There is this ongoing fear of technology in terms of economics. Perhaps we are right to fear technology when it comes to nuclear weapons or the government spying on us. But when it comes to doing things more efficiently that make our lives better, we should not fear technology.
It has become common to hear that robots are going to take our jobs. This has been one of the main lines of argument for those promoting a universal basic income. After all, if people don’t have jobs, how will they buy anything? Therefore, it is “reasoned”, we need the government to redistribute wealth by providing a universal basic income.
Those who do not fear the takeover of robots point out that other jobs are created. For example, cars put the horse and buggy industry out of business, but it didn’t mean that people were worse off for it. Other jobs were filled, some having to do with the new technology.
If you go back 200 years ago, the majority of people in the United States were farmers or did some kind of agriculture. Now, it is less than 2% of the population that do the farming for everyone else. This has freed up the time for the rest of the population to do other things to better our lives.
The ones who are scared of the coming robots (or who want others to be scared) reject this. They say, “This time is different.”
Why this time will be different is never fully explained. Are we supposed to believe that robots will do everything? Are they going to run a massager parlor? Are they going to work as nurses? Are they going to raise children? Are they going to provide all of our entertainment? Are they going to pet sit?
We live in a world of virtually unlimited wants, but we have scarce resources. As long as that situation exists, there will be jobs for people. If we ever got to a point where everything was provided by robots, then we wouldn’t need jobs anyway.
Those who are scared of the robot bogeyman will sometimes admit that there will still be jobs available. But they say that the skills of people laid off won’t match the skills needed for the new jobs. They also say that if people could fill those jobs, then the wages will be so low that they won’t be able to buy the stuff that robots make anyway.
Understanding Free Market Economics
This is just a terrible lack of understanding of the market economy.
First, if people can’t afford to buy what the robots are making, then why would the robots make anything? Who is paying the capital investment to make robots that can’t sell the products they are making? Why would they have these robots if they can’t make a profit? It isn’t going to be very profitable if there is just a tiny circle economy of just the capitalists who own the robots. Most entrepreneurs rely on the middle class as customers (and employees) in order to make significant profits.
Second, there is a major missed point in all of this. If robots take the jobs of people, it means they are more efficient. They are more cost effective. It means that, assuming we have a relatively free market, the lower costs and competition will drive down consumer prices. So even if nominal wages did go down, the cost of living would be going down too.
Imagine if all products were like electronics have been for the last couple of decades. Televisions get better and better in quality while the price keeps going down (in spite of monetary inflation and rising consumer prices).
Third, there is this worry about skills, but human labor is very versatile. In addition, if robots take the jobs of all truckers (self-driving automobiles), it doesn’t mean all of the unemployed truckers have to go into the exact jobs that are created. There is a market process, where price plays a function. In this case, it is the price of labor.
Let’s say we need more people in healthcare and we need more teachers. It doesn’t mean all of the truckers have to go into these professions. If there is a high demand for nurses, then wages for nurses will rise. This will encourage other people to go into these professions. It could be young people going to school, or it could be people changing professions.
Maybe someone who was going to be an accountant will become a nurse. Someone who was going to be a plumber instead decides to be an accountant. Maybe a former truck driver then decides to become a plumber.
The market sorts all of this out as long as it is allowed to function. This is the price mechanism at work. Prices allocate scarce goods, whether it is consumer products or labor.
Technology will make us richer. It will even improve the living standards of those people who lose their jobs to robots, at least in the long term, assuming the market is allowed to function. Real wages will go up. Someone working a minimum wage job today is likely much better off than someone who was considered middle class 200 years ago. We have access to electricity, refrigeration, air conditioning, smartphones, and a long list of other things that mostly did not exist back then.
So to answer the question – How will people buy stuff when robots take their jobs?
They will buy things easily with higher real wages. Things will be much cheaper if the free market is allowed to exist.