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The tech sector right now has a lower unemployment than the general US economy
https://www.google.com/url?sa=i&source=web&rct=j&url=https://www.wsj.com/cio-journal/tech-unemployment-ticks-up-to-3-8-in-april-amid-ai-driven-layoffs-214b0ca4&ved=2ahUKEwins7yEpNGUAxW7ZvUHHXKrPfsQ1fkOegoIAggACAAIHRAC&opi=89978449&cd&psig=AOvVaw0IYy6J7-fiZwA_vTGmEcwb&ust=1779690002348000
3.8% in the information sector vs 4.3%
I'm stating this first to sort of color the rest of my point in the context that a lot of what people say about what AI has already done is just bullshit. But furthermore, people fundamentally don't seem to understand how employment works. You can have mass layoffs and still have high employment. I'm not even sure tech layoffs are higher than other sectors, but I am sure thar every company that lays off tech workers gets front page news while if there's a cut in delivery drivers nobody notices.
The only smart prediction to make is that we don't really know. People here just don't realize how big and complex the economy is and the world at large is. Even if your job is gone, your skills are often still transferable. When horse carriage producers were put out of business they didn't all starve and never find jobs. They started working on building cars for the most part.
AI is just another step in a long line of automations. Is it an exceptional step? Probably. Will it ever replace all workers? No. By the nature of economics, that's basically impossible. People's desires are infinite and there arent infinite resources and labor, so there are always niches to fill. Might it make people poorer? Maybe. I kind of doubt it unless governments uses it as an oppressive system that cracks down on a lot of market activity.
My point here is really that making predictions is a fools errand. People have tried to do it, and at best a few get lucky and pretend they're geniuses and then return to the mean on the next prediction. There are obvious truths you can see, sure, like if the price of compute continues to decrease at an decelerating rate, it will significantly affect AI progress. I think that even as we see continued progress in AI, that will be the fundamental factor that's overlooked. Look at the flop count per dollar on a CPU from 2005 vs 2015 and then a GPU from 2015 vs 2025. Nvidia is squeezing some progress out in other ways, but at massive costs.
So my prediction is simple I guess. AI will be a big boon to the economy. It will take a few years for companies to learn how to cost effectively implement it.Some sectors will disproportionately reap the rewards. I suspect the gains will be in the.5-1% range of additional productivity growth a year, which is a lot. For context, the early industrial revolution was something like 2% growth year on year excluding population growth. With an extra 1% productivity growth the US would be higher than that right now I believe.
I also suspect there are factors that are huge burdens to society which AI can't overcome. Population decline. A war in Taiwan. Developed country and Chinese debt burdens. All of these things could affect AI. Which is ultimaty why all predictions beyond a year or two will be meaningfully wrong.
That only works when the thing that destroyed your job doesn’t destroy all the jobs your skills are good for at the same time. But the AI is specifically aimed at replacing skills. The skill of recognizing patterns in pictures is something AI can already do. It can recognize my face, my emotional state, detect cancers, and read road signs — all things that require recognizing patterns in images. So when AI is deployed in hospitals to detect cancer, the same image recognition machine can be trivially reconfigured to translate documents from photos, read faces, and read emotional states. It can probably drive my car if coupled with robotics properly. Where does the human go? And again with other sectors. Not only do you have the problem of “the AI can replace the skills you have”, but there’s a problem that will be caused by any sectors AI doesn’t yet have skills at being absolutely flooded with applicants from sectors AI just destroyed. When accounting gets eaten, those with the skills pivot to something else, as will spreadsheet jockeys and so on. They’re going to try to get in where there are jobs. The wages for the remainder will thus fall compared to inflation as the market gets flooded. Why give raises when there are hundreds trying to get every opening?
This is what people were saying during the industrial revolution. Don't forget that 90% of people in developed Europe were farmers 200 years ago. There will be winners and losers, but I don't see evidence that the 20th round of automation is different than the previous ones.
