The Shrinking Lump of Labor

by Andrew McAfee on August 20, 2012

John Markoff has a fascinating long article in Sunday’s New York Times about the ever-greater capabilities of today’s industrial robots (and I don’t just say nice things about the piece because Markoff quotes from Race Against the Machine). He reports from places as diverse as a Philips factory in Holland, the plant where Tesla roadsters are made in California, and a grocery warehouse in Newburgh, New York.

In these and other facilities, he observes the same trend; robots and other modern machinery doing tasks that until quite recently used to be done by humans. These include assembling precision devices full of tiny parts; grabbing products off shelves, assembling them into a giant cube for shipping, then wrapping it in plastic sheeting; and loading and unloading trucks full of packages. This last example is particularly striking; the boxes can weigh as much as 130 pounds, and the robot senses them not with a high-end vision system, but instead with hardware based on Microsoft’s Kinect, which retails for less than $150. Cheap, powerful sensors are one of the reasons that, as Markoff writes, “Robot manufacturers in the United States say that in many applications, robots are already more cost-effective than humans.”

The article concisely states the one big potential problem with this relentless technological progress: “The ascension of robots may mean fewer jobs are created in this country, even though rising labor and transportation costs in Asia and fears of intellectual property theft are now bringing some work back to the West.” And, I’ll add, even though the companies that buy these robots are part of healthy, growing industries.

If and when this happens, more and more sectors of the US economy will look like the manufacturing industry, where output (in constant 2005 dollars) has been growing steadily over time, and employment falling:

Sources: UN (for mfg. value added), BLS (for employment)

The conventional explanation for this phenomenon — and the one I believe — is productivity growth. Michael Mandel and a few others debate this, and highlight instead the role that offshoring to China and elsewhere plays in inflating the value added number, and so overstating productivity growth. As Mandel writes, “ongoing research from a new policy brief from the Progressive Policy Institute shows that the official statistics have significantly overstated GDP and productivity growth since 2007.”

But the graph above makes clear that American manufacturing value added was rising while American manufacturing employment was falling for a long time before 2007. In fact, both have been going on since the early 1980s (well before China emerged as a global economic powerhouse), with remarkable steadiness.

So offshoring and globalization aren’t the real drivers here; domestic productivity growth is. American manufacturers have been figuring out how to produce ever-more stuff while employing ever-fewer people for a while now. Markoff’s article makes clear that this trend is far from played out.

Because of advances in sensors, software, chips, and the other components of robots, and because of lots of innovating and tinkering with them, the industries that deal with physical products — distribution, transportation, wholesaling, and so on — are about to become a lot more productive. My guess is that their output-vs.-employment graphs are going to start to look a lot like the manufacturing one above.

And because of similarly impressive advances in artificial intelligence, machine learning, crowdsourcing, and exploitation of Big Data, the same will in the near future be true of industries that deal with virtual products like knowledge, information, media, decisions, and communication. In many cases, their employment will start to trend downward even as their output rises over time.

I don’t know of any economic law that prevents this from happening. Yes, I’m aware of the “lump of labor fallacy.” But I think the more up-to-date fallacy is the assumption that a growing industry means that there will be more work for people to do, rather than for ever-more capable machines to do. The graph above shows that this has clearly not been the case for US manufacturing over the past 30 years.

In an era of astonishing technological progress, why won’t the same be true for other industries in the US and elsewhere? If you have some faith that employment must keep rising as output does, please leave a comment and explain where it comes from. Because the evidence, both past and present, is making me a skeptic.



  • Tom Walker

    Fantastic! As the only person I know of who has actually researched the history of the lump-of-labor fallacy and written a peer-reviewed, published scholarly article about it, I sincerely doubt you’ll get any substantive responses to your request for an explanation. To use Hayden White’s expression, the fallacy claim is essentially a “technique of ostensive self-definition by negation” practiced by “scholars and intellectuals seeking to establish their claims to elite status against the vulgus mobile.” Or in plain English, it’s bunkum.

    Furthermore it’s bunkum with a long pedigree, having originated in 1780 in a pamphlet by a Lancashire magistrate, Dorning Rasbotham, eager to demonstrate that the poor had nothing to complain about because “a cheap market will always be full of customers” and therefore new machines would swiftly and surely open up more jobs for displaced workers than they eliminated. Karl Marx called this supposed principle, “the theory of compensation as regards the workpeople displaced by machinery.” John Maynard Keynes called it the belief that the economic system is self-adjusting.” They both demonstrated that it doesn’t work the way economic orthodoxy insists it should.

    Sure, employment always increased in the past after the introduction of new machines but it was the expansion of credit that facilitated job growth, not cheap prices or low wages caused by the machines. And let’s not forget that plenty of wars and depressions intervened along the way. The situation we face today is in some respects the result of the success of Keynesian and quasi-Keynesian policy in maintaining a remarkably long-term expansion of credit. Keynes never expected that expansion to go on forever, which is why he made provision in a 1943 memorandum, “The Long Term Problem of Full Employment” for a third phase of policy “when investment demand is so far saturated that it cannot be brought up to the indicated level of savings without embarking upon wasteful and unnecessary enterprises… It becomes necessary to encourage wise consumption and discourage saving, -and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours.”

