Jun 4, 2017

Summers: Automation is the middle class' worst enemy

Michel Euler / AP

For Americans, it seems like a terrific jobs market, with an astonishingly low,4.3% unemployment rate. Yet a closer look reveals a middle class hollowed out by automation, says Larry Summers, the former Treasury Secretary.

"This question of technology leading to a reduction in demand for labor is not some hypothetical prospect ... It's one of the defining trends that has shaped the economy and society for the last 40 years."

In an interview with Axios, Summers points out that 5% of American men aged 25 to 54 were jobless in 1968; today, that number is 15%. In this statistic, the U.S. trails most of Western Europe.

Data: OECD; Chart: Andrew Witherspoon / Axios

Why it matters: If the participation rate for this age group were at its 2001 peak, there would be millions more workers in the economy, making both the country and many families richer.

Summers says a lot of economists advocate "more dynamism and flexibility," but that the U.S. already has a freer market than most other wealthy countries. More flexibility isn't going to make a big dent in this jobs crisis. Meanwhile, "it is a close race between the United States and Italy as to who is going to avoid the cellar of the major industrialized countries" in terms of prime-age male joblessness, he said. And it doesn't seem likely to improve soon. Here is Summers again: "I suspect that if current trends continue, we may have a third of men between the ages of 25 and 54 not working by the end of this half century, because this is a trend that shows no sign of decelerating. And that's before we have ... seen a single driver replaced [by self-driving vehicles] ..., not a trucker, not a taxicab driver, not a delivery person. ... And yet that is surely something that is en route." What it says it about policy: Both Democrats and Republicans believe that able-bodied men and women should work. But there's a growing body of evidence that the conventional U.S. strategy of low taxes, skimpy welfare benefits, and prohibitively expensive higher education won't result in more of them getting jobs.

Mass incarceration could play a role: Former Obama Council of Economic Advisers Chair Jason Furman has presented evidence that the rise in prison populations have something to do with the problem, as employers often shy away from hiring ex-convicts, who are also barred by law from certain jobs.

Go deeper

An unsettling future for millions of American jobs

Illustration: Aïda Amer/Axios

The U.S. economy is besting expectations for job growth, and the unemployment rate is at its lowest in several decades — but the other side of the story is that millions of jobs out there just aren't good enough.

Why it matters: Almost half of all American workers are stuck in low-wage jobs that often don't pay enough to support their lives, lack benefits and sit squarely inside the automation bullseye.

Unemployment fell to 50-year low in 2019 but wages stagnated

Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals

Friday's jobs report missed expectations, but still delivered solid numbers, showing the U.S. economy added well over 100,000 jobs and the unemployment rate remained near a 50-year low.

The big picture: BLS reported that the number of people who were employed part time but would rather be full-time employees declined by 507,000 over the year.

Growing divide between the two Americas

Illustration: Aïda Amer/Axios

Life in the U.S. is increasingly divided into two realities — one in which things have almost never been better and another in which it's hard to imagine them being worse.

Driving the news: Bankruptcies led more companies to announce job cuts last year than at any time in more than a decade, WSJ's Aisha Al-Muslim reports (subscription), citing data from outplacement firm Challenger, Gray and Christmas.

Go deeperArrowJan 3, 2020