Pick One Worry: Technological Unemployment or the Crushing Burden of Entitlements

A woman holds a new communication robot produced for elderly people who need nursing care in Japan.

Photo by Toru Yamanaka/AFP/Getty Images

This second paragraph from Lawrence Summers In a Washington Post op-ed provides a nice and concise rundown of what the American political elite is worried about. So nice and so concise that it helpfully illustrates how contradictory these elite worries are, though unfortunately he takes the column in a different direction:

Meanwhile, profound changes are redefining the global order. Emerging economies, led by China, are converging toward the West. Beyond the current economic downturn lies the even more serious challenge of the rise of technologies, which may increase average productivity but which also displace large numbers of workers. The combination of an aging population and the rising costs of health care and education will put pressure on future budgets.

I understand why people worry about technological unemployment. And I understand why people worry about rising entitlement spending burdens. What I don’t understand is why people worry about them both simultaneously. In the technological unemployment world, we’ll be able to give everyone a 2013 level of consumption goods with a radically diminished workforce, raising the question of what everyone is going to actually do. To optimists, this simply amounts to ushering in an era of utopian socialism, but to pessimists it smacks of decadence and decay.

The other worry is the opposite of this one. It’s that in the future a very large share of our population will be elderly nonworkers and a very large share of our workforce will be dedicated to taking care of elderly nonworkers (“skyrocketing health care costs”), and that consequently younger people’s living standards will diminish or stagnate.

Either of those things could happen, but they can’t both happen. A world of widespread technological unemployment is a world in which productivity-enhancing technology is allowing us to care for the elderly in some as-yet-unknown low-cost manner. If that doesn’t happen, and health care costs continue to skyrocket, we’ll simply be seeing a structural shift in the patterns of employment. At some point we stopped needing very many farmers to produce enough food to eat, so workers went to factories, and we increased our consumption of manufactured goods. If robots and Chinese people can make the manufactured goods, then workers will go to hospitals and nursing homes, and we’ll be able to cope with the needs of an aging population. Alternatively, if robots can also take care of the elderly, then it really isn’t obvious where the labor demand will come from, but there’s going to be no entitlement crisis—just a clash of social values between moralists and utopians about how to build a leisure society.