  • Toby Russsell

    Charles Eisenstein calls it the “lump of labor fallacy fallacy”. Implicit in it is the unexamined assertion/instinct that paid work is more valuable than unpaid work, and deeper still that work itself should be unpleasant, that money is therefore a necessary reward for it. A related question that goes unasked in the mainstream is how it is we Just Know that economic activity is more valuable to society that non-economic activity (or, Why must the economy grow forever?). I am unaware of any watertight proof that the price system in conjunction with (moslty) artificial scarcity can, over the long term (and even day to day), satisfactorily measure true value via supply and demand generated numbers (if this so-called law is indeed a law) with symbols attached to them. To my mind, value can only ever be subjective (as Tarde argued). We ought therefore to be examining the connotations of this beautiful truth more closely and openly. Therein lie the most fruitful, juicy solutions, in my opinion.

    For example, the money-value assigned to some paid hour of work can never be a satisfactory assessment of that work, while the unpaid work we humans do in our millions goes unnoticed, as it were. The infamous uselessless of GDP as a measure of national success hints at the problem. Numbers, with or without currency symbols attached to them, are very poor measures of value, of either the exchange or utility variety. So until we have culturally regrasped this nettle, all discussions about post-scarcity, about technological unemployment, about the value of work, etc., will remain woefully lacking. If we are to accept, as we must, that machines can do most of the work modern society “needs” (a horribly slippery word), and if we can begin to accept that people doing any kind of work no matter how environmentally harmful or humanly degrading just so as to furnish consumers with purchasing power (“earning a living”) is not in society’s best interests, we must surely be able to discuss ‘radical’ alternatives, like a guaranteed income.

    When people first hear about guaranteed income (money for nothing), they tend to have two main objections. 1. We can’t afford it, and 2. People would do nothing. To the first objection I say, money cannot afford, only resources, goods and services can. Money is just numbers, which exist in infinite supply, like inches. The reason for money’s apparent scarcity lies in its design, not in any inherent quality money inescapably has. If money is scarce but goods and services are not, we have a design problem. This is something I feel we have to address, and quickly. To the second objection I say two things. The first is rude: so the hell what? It’s up to people what they do with their lives. If they want to ‘waste’ them, let them. Then I add, the likelihood that most people would want to do nothing of any use to society their entire lives is zero, as far as I can make out. Humans are obviously social animals, so social standing/value is very important to them. No one likes to feel useless and unneeded. Work is what we do to feel valuable, or, more broadly, to get what we want. It does not, for example, take money to motivate babies. They are driven to learn and do work. It takes a very poorly (or well!) designed state education system to dumb people down and demotivate them, over about a decade or more. That kind of investment we can do without.

    So, money system revolution, education revolution, guaranteed income, embracing technology and a worldwide human emancipation declaration, while restoring the health of our ecosystems, and truly freeing people to contribute as their hearts inspire them, is for me the set of ‘radical’ choices which lies before us. That, or cling to outdated and rapidly crumbling ideologies and unscientific economic dogma in the hope The Old Way can be revived to some semblance of its former glory.

  • ralphl

    I think you are stating the obvious, but it is good to hear the obvious stated now and then. I get tired of people adding complex theories to the obvious.

    Yes, I agree that we are now seeing technological unemployment and will see much more of it in the future. That’s a given. The question is what to do about it. I can give a two possible scenarios that I think are possible. I am sure there are others.

    1. The US turns into a third world country, where the few have everything and the rest have nothing. If we continue to pursue today’s culture and politics (particularly the Republican brand) this is what will happen. The top group of people, the “big wheels” of society, will make oodles of money from factories and facilities they own–as they are doing now. Because “labor” of any sort will be almost infinitely available, its value will approach zero. So the second group we will have is the “working poor”, the few who are lucky enough to find jobs. The third group will be the unemployed. If we retain our present welfare system, they will get minimal support–some rent subsidies, food stamps, a little Medicaid. Actually there will probably be little difference between the working poor and the unemployed, because wages will be so low. Picture the cardboard shacks in the barrios of Caracas.

    2. The US realizes that with automation we can’t possibly employ everybody 40 hours a week, because they would produce more than we need. So we look for a solution. Although its inefficient, because of the extra number of people that would require training, we could have everybody work 20 hours per week and get extremely long vacations–like half a year. Or we could have a few people work 40 hours per week and the rest get real welfare–enough money to live a decent life with a house, car, and all the trimmings. Maybe we could get the unemployed all to go to school to learn exotic things that might tickle their fancy. Maybe they would all become street punks and terrorize their neighbourhoods. I favor having everyone work at least a small amount.

    I don’t think we are going to get back to full employment, but we could improve the situation by bringing back our jobs from China–to the point that we have a balance of trade–exports equal imports. And we shouldn’t export our raw materials (coal, oil, gas, etc) overseas thus depriving our children of what they will need. Bringing back jobs can be done in several ways, but the easiest is to go back to tariffs. Yes, there is a price to be paid for loss of efficiency with tariffs, but that is a small price. Bringing back jobs would bolster our employment and reduce our foreign debt. But in the long term we must deal with technological unemployment. We can do it in a dumb manner or a smart manner. The choice is up to us.

  • Amy Stapleton

    I don’t have any data to argue against the case for increasing productivity and an accompanying acceleration in joblessness. I happened across the writings of Robert Anton Wilson, though, and noticed that he dealt with this same issue 30 years or so ago. He proposed some ways to address the consequences. Don’t know that I agree with any of them, but it’s interesting to see that his ideas have a ton of relevance now. (Guess he was just a tad early on his predictions!).

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