Now is the time to put people before robots
Artificial intelligence is a topic that has sparked widespread debate and concern. When British Prime Minister Rishi Sunak asked Elon Musk about his thoughts on AI, Musk’s response was eye-opening. He predicted that there will come a point where no job is needed, as AI will be able to do everything. This statement may seem like something out of a science fiction movie, but there is evidence to suggest that it could become a reality.
Ann E Harrison, an economist and the dean of the Berkeley Haas School of Business, investigates the decline in labor’s share of national income in her research on global incomes. Traditionally, the division of national income between labor and capital was believed to be fixed, but Harrison’s findings challenge this assumption. In many countries, labor’s proportion of national income has been declining in recent years.
In the United States, this decline is especially pronounced. Harrison refers to it as the great slide because of the extent of the reduction. While profits for US-listed companies nearly doubled between 1997 and 2019, the share of revenues going to wages and benefits fell significantly. This alarming trend is not unique to the US and has a direct relationship with rising inequality worldwide.
So, what is driving this decline in labor’s share of income? Harrison explores three possibilities: globalization, the market power of big companies, and technological advancements. While all three factors play a role, her research suggests that the biggest driver is the replacement of workers with machines.
Studies conducted by Daron Acemoglu and Pascual Restrepo at MIT support this notion. They calculated that each additional robot in the US eliminates 3.3 workers. Furthermore, Harrison’s research indicates that an increase in research and development expenditure is associated with a decline in a company’s labor share. This suggests that technology is indeed rendering workers obsolete from an economic standpoint.
The consequences of this trend are significant. Inequality is on the rise, with after-tax income inequality in the US at its highest level in 40 years. Greater inequality often leads to social unrest, increased poverty, and extreme outcomes in elections.
To address this issue, various solutions have been proposed. Some economists advocate for a form of universal basic income, while others suggest that public policy should prioritize human workers and discourage excessive automation. Harrison believes that policymakers should ensure that tax and subsidy incentives encourage companies to create more and better jobs. Shifting incentives to invest in human resources rather than machines could help reverse the decline in labor’s share.
In addition, promoting higher educational opportunities and providing stronger social safety nets can protect individuals from the negative impacts of automation. It is crucial to avoid protectionist measures and instead focus on the benefits that technological advancements can bring.
As the head of a business school, Harrison emphasizes the importance of putting people first. Business schools should teach future leaders to consider the needs of all stakeholders, not just shareholders and profits. By prioritizing the well-being of workers and creating an environment that fosters job growth and development, it is possible to achieve a more equitable and prosperous society.
In conclusion, the decline in labor’s share of income is a concerning global trend. The replacement of workers with machines, driven by technological advancements, is a significant factor contributing to this decline. To address the issue, policymakers should consider incentivizing companies to invest in human resources, promoting higher education, and providing stronger social safety nets. By prioritizing people over robots, we can strive for a more inclusive and sustainable future.
