, Kurt Vonnegut's 1952 vision of a dystopian U.S., technology
created a vast underclass of unemployed, and not even the
technical elite were immune, as the engineer Bud Calhoun invents
himself out of a job. Today, what is being described as the '
Second Machine Age
' is upon us. Recently disappointing payrolls reports partly
reflected the global trend of technology displacing jobs, and in
turn reinforced