Supply Chain Automation And Job Loss: The Fears Of 1964

Blog - automationA half-century ago, there was deep and widespread concern that automation and new technology were leading to chronically high levels of unemployment. In retrospect, we know the fear at that time was unfounded. But it is nonetheless fruitful to review the controversy.

To set the stage, the U.S. economy suffered 10 months of recession from April 1960 to February 1961. The unemployment rate rose from 5.0% in June 1959 to 7.1% by May 1961. A widespread fear was that the job losses were due to the arrival of automation and electronic technology. For example, here are some excerpts from a TIME magazine article on February 24, 1961, “The Automation Jobless.”

The rise in unemployment has raised some new alarms around an old scare word: automation. How much has the rapid spread of technological change contributed to the current high of 5,400,000 out of work? … While no one has yet sorted out the jobs lost because of the overall drop in business from those lost through automation and other technological changes, many a labor expert tends to put much of the blame on automation. … Dr. Russell Ackoff, a Case Institute expert on business problems, feels that automation is reaching into so many fields so fast that it has become “the nation’s second most important problem.” (First: peace.)

The number of jobs lost to more efficient machines is only part of the problem. What worries many job experts more is that automation may prevent the economy from creating enough new jobs. … Throughout industry, the trend has been to bigger production with a smaller work force. … Many of the losses in factory jobs have been countered by an increase in the service industries or in office jobs. But automation is beginning to move in and eliminate office jobs too. … In the past, new industries hired far more people than those they put out of business. But this is not true of many of today’s new industries. … Today’s new industries have comparatively few jobs for the unskilled or semi-skilled, just the class of workers whose jobs are being eliminated by automation.

Thus, President John F. Kennedy–who probably edged out Richard Nixon in the 1960 presidential race in substantial part due to the seemingly dicey state of the economy at the time–delivered a speech to a joint session of Congress on May 25, 1961. The speech has become best-known for Kennedy’s call to put a man on the moon. But that was part IX of the speech. Much earlier in section II, Kennedy stated:

I am therefore transmitting to the Congress a new Manpower and Training Development program to train or retrain several hundred thousand workers particularly in those areas where we have seen chronic unemployment as a result of technological factors and new occupational skills over a four-year period, in order to replace those skills made obsolete by automation and industrial change with the new skills which the new processes demand.

The U.S. unemployment rate had declined back to the range of 5.0% by August 1964, but concerns over how the U.S economy might adapt to technology and automation remained serious enough that President Lyndon Johnson signed into law a National Commission on Technology, Automation, and Economic Progress. The Commission eventually released its report in February 1966. when the unemployment rate had fallen to 3.8%.

Blog - elephant-in-the-roomBefore reviewing the tone and findings of the Commission, I’ll just note that when I run into people who are concerned that technology is about to decimate U.S. jobs, I sometimes bring up the 1964 report. The usual response is to dismiss the 1964 experience very quickly, on the grounds that the current combination of information and communications technology, along with advances in robotics, represent a totally different situation than in 1964. It’s of course true that modern technologies differ from those of a half-century ago, but that isn’t the issue. The issue is how an economy and a workforce makes a transition when new technologies arrive. It is a fact that technological shocks have been happening for decades, and that the U.S. economy has been adapting to them. The adaptations have not involved a steadily rising upward trend of unemployment over the decades, but they have involved the dislocations of industries falling and rising in different locations, and a continual pressure for workers to have higher skill levels.

It is of course theoretically possible that the technological changes of our own time will be profoundly different than anything which has come before. There is of course no way of proving that something in the future either will or will not be completely different than what has come before, but I am highly wary of such claims. After all, history also reminds us of that claims about how the present moment is utterly unique can sound plausible at the time, but look less plausible even just a few years or a decade later. What strikes me in looking back at the 1966 report is how much the description of the problem sounds quite modern, but how the recommendations of policies sound by contemporary standards fairly extreme.

For a sample, here’s an overall perspective on technology and jobs from Chapter Two of the 1966 Commission report:

We believe that the general level of unemployment must be distinguished from the displacement of particular workers at particular time and places, if the relation between technological change and unemployment is to be clearly understood. The persistence of a high general level of unemployment in the years following the Korean war was not the result of accelerated technological progress. Its cause was interaction between rising productivity, labor force growth, and an inadequate response of aggregate demand.  This is firmly supported by the response of the economy to the expansionary fiscal policy of the last 5 years. Technological change on the other hand, has been a major factor in the displacement and temporary unemployment of particular workers. Thus technological change (along with other forms of economic change) is an important determinant of the precise places, industries, and people affected by unemployment. But the general level of demand for goods and services is by far the most important factor determining how many are affected, how long they stay unemployed, and how hard it is for new entrants to the labor market to find jobs. The basic fact is that technology eliminates jobs, not work. It is the continuous obligation of economic policy to match increases in productive potential with increases in purchasing power and demand. Otherwise the potential created by technical progress runs to waste in idle capacity, unemployment, and deprivation.”

A container truck drives past the container area at the Yangshan Deep Water Port, part of the newly announced Shanghai Free Trade Zone, south of ShanghaiMy guess is that a lot of contemporary economists could still sign on to most of this sentiment, a half-century later, although there would be squabbling on a few points.  For example, economic discussions in the early 1960’s put a heavy emphasis on Keynesian-style stimulation of aggregate demand, and at least some modern economists would put more emphasis on supply-side growth and adjustment problems. The focus here is primarily on job loss and unemployment, while a modern economist would be likely to focus at least as much on issues about rising inequality. And of course, the claim that “The basic fact is that technology eliminates jobs, not work” proved true for the 1960’s, but there is controversy over whether it will continue to be true.

The 1966 Commission report offers a long list of recommendations, and I found it interesting to consider how many of the topics are still very much with us 50 years later.  It’s worth remembering that this is a Commission appointed by a Democratic President at the heart of what came to be called Johnson’s “Great Society” wave of legislation. That said, here’s a sampling of the recommendations:

“We recommend a program of public service employment, providing, in effect, that the Government be an employer of last resort, providing work for “hard-core unemployed” in useful community enterprises.”

“We recommend that economic security be guaranteed by a floor under family income. That floor should include both improvements in wage-related benefits and a broader system of income maintenance for those families unable to provide for themselves.”

“We recommend compensatory education for those from disadvantaged environments, improvements in the general quality of education, universal high school education and opportunity for 14 years of free public education, elimination of financial obstacles to higher education, lifetime opportunities for education, training, and retraining …”

“We recommend the creation of a national computerized job-man matching system which would provide more adequate information on employment opportunities and available workers on a local, regional, and national scale. In addition to speeding job search, such a service would provide better information for vocational choice …”

“We recommend that present experimentation with relocation assistance to workers and their families stranded in declining areas be developed into a permanent program.”

“We recommend … regional technical institutes to serve as centers for disseminating scientific and technical knowledge relevant to the region’s development …”

Blog - Need workThere’s more, including discussion of how to encourage the use of technology to address health and environmental concerns, to improve workplace conditions, and to make government work better. Much of this list is more about overall goals (“improvements in the general quality of education”) than about details of how public policy might address these goals. But viewed as a list of areas for concern, this list of priorities for helping a modern workforce adjust over time to changes in technology seems quite relevant today, a half-century later. The notion that this list still seems so relevant a half century later is in part, no doubt, because the underlying issues are hard ones. But it also seems a depressing commentary on some central inadequacies of public policy in the last half-century, and a grim commentary on the irrelevance of much of what passed for public debate in the 2014 election season.


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