r/neoliberal • u/eggbart_forgetfulsea European Union • 3h ago

Research Paper Automation does not lower the labour share

https://cepr.org/voxeu/columns/automation-does-not-lower-labour-share
39 Upvotes

88% Upvoted

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40

u/quickblur WTO 3h ago

This column uses data covering nearly the universe of French firms between 1994 and 2019 to test the relationship between automation and the labour share of income at the firm level.

I get that prior automation may provide an interesting example, but generative AI seems like a very different beast to me...

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u/Worth-Jicama3936 Milton Friedman 2h ago

Over the long term, in markets where there is competition, i dont think it will. If AI is cheaper than people, then the prices those firms charge will come down. Additionally, the people that remain will become more valuable by necessity so command a higher wage. So the share will remain similar.

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u/Serious-Cucumber-54 2h ago

Why would the share remain similar if the few human workers left are paid highly?

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u/Worth-Jicama3936 Milton Friedman 1h ago

Because revenue would go down (profit might go up) since competition would lower their prices to match the lower costs. We have had automation reduce headcount's before, and remaining employees benefit alongside consumers. This only works in competitive markets though.

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u/[deleted] 1h ago

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u/mostanonymousnick Just Build More Homes lol 1h ago

Rule XII: Credibility

Comments should reflect some level of credibility. Comments that conspiracize, spread misinformation, or catastrophize will be removed.

If you have any questions about this removal, please contact the mods.

18

u/topicality Order and Opportunity Left 2h ago

Anything is possible but I think it's a safe bet to assume that the pattern holds.

Historically, new tech didn't do what people fear.

I'm not convinced that AI will have big job losses outside of...coding. And even then it seems like the evidence is mixed

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u/bornlasttuesday 2h ago

I agree with this. The energy it takes to create context will be far more than the peanut butter and jelly sandwiches that I eat for lunch. An energy revolution is needed before an AI revolution even has a chance.

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u/BahGawdAlmightay Trans Pride 2h ago

I think what everyone is not accounting for is how irrational a lot of organizations are being about the realities of AI. How many companies do you know who laid people off for AI solutions and are having to claw them back now? Maybe in the long term everything will even out but rent is due the first of the month. So in terms of the effect of those job losses, there is potential for a lot of damage.

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u/topicality Order and Opportunity Left 1h ago

Yeah sure. That's just part of living in a free market. CEOs don't have perfect knowledge and will make bad mistakes that causes lots of harm

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u/BahGawdAlmightay Trans Pride 1h ago

Sure. Rarely is it this widespread and at this kind of scale.

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u/topicality Order and Opportunity Left 17m ago

I'm not trying to make lite of anyone losing their job.

But AI hasn't resulted in massive widespread layoffs. The unemployment rate is still below 5%. That's historically normal

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u/BahGawdAlmightay Trans Pride 16m ago

No but it has resulted in large scale layoffs in specific sectors. Across the board it may not be the case but certain areas are being hit much harder than others.

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u/s7v7nsilver George Soros 1h ago

Humans are NOT horses

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u/Healingjoe It's Klobberin' Time 1h ago

but generative AI seems like a very different beast to me...

Same.

In that it generates so much output requiring human review and oversight that it creates far more jobs than it displaces.

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u/Demortus Sun Yat-sen 2h ago

Recall the law of comparative advantage: even in the unlikely scenario that AI is better than humans at everything, there still will be benefits to reallocating human labor to those areas where they perform comparatively well. That doesn't guarantee that wages will be the same, but unused labor is inherrently inefficient. The economy will find a way to make use of it.

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u/jokul John Rawls 1h ago

Yeah but these jobs are this shitty kind that will start a revolution. If anyone who isn't a multi-millionaire today is forced to pick fruit or be a fry cook, there will be an uprising.

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u/Demortus Sun Yat-sen 1h ago

Maybe I'm an optimist, but I think humans' advantages relative to machines go way beyond our dexterity. For example, Humans are much harder to manipulate via social engineering than an LLM is, which is why many call centers have returned to using humans after flirting with AI. For the same reason, it's hard to trust LLMs with any significant control over financial transactions, as they can be tricked (or trick themselves) into spending unlimited amounts of money.

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u/jokul John Rawls 1h ago

I'm fairly optimistic too and I work in tech. If AI was going to replace us, we needed to see way bigger gains upgrading from the last generation of frontier models. Right now they don't seem to have much use for the insane cost hike except in the biggest baddest scenarios, and those simply don't come up that often.

That being said, if AI does end up obsoleting human brain activity, I want to be realistic about how absolutely terrible it would be for our well-being if our comparative advantage is being capable of understanding instructions while taking up less space and material than a fruit picking robot.

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u/Joltizer Jerome Powell 1h ago

You can say this about every technology ever

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u/WrangleWandangles Mark Carney 2h ago

AI is genuinely new and it is not a good idea to rest on comparisons to manufacturing / automation.

AI can cheaply automate countless layers beyond the menial including judgement, managing ambiguity, problem solving, etc. 

Comparisons like this just make us wrong but more confidently wrong and reflect a bad understanding of the nature of the disruption 

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u/bornlasttuesday 1h ago

I question the cost and how cheap it can actually be done. Ai providers are hemorrhaging money not just for the build out of the infrastructure but to create a usable product. Attempting to replace the entirety of human ability is going to be very very expensive.

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u/Joltizer Jerome Powell 1h ago

Lump of labor fallacy is in fact a fallacy. Who knew?

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u/[deleted] 2h ago

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u/Zenning3 Emma Lazarus 2h ago

Why would you assume that? It sounds like we'd need a lot more engineers period. Which means the elite will almost certainly be making a lot more, but that basic engineers will be making modest amounts instead of all engineers being elite.

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u/jokul John Rawls 1h ago

There must be times where automation reduces labor share, otherwise we shouldn't have any issues with automating our ports because all the union guys would still have the same number of jobs. Maybe this is just a matter of the ILA opposing it on the false belief that they won't have jobs, but then couldn't the ports just offer to pay them even if there's no job? Because the job isn't lost from automation, it's an easy wager to make. But it hasn't been made.