I mean once a person cannot trade on body or mind, there’s kind of a problem. The difference is exactly that. Because of Industrial Revolution 1, most people Don’t trade their time by doing physical labor as factories are largely mechanized and so is farm production. So when the same thing happens again, you can’t go back to “hey, let’s make everything by hand”, but a large percentage of mental work goes away in the same way in Industrial Revolution 2, then you have to find a way for millions of people to find jobs that pay liveable wages that are not either physical labor or mental labor. What’s left might be emotional labor of various forms. But what demand for that kind of thing exists? If everyone is a therapist, how does that even work?
You're.misunderstanding how economies work. There isn't a set pool of "things that needs to be done" that labor pulls from and then gets a job according to that. People have endless desires, those desires are arbitrary, and there are limited resources. That means there's always more work to be done.
Nor does someone or something being better than you in every conceivable way does mean you cannot find a way to trade and profit within that system. Here's an explanation of that--
https://en.wikipedia.org/wiki/Comparative_advantage
I don't know. That's kind of my point. How do therapists work now? I personally feel like 90% of their work is totally unproductive.People's desires are arbitrary though. You don't necessarily make more money by creating 5000 times more steel instead of paying some weirdo to listen to you blabber for an hour. That's one huge mistake the Soviets made.
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Tech sector unemployment hit a low of 1.8% in 2018 and is now 3.8% and rising. That's an absolutely massive change. In the meantime, total unemployment hit a low of 3.5% in 2020 and is now 4.3% and steady, which is a much smaller change. And "rising" is important, if you're already not working.
But you’d expect that regardless of the tech improvement. People were going to flood into the “low unemployment + high pay” job raising the unemployment rate of that industry.
We know that an increase in supply is not what's causing unemployment, as tech employment is dropping. Supply isn't all that elastic so that increase in supply due to increase in demand usually doesn't cause unemployment -- such inrushes have happened, but were more than absorbed by the industry.
https://fred.stlouisfed.org/series/CES6054150001
https://fred.stlouisfed.org/series/CES5051800001
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Minimum wage and related barriers put a finger on the scale though. Currently, very-low-skilled people are unemployable because the assorted costs of hiring them outweigh the expected benefits. In the future, will that extend to moderate skill levels? high? I don't think it'll cut off 100% of people before extinction and/or post-scarcity, but I could see the labor force dropping from about 50% of all people today to 10-20% even if AI remains a normal technology.
I'm not sure that this is entirely true. Very low-skilled people are unemployable period, and lowering the pay rate doesn't do anything. For example, there's a guy I know who isn't the brightest, retired now but comes off as someone who was definitely in special education back in the 60s and 70s. He worked as a janitor at a local elementary school. In Pennsylvania the minimum wage is the Federal $7.25. Someone in his position would be making $22.62 this yer and $24.35 next year. Of course, that's because he's been there for 35 years, but even a new hire makes $16.60 on the current contract and $18.60 on the next. Grocery, retail, and fast food wages aren't much lower, even for 16-year-olds with no experience. The only exceptions I'm aware of are for people with disabilities, but that's more because they can only make so much before they lose their benefits. I don't think there is a significant population that's employable but for minimum wage laws.
In most places, inflation has effectively repealed minimum wage laws. However, other indirect regulatory and legal costs have accumulated that make people more expensive to hire.
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Now that you mention it, when was the last time you even saw a minimum wage job? Even the convenience stores and McDonald's around me are offering well over the state minimums. It seems like it's one of those things that exists on paper but doesn't really come up anymore.
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This is a fair rebuttal. I don't think Americans workers will ever be willing to support 80% of the population with welfare, let alone the fiscal reality making it totally unfeasible.
That 80% gets to vote too. I wonder what sorts of welfare they'll vote themselves.
We can see the answer to this in every discussion on social security caps/contributions/clawbacks or British discussions on the "triple lock"
Hint, even if the welfare formula is mathematically destined to out compound the entire country's economy (triple lock) the voters will never, ever, EVER vote away their gibs.
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If American workers are only 20% of the population (and the 80% are people actually looking for work, not children, retirees, housewives, etc.), then I don't think normal political considerations will matter much.
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