It’s the long-term implications that remain worrisome. “Decelerating workforce growth, in the short term, will be great for wages,” Harris said. But by the end of the build-out, some people will have “built away” their own jobs. Think about Microsoft employees who received generous severance packages to stay around and help train lower-paid foreigners to do their jobs. This time, it’s machines, not foreigners.
The advance of robotics opens a Pandora’s box of other issues. Employers may like robots because they don’t take vacations or ask for raises. But as Mauldin reminded Harris, individuals pay half of all tax receipts and robots don’t pay income taxes. Harris countered that Bill Gates has wondered if the U.S. should start taxing robots.
One issue with the scenario Harris depicts is that it will unfold very fast. If she’s wrong and the great displacement takes until 2040 instead of 2030, that means 1.3 million workers (not 2.5 million) would find themselves obsolete every year, giving the U.S. economy more time to absorb workers.
The best economists admit they don’t know the answers. “The best bet is that AI and other new technologies will eventually come to have a larger impact on growth than they have up to now,” wrote Harvard University economist Kenneth Rogoff recently at Project Syndicate. “It is well known that it can take a very long time for businesses to reimagine productive processes to exploit new technologies: railroads and electricity are two leading examples.”
That might be wishful thinking. Today’s world is exponentially more connected than it was a century ago.
Rogoff, who predicted the financial crisis would be followed by seven years of subpar growth as the world deleveraged, acknowledges this. “The bottom line is that neither policy makers nor markets should be betting on the slow growth of the past decade carrying over to the next,” he continued. “But that might not be entirely welcome news. If the scientists are right, we may come to regret the growth we get.”
Harris admitted to attendees at the SIC she doesn’t know who the winners will be. However, she fears the great displacement will coincide with the wave of baby boomer retirees, dramatically expanding the number of Americans who aren’t participating in the labor market. “Expect a much more interventionist government,” she warned.
Another conference speaker, DoubleLine Capital CEO Jeffrey Gundlach, predicted a universal income for Americans who choose not to work would become a major issue in the 2020 election cycle. In 2006, only 12% of Americans supported that concept. Today, the figure is 48%.
For the next decade, resiliency is necessary and it will be rewarded in Harris’s view. Why? “Because when things change this quickly, we’re going to screw up,” she predicted.
Over the long term, individuals’ quality of life is likely to improve. “Do I believe this is a permanent state of a downturn? Of course not,” Harris said. “I can even stipulate that maybe in 2050, everyone will get dropped at their emotionally fulfilling job and, no matter what, you’ll get a trophy just like our kids today, just for showing up. That doesn’t make it any easier between now and 2030.”