50!).  The main reason, of course, is that farming became much more efficient through technological innovations.  (Here is a good history that also notes the role of agricultural extension programs in trying to make farming more efficient.  That is, the government encouraged job destruction.)

So, should we conclude this massive change in agricultural was a bad thing?  After all, it destroyed millions of job.  Do you think we would be better off if 38% of Americans still had to farm so we could all eat?

Look at Both Sides of the Coin

Often it is easier to consider a question from a distance.  Today, technology like the Internet is destroying jobs and it is hard to see the bigger picture.  The short-run pain is most salient.  But, thinking about the great change in farming in the 20th Century might help us think about the long-run impact of the Internet.

You see, in the long run, America was better off with a more efficient agricultural sector.   Why?  Because agricultural products became cheaper, and because this freed-up labor resources for other things.  Millions of ex-farmers were now available to produce other goods.  Millions migrated from rural areas to cities and began working in factories which made new products never before available.

Of course, the personal and emotional costs were real (which is why I am sympathetic to those affected by structural economic changes), but please realize that this shift in how the economy allocated resources is a big part of why we live lives of abundance and leisure today.

As farming became more efficient, Americans spent a smaller portion of their income on food which in turn meant they could buy other things they couldn’t previously afford.  This demand for “other things” created new jobs.  Economic growth is all about populations producing more with less inputs (such as labor).  The economy can then allocate that unused labor to produce other goods.  For the economy as a whole, history has shown that technology ultimately creates more jobs than it destroys.

When we see technology destroying jobs, we should be compassionate toward those adjusting, but we should also realize it is a good thing too.  If in 1900 you were told millions of farming jobs would be lost in the coming decades, you might have imagined a nation of high poverty and unemployment.  You might think of the Great Depression as a period of painful adjustment away from agriculture.  Yet, despite some pains of adjustment, America today is a country of plenty with relatively low unemployment and high amounts of leisure time (yes, even now).

So, What About the Internet?

The changes in agriculture should make us optimistic about the changes caused by the Internet.  Both affected virtually all parts of the country.  Both destroyed millions of jobs.  And, both have given us much better lives.  I bring this all up, because there is a new study which tries to quantify the economic impact of the Internet.  As with agriculture, the news is good.

In terms of jobs, the authors find that for every 1 job destroyed by the Internet, 2.6 are created.  One step back and 2.6 steps forward means we end up with 1.6 more jobs than before.

This all goes back to a recurring lesson from economics:  we must consider both the “seen” and “unseen.”  It is easy to “see” the jobs displaced by the Internet (e.g. bike messenger), yet the jobs created are “unseen” because they are spread all over the complex economy.

(I’d recommend looking through the report.  Another fun fact related to a previous post:  the authors find the Internet provides 20 Euros of consumer surplus per month per Internet user.)

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This entry was posted in Better Thinking, Economics, Poverty. Bookmark the permalink.

2 Responses to Is the Internet killing jobs?

  1. Michael LeGower says:

    “… the Internet provides 20 Euros of consumer surplus per month per Internet user.”

    And all of it porn-related!

    Sorry. Had to make the obligatory “Internet is for porn” joke.

  2. Pingback: Starbuckonomics: More Coffee, Less Deaths? | Not One Square Inch

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