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Our future prosperity depends on more automation, not less

It seems that almost every announcement of a major technological innovation that involves the automation of a production process is accompanied by a chorus of voices from those who fear that thousands of workers will be replaced by “robots” that can operate 24-7 and don’t need coffee breaks.

The spectre of this dystopian automated workerless future may stem from iconic science fiction movies like 2001: A Space Odyssey, Westworld or Terminator. However, the premise that robots will render hoards of human workers redundant is definitely at odds with the effects of major technogical developments on the labour force in the past.

For example, although the mechanization of agriculture displaced a very large number of farm workers early in the twentieth century, the farm equipment industry created thousands of jobs in manufacturing, transportation, raw material production and a multitude of support industries. The introduction of the automobile was a death knell for the buggy whip and other horse dependent businesses. However, this loss was overwhelmed by employment gains in motor vehicle manufacturing, auto servicing and all the industries both directly and indirectly "driven" by the auto industry. Further, in the communications industry, the mechanization of telephone switching has dramatically reduced costs and has fuelled the exponential growth of the internet.

Unfortunately, those who express fear about the potential negative impact of automation on employment are embracing a number of myths. First and foremost, the steady gradual improvement in living standards in both Canada and the United States is completely dependent on productivity growth stemming from technological innovation.

Second, while many believe workers in developed countries are facing unprecedented threats to their job security due to an accelerating pace of technological innovation, this is just not the case.

Termed "creative destruction" by economists, the displacement of workers by new innovations such as robots in manufacturing, the use of mathematical models to execute securities trading or the impact of internet-based accommodation providers such as Airbnb on the hotel industry is actually occurring at a slower pace now than it has in the past.

Based on research by the Information and Technology and Innovation Foundation, the pace of labour market "churn" — i.e., the replacement of outdated occupations (think elevator operators) with new occupations such as distant learning co-ordinators, internet service providers and natural gas and oil service-related occupations — is actually trending lower.

As highlighted in a recent Wall Street Journal article by Greg Ip, with an unemployment rate at a ten-year low and wages increasing by 3%, the U.S. economy is at or above "full employment". However, despite the apparent "wave" of technological innovation that has swept across both Canada and the U.S., productivity growth in both countries has been abysmal. Further, the pace of job churn has slowed over the past several years in both countries.

In Canada, this slower rate of job churn is reflected by a steady increase in the average time that both full- and part-time employees are remaining in the same type of work. Whereas in 1978, the average worker remained in the same type of work for 6.9 years, by 2016 average job tenure has risen to 8.6 years. While the nature of part-time employment is more informal than that of full-time employment — the average tenure of both full- and part-time employees has increased steadily over the past 40 years.

Given this increase in both full- and part-time job tenure, the persisting subpar pattern of productivity growth and the concomitant steady slowdown in the rate of entry into the labour force caused by an aging population, it is clear that without further significant gains in technological innovations, and yes, more robots, living standards in both Canada and the U.S. will gradually stagnate and eventually retreat.

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