Economics: Why We Need More Robots

(Drivebycuriosity) - Life expectancy is rising globally thanks to rapid advances in health care and medicine. A reason to cheer? Not for the media and many pundits. They lament about over-aging and claim that an "aging population"will lead to a "shrinking work force" (in some countries like Japan this is already happening bloomberg  washingtonpost). Will we really run out of things & services because there are too few people?

I don´t think so. There is a continuing process of automation since the 19th century at least. Automation has been rising productivity of labor, meaning we need less & less labor to produce things & services. Machines, including computers, have been replacing labor for a long time. It seems that this process is accelerating, just in time to fill the widening growing gap between the numbers of retired and the working.

A study by economists John G. Fernald and Charles I. Jones from Stanford & the Federal Reserve Bank of San Francisco claims that "it becomes possible to replace more and more of the labor tasks with capital" (robinhanson ). Fernald & Jones define capital as physical capital (machines including robots & computers), plus human capital (knowledge & skills) plus discovery of new ideas (inventions like computer, internet etc.). According to them "artificial intelligence and machine learning could allow computers and robots to increasingly replace labor in the production function for goods", meaning that the society can produce more things without increasing hours worked or even with a shrinking labor force. As a result the growth rate of income per person and the long-run growth rate (now around 2%) will rise as well: "The possibility that artificial intelligence will allow machines to replace workers to some extent could lead to higher growth in the future". Other researchers ( bloomberg) observe that automation allows companies to reduce costs and lower prices so that more people can buy what`s on sale.

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A glance on the US job market  - about 2  million new jobs in 2019, record low unemployment and climbing wages (charts above) - shows that automation is advancing slowly and the influence of robots and other machine is still weak. If the predictions of an aging population and a shrinking labor force are right we will need more robots!

History shows that robots and other machines create wealth by producing more goods & services with lower costs & prices. So a rising number of robots grows wealth and hikes company earnings & salaries. Governments participate with climbing tax revenues. Some day robots (and other machines ) will produce the majority of goods & services which will enable the governments (via high tax revenues) to pay everybody a sufficient minimum income (universal basic income). More robots please!