Unemployment due to Technology

by Alistair B.

The United States of America is in a recession. Every day thousands of people are losing their jobs so that hundreds can make more money. Among various other ideas for causes of all these recent layoffs is the introduction and acceleration of new technology. Technology makes work easier, cheaper, and more efficient.

But does technology create unemployment, or is this an unwarranted fear?

Unemployment is a term used to describe what occurs when a person is able to work, but is without a job. Unemployment is measured by something called the Unemployment Rate. This rate is a measure of people in the labor force without a job. It is represented by a percentage. Unemployment can cause people to suffer a lot of stress. Unemployed individuals are not able to make money to meet financial obligations, like paying rent or paying for food. This can cause homelessness, illness, and malnutrition.

There is also the challenge of finding a new job. One was laid-off because they were not able to fulfill the duties of their position, that means that they either have to learn a new skill altogether or find a job with lower standards.

A high unemployment rate can also affect the country. If there are a lot of unemployed people, the country is not using all of its labor resources. If this happens, then a country is less efficient and is operating under its production possibility frontier, which represents our maximum output ability. However, if people who had denied a first job offer to seek a better one had accepted their first offer, then there would be less unemployment, but they would be working below their skill level, which also reduces the economy’s efficiency.

This graph shows the rise in the National Unemployment Rate over two years. We can see that the rate is steadily growing, and even faster more recently.

Technological change, achievement, development, and progress all refer to one sequence of development: Invention, Innovation, and Diffusion. Invention is the product of research, and the release of a new creation, like the automobile in 1894. Innovation then occurs. Innovation is the on-going process to improve inventions.

Today, the automobile has already gone through a huge amount of innovation, including multiple colors and makes, radios, increased miles per gallon, air conditioning, and many more features both luxurious and practical. Diffusion is the final process. Diffusion is the spread of a new technology throughout a society or industry. Diffusion generally follows an s-shaped curve, because new technologies are unsuccessful, then as they are improved they become more popular, and finally they reach their maximum potential market, and decrease in popularity.

When a new technology is invented, it can be used by an industry to increase both efficiency and productivity. For example: There were two men whose jobs were to put wheels on axles in an automobile assembly line. A new machine comes out that can automatically assemble wheels and axles much faster. The automobile company will then buy this product, thinking that it will be able to outwork the current employees and produce more wheels and axles per day than the humans. It will also not have to be paid an hourly wage.

These two workers are then laid-off, and the single machine takes the job of both of the workers. At this point, it would seem that new technology does cause unemployment. A machine was invented, improved so that it is faster and cheaper than its beta version, and then diffused to this particular automobile company, taking the job of two human workers. In the short run, yes, technology can and does cause unemployment.
From this graph, we can infer that most people are being laid off in the construction, manufacturing, and wholesale industries. The information, agriculture, and mining industries have been effected least by recent lay-offs.

But what if after they were laid-off, the workers looked for a new job attaching wheels to axles, but couldn’t find one because all the companies had implemented this new machine. Then the workers decide to learn a new skill, mechanics per say. These workers go to Mechanic School, get a degree, and then set out to look for a job as a mechanic.

It turns out that the new machine in an auto company had broken down, and the company was now looking to hire two mechanics to ensure that this machine is always running well, and to fix it when it breaks down. These two workers apply for the job, are hired, and are now employed, thanks to the machine that unemployed them in the first place. As you see here, in the long run, technology does not create unemployment, but instead it opens opportunities for people to learn a new skill. Though physical labor can be replaced by a machine, humans are still needed to repair and maintain the machine.

In conclusion, when a new technology is invented, improved, and diffused, it creates unemployment. As the technical progress continues to accelerate, unemployment levels rise because the technology is still being enhanced. When the technology is stabilized at a permanently high level, the unemployment rate begins to decrease as people are being hired to work on or with the machines. So, while new technology may create immediate rises in unemployment, in the long run, technology does not affect unemployment rates.

This graph shows the fluctuation of the unemployment rate as people lose jobs and gain them back, while the per capita output (output per person) increases steadily.