Business

Wealth Inequality Directly Related To Automation, Says New Study

New socioeconomic models needed as IT-based automation revolutionizes the workplace

A recent paper written by Dagobert L. Brito and Robert F. Curl of the James A. Baker III Institute for Public Policy at Rice University argues that the information technology revolution has changed the economic landscape more than almost anyone realizes. Moreover, they argue that the wealth redistribution we are seeing towards the top 1% today is directly related to the automation enabled by information technology, but very little of the value created by this automation is trickling down to the other 99%, especially those with low-paying jobs or without jobs.

Wealth Inequality

Finally, they argue proactive social engineering is required to prevent wealth inequality from creating a problematic dystopian future of uneducated and unemployed masses.

Understanding the Brave New World (or the Rise of Turing Robots)

Brito and Curl begin their argument by pointing out that until the 1980s machines typically still required human brains to operate and guide them. Moreover, as predicted by classic economic theory, the total number of jobs increased with growing production.

Wealth Inequality

However, they note “the second machine age is replacing human brains in tasks that can be reduced to an algorithm.” They argue it will be hard to replace the jobs lost to computers, and it will be extremely difficult to replace the jobs lost to computers with high-paying jobs.

The authors say that high-paying jobs typically have two characteristics: “First, they must require a skill set that cannot be reduced into an algorithm and thus subject to automation. Second, the skill set must be scarce in the human population and be in demand. If the first condition is not met, then the job will be automated.”

They note that if the second conditions aren’t met, then the law of supply and demand will make sure these are not high-paying jobs. Brito and Curl argue the only way that investment in human capital can mitigate the problem is by teaching skills that do not compete with automation. Simply increasing the literacy and numeracy of the general population will not solve the problem. They point out that as well as the “mechanical devices used in industrial production, automation also takes the form of developments in computer software, hardware, and communications that have displaced many clerical workers.”

Wealth Inequality

For example, when you buy a book from Amazon, no human is involved in recording the order, directing that it be shipped or in the payment process. Brito and Curl note that because of their focus on the impact of technology, they “will write of the displacing technology in terms of ‘Turing robots.'”

Redistribution of resources will be required to minimize wealth inequality

Unemployment and unemployment will be endemic in the age of the Turing robots, as jobs they can’t do better than humans will be few. Besides the obvious need to redistribute resources when the majority have no jobs or source of income, other socioeconomic issues are likely to arise in this situation.

1. Maintaining a competent elite class — History shows that successful societies need competent elites for governance, innovation, creativity, the transmission of values, as well as for protection from external threats. That said, individuals in the top tail of distribution of leadership qualities tend have children who are on average less able than the previous generation because of reversion to the mean. Therefore, in each new generation, many members of the elite class need to be replaced by individuals outside the class. Of note, this kind of important class mobility will be damaged if there’s an underclass that is not included in the elite class recruiting pool. Brito and Curl note: “If talent is scarce, it is necessary to recruit from as wide a pool as possible.”

Wealth Inequality

2. Avoiding the  loss of social capital — The authors also highlight that without the possibility of work, why bother to acquire an education and the other forms of human and social capital required for employment? Of course, these same attributes needed are required to be a functioning member of a civil society. They argue that without education, “many elements of a dysfunctional society follow.”

3. Maintaining a civil society — Strong evidence exists that employment is an important factor in the maintenance of a civil society. Studies show that males tend to be more reckless and prone to violence between the ages of 16 to 26. More importantly, young males with jobs are only one-third as violent as unemployed young males (Wilson 1997, 22)..

Wealth Inequality

4. Large shifts in the economic system — Brito and Curl also argue that given our democratic system, “governmental redistribution appears inevitable, with the result that the role of government increases.” This is because new technologies create new economies of scale and economies of scope leading to natural monopolies, and that is what we are seeing today. Income and wealth is becoming more and more concentrated in the employed and productive elite. Moreover, the role of the free market as a balancing decentralized power is clearly diminishing.

Of course, the macroeconomic problem of insufficient demand crops up when the distribution of income is highly unequal, and this rapidly leads to widespread poverty and the resulting social ills. The authors note: “the poor may not be able to purchase the goods being produced primarily by robots, and perhaps half of the population is impoverished if there is no redistribution.”

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