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  • Writer's pictureRealFacts Editorial Team

The Historical Waves of Innovation and Unemployment: Lessons for the New AI Era

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A new revolution of technology is among us, in the past decade it was the internet and now with artificial intelligence (AI). As the new advancement plays out it's worth taking a step back to understand the historical context and lessons learned from previous waves of technological disruption first. MIT through its 125-year history provides deep analysis of insights, tracing back the trajectory of fears and hopes surrounding technological progress and its impact on employment.

In 1938, during the Great Depression, MIT President Karl T. Compton wrote an article addressing the concern of "technological unemployment." This term was coined by renowned economist John Maynard Keynes, he said that labor saving advances were “outrunning the pace at which we can find new uses for labour.” This put the fear into many that labor-saving advances through machines or contraptions in his time would outpace the creation of new jobs, this would (in his mind) compound leading to widespread unemployment. Compton, however, looked at this from a different perspective. Instead he researched the macroeconomic effects of the progression of technology and the impacts on individuals and communities.

At the macroeconomic level, Compton argued that technological advancements had historically spurred the creation of new industries and expanded markets, ultimately leading to more employment opportunities. However, he acknowledged the harsh reality that for many workers and communities, “technological unemployment” did leave many out of a job. This duality—of progress and pain—has persisted through the decades, resurfacing in times of economic upheaval and technological innovation.

Fast forward to the early 1960s, was another period of economic uncertainty and fast moving technological change. MIT economist Robert Solow studied the prevailing fears of mass unemployment. In his research he concluded that productivity growth alone was insufficient to predict widespread job losses. He also recognized the effects of technological change on certain

sectors and types of labor, concluding that it truly did disrupt many industries, However the long term gain was greater than the short-term pain felt for the economy as a whole.

Debates of employment are once again a point of topic in our current era of AI. The early 2010s with the issuance of the internet had high unemployment rates and groundbreaking technological advancements. Many who worked in such jobs realized that they can be replaced by a computer and that once again sparked renewed concerns about job displacement. Economists like Erik Brynjolfsson and Andrew McAfee sounded the alarm, arguing that technological change was outpacing job creation, particularly in sectors vulnerable to the internet and its uses, and that we should all worry about machines replacing us as humans.

However, over the anxiety of a jobless future, time after time has shown that with new advances bring new opportunities. It may outpace demand for jobs from time to time, however it is still running its course and is in line with demand. It's crucial to maintain a balanced perspective. While AI will undoubtedly reshape the labor market, evidence suggests that the impact on overall employment may be more complex than a simple narrative of job destruction.

Goldman Sachs' analysts have highlighted the relationship between AI and employment, noting that while many industries and careers are exposed to innovation and possible job loss, not all will be replaced. Moreover, historical precedent suggests that technological innovation has consistently fueled the creation of new types of jobs while still employing others. Of the jobs today only 40% were still around in 1940, the other 60% have been replaced with different titles and roles given to employees that do things that we couldn't do or didn't even know were possible to do in the 40s but are needed more than ever. Looking at this by each sector or industry we can see that we do in fact have some occupations that became obsolete, however it created and sparked new opportunities for new ones.

U.S. Employment graph

Employment growth chart

These waves of innovations make it easier for all of us. Giving us more resources to focus on the next best thing and not focusing on the repetitive and nuanced tasks like video editing, storage, and generation that seem to be a mundane task and can be taken care of with a machine faster than a human. With more time on our hands, we can focus more on what humans are good at, Creation. As we have these waves of creation or technological advancement, we hit wave after wave of innovation making our lives easier and easier in a continuous cycle.

We have demonstrated that with innovation brings new opportunities, however, the critical questions remain: How do we ensure that the benefits of technological progress are going to continue through the AI era rather than that AI “outpaces” us finding new opportunities? And that AI benefits human potential and creation rather than replacing it?

Compton's calls for responsible management of technology, emphasizing the importance of mitigating the short-term business gains of technological transitions. We need to discuss between all industries, the long-term effects before getting into this advancement too soon and really understand which industries are going to be affected, how they are going to be affected (for better or worse) and what we can make of it to still provide benefit to the economy as a whole. To act in a way with minimum backlash on the American workforce, as to not leave millions jobless too soon. This can be done through investment in retraining and reskilling programs, to put our workforce above the curve and understand how it works first, so that they can better understand and contribute to the advancement. We also will need a commitment to prioritize long-term economic progress and well-being over short-term profits. These are essential principles for guiding the deployment of AI and keeping us in pace with technology advancement and away from “technological unemployment.”

As we stand at another technological wave, we must heed the lessons of the past. The future of work is not totally determined by technological advancements but shaped by the choices we make today. In using the power of AI, we can change the relationship between technology and labor, creating new jobs and new opportunities for all.

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