Reallocating Labor Takes Time (or Another Problem with the Luddite Fallacy)

Technology both destroys and creates jobs. But this truth does not eliminate the possibility of technological unemployment. As Andrew McAfee, author of Race Against the Machine, is fond of pointing out, “there is no economic law that says that technology, by definition, has to create as many or more jobs as it destroys.” But even if there was a 1:1 relationship between jobs destroyed and jobs created, we could still have an issue with technological unemployment.

Finding a new job takes time. In addition to the standard matchmaking process that must occur between workers and employers (applications, interviews), securing new work may require new skills (retraining) or a new location (relocating). The result is an inevitable delay between losing a job at point A and getting a job at point B.

When technology is changing rapidly, even short delays become increasingly significant. What happens if the average delay time between jobs exceeds the average time it takes for a job to be automated away? In short: you get technological unemployment.

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