Pethokoukis, Economics, U.S. Economy

Every GOPer should read what McKinsey says about technological unemployment


By the early 2020s, entitlement spending will likely drive ever larger US budget deficits. In 2023, for instance, so-called mandatory outlays will be 14.1% of GDP, a percentage point higher than today. And another decade out, they could equal nearly 17% of GDP. So the clock is ticking. The faster we reform entitlements, the better.

But there is another race going on that’s even more important, the race between technological innovation and the ability of society to provide workers with the skills to succeed in a world of accelerating change. A new report from McKinsey Global highlights a host of new technologies and their potential economic impact. (See above chart.)

It then goes on to warn about how these disruptive technologies might affect the bulk of the labor force:

By 2025, technologies that raise productivity by automating jobs that are not practical to automate today could be on their way to widespread adoption. …  Given the large numbers of jobs that could be affected by technologies such as advanced robotic and automated knowledge work, policy makers should consider the potential consequences of increasing divergence between the fates of highly skilled workers and those with fewer skills. The existing problem of a creating a labor force that fits the demands of a high-tech economy will only grow over time.

The issue of technological unemployment is one I have frequently blogged about. America’s future does not have to be “Bladerunner with food stamps.” But to avoid that, we need entrepreneurs to keep inventing new ways of combining technology and better-educated workers to create new industries and innovations. And government has a role to play in creating a fertile environment for education and entrepreneurship.

Failure could mean, writes Walter Russell Mead, the US ends up with the “mother of all welfare states [where] something like 80 percent or more of the population is going become superfluous to the economy. There will be no jobs where the work of this group could command a living wage; the state must somehow make provision for them or wait for them to fall into poverty and risk the social explosion that will probably follow.” And a  demoralized, stagnant society is more likely to push for redistributionist policies that will ensure the stagnation is permanent.

Successfully running this race against the machines – with the machines, really – should be a prime policy goal for Republicans and Democrats (though I highlight the former in the headline). As The Economist puts it, “Policymakers need to think as hard about managing the current wave of disruptive innovation as technologists are thinking about turbocharging it.” If the GOP is looking for a focus beyond debt reduction, this might be it.

17 thoughts on “Every GOPer should read what McKinsey says about technological unemployment

  1. Should these technologies advance at the speed forecast, the likelihood is that there will be few real experts at making money from the opportunities, so almost everyone becomes one, similar to the Dot-Com boom. Investors will be desperate not to be left behind and will throw money at almost anyone who can fog a mirror.

    • The problem is not the technology but the zero interest programs that allow it to be brought on line even though it makes no economic sense in many cases because there are insufficient savings in the system to provide the necessary capital that is required for its full implementation. The commentators on the left and the right have a problem with real world economics and require reality to intervene before they finally get it.

  2. I’m skeptical that technology is causing unemployment. People will naturally engage in economic activity if they have the freedom to do it.

    In my view the problem is government restrictions on economic freedom ie, over regulation. Unemployment is high because the economy is growing too slow. The economy is growing too slow because of government interference in markets.

    • Hmmm…the collapse of the mortgage market and ensuing near collapse of our financial markets/banking systems happened after the highest level of deregulation our country has had. Interest rates are at an all time low and many industry sectors have seen ever increasing profits and we aren’t seeing much capital/labor investment…not to mention that that the big global companies have structured themselves so they aren’t exactly constrained to the domestic market…in fact, it looks to me like it’s the Wild Wild West out there or would be if so many developed nations economies weren’t tanking.

      And in large measure companies (market players) have been able to do this with a declining domestic labor force (which they call “higher productivity” as well as moving to replace human labor with machine labor to push down labor as a cost of doing business even more.

      Finally last time I checked, I didn’t see much regulation going on in the capital markets/trading (also increasingly automated…bye bye floor traders, hello automated trading)…so ‘splain to me again where al that interference by government forces (or maybe you meant “alien forces” from Mars are behind our slowing economy).

      • Hmmm…the collapse of the mortgage market and ensuing near collapse of our financial markets/banking systems happened after the highest level of deregulation our country has had.

        Really? There were more than 100 agencies in charge of regulating the financial institutions and the GSEs. How can that be said to be ‘deregulation’? Deregulation means that nobody is too big to fail and that nobody gets a bailout when they lose money. It means that there are no barriers to competition. What you have is the opposite with more government more rules, and more barriers to entry. The consumer and taxpayer get screwed while the lobbyists, regulators, and corporations that pay them are protected.

