Incentives for Entrepreneurs and Subsidies for Wages Can Cushion Automation’s Blows

Andrew McAfee is the co-founder of the M.I.T. Initiative on the Digital Economy and author, with Erik Brynjolfsson, of "The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies." He is on Twitter.

Updated October 4, 2016, 3:21 AM

The benefits of technological progress are extraordinarily large. Self-driving cars will restore mobility to the blind, elderly and disabled. Automated medical diagnosis via mobile phones will come to billions around the world. A world-class education on many topics is now freely available to anyone with a connected device. And so on.

Give the economy every possible chance to create new types of good jobs, but we're far from needing large-scale wealth redistribution.

But as technology advances, isn't it eating all of the jobs? A quick look at the evidence shows that it's not. The American economy is the world's most technologically advanced, yet it has seen net job growth every month for more than five years. So the robots and artificial intelligence systems aren't yet automating work faster than we're generating it.

The problem is that due to automation, globalization and other tectonic forces our job creation engine has changed. It’s no longer producing lots of opportunities for people to earn a good living by doing routine physical work (like staffing an assembly line) or cognitive work (like handling payroll for the factory). The large, stable and prosperous post-war middle class in the United States and other rich countries was built on jobs like these. They’re disappearing, and not coming back.

So what can we do? Quite a few things, actually. The first, and most important, is to give the economy every possible chance to create new types of good jobs. This means we have to create both a better supply of workers, and more demand for them. A better supply will come from de-emphasizing routine skills in education, and instead teaching students of all ages the art of not only solving problems, but also of identifying them in the first place, and of working with others to get complicated projects done.

More demand will come clearing out red tape and other barriers to entrepreneurship, bringing our infrastructure into the 21st century, making it easy for the world’s most talented and motivated people to come here to launch their companies and careers, and funding the basic research that eventually leads to breakthrough innovations and entirely new industries.

In parallel with this, it also makes sense today to support the people who are out there working but not earning high pay. The best way to do this is with a wage subsidy like the earned income tax credit. While the existing credit works, it is too small and hard to use at present and needs to be expanded and simplified.

We might someday have a super automated, labor-light economy that requires large-scale wealth redistribution via something like a universal basic income. But it’s not here yet, so let’s not get ahead of ourselves. There’s too much work to do right now.