August 31, 2016

How robots help us buy more stuff

A joint study by the Centre for European Economic Research shows that robots are helping us to buy more products as well as saving on labor costs.

The study shows that although some human jobs were replaced by machines in the EU 1999-2010, the boost in demand for goods ultimately caused the number of positions in other parts of the economy to rise faster. For example, a firm which produces goods also employs people in management, sales and marketing. Automation of repetitive tasks, such as assembly line work, allows the firm to produce more goods, which lowers the prices for consumers and increases sales. The result is an increase of work in other areas of the business, especially jobs which focus on non-routine tasks.

The team behind the study estimates that although machines replaced 9.6 million jobs in the EU, the demand for goods added 8.7 million jobs. As people were able to afford cheaper goods, the resulting increase has what is known as a “multiplier effect.” This ends up increasing demand for labor even further across the economy.

Richard B. Freeman in his article Who owns the robots rules the world says, “As long as the relative advantage of machines varies, there will be work for humans.” He states that the problem of automation is that it is the owners of the machines who will receive the bulk of the benefits of the technological progress. The best solution, he argues, is for workers to own large shares of capital such as the Employee Stock Ownership Plans in the US.

Download the full report.

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Who owns the robots rules the world by Richard B. Freeman