  3. This happened once before during the roman empire to the roman mob, recall bread and cirucuses to keep the population quiet. Only today it would be bread and video games as suggested by Arthur C Clarke in the City and the Stars and Iassac Asimov in Robots of Dawn.

  4. Obama was right: We need to get rid of ATM machines to boost employment of bank tellers. And backhoes to boost ditch digging employment. And cars to boost horse and buggy employment.

  5. The idea that all we need to do is “free people to innovate” is not convincing to me. In 20 years, the likelihood is that machines will be capable of doing any conceivable task that a human can do today. The price of labor (at all skill levels) will plunge to zero. What then for the large mass of humans who aren’t fortunate enough to own significant amounts of capital ?

    Something like a basic income guarantee seems like the only practical solution to me. I’d like to hear other ideas…

  6. People have been predicting for a long time that labor-saving mechanization will mean the end of labor, and it has been coming true so slowly some doubt it has been coming true at all. Nonetheless, in farming, manufacturing, shipping, publishing and perhaps soon in sales, jobs have disappeared for good. As the skill levels rise for the remaining jobs, it becomes hard for people of average intelligence and education (most everyone, as always) to find something to do, let alone something that will pay enough to live on.

    However, I do not believe it follows that we’ll have an expanded welfare state as a result. More likely, as I see it, is that we’ll have less welfare and more poverty, as the desire of an increasingly plutocratic society to support a huge mass of unproductive people wanes. We will continue to shrink government, cut taxes and services, and revert to earlier ideals of what government and society are for.

  7. Just as software developer would’ve been an occupation impossible to imagine at the beginning of the last century, innovation will create new job categories that will out pace “technological unemployment” over time as free market capitalism maximizes resource utilization. Assuming profit is allowed to create incentive.

  8. For robots to replace humans in nonrepetitive jobs would require deductive reasoning. Breakthroughs in artificial intelligence have been just around the corner …. for almost 60 years.

    So, Mr P., let’s hear about cryogenics because the only way anyone here will see a world of 80 percent unemployed is to be frozen and thawed. Because of technology, that is. The tea party is a bigger risk.

  9. The impact of renewable energy is WRONG. Renewable energy sources are currently going for 10x the wholesale cost of production of conventional. As the greens and their enablers replace more low cost energy with high cost energy, the NEGATIVE impact on jobs will be enormous.

  10. By the early 2020s, entitlement spending will likely drive ever larger US budget deficits“…

    Solution is simple enough, sunset all federal ‘pandering to parasite‘ programs whether they’re entitlements or have some other BS spin name appled to them…

  11. Robots are still decades away from being sophisticated enough to take most peoples jobs. However, even at that slow pace ever better technology is allowing fewer people to do more. Whether it is robots or fellow humans with better tech is probably of little consequence to those left behind.

    One of the problems not often discussed is the tech revolution is increasing ‘winner take all’ situations where only a small number of players grow to dominate new industries and are able to force competitors out of business or prevent competition to begin with. It used to be large industries employed large numbers of workers across many companies, but that really isn’t so much the case anymore. I don’t know what the answer is, but it is a problem that will get worse as a smaller workforce is able to staff larger sectors of our economy.

  12. “In 2023, for instance, so-called mandatory…”


    The “financial barbers” are already sharpening their scissors for deep “haircuts” unlike anything their world has ever seen.

  13. There has to be some upper bound on the value of an ordinary human being’s labor and skill. Maybe that bound can be indefinitely augmented by more and more cognitive prostheses (which could range anywhere from really good software all the way up to human-machine hybrids), but there’s a good possibility that a big chunk of the population simply isn’t going to be able to offer much of value to the economy.

    That may indeed lead to Mead’s mother of all welfare states, but remember that when productivity growth outstrips output growth (which is kind of the ultimate definition of labor being devalued), prices on goods and services fall precipitously. I wouldn’t be surprised to discover that 75% of Americans could live quite comfortably on 25% of GDP in an economy running on machine-generated abundance. That doesn’t necessarily cause redistribution much worse than what we have today.

    As for what that 75% actually does with themselves, that’s going to be the real problem. I’ve recently been wondering if turning them into really, really good parents wouldn’t be a decent goal. Of course, that might mean that you’ll have 120-year-olds second-guessing the decisions of their 90-year-old children…

  14. Any technological advancement for human benefit is acceptable. but not (acceptable) for unemployment or creating unhealthy environment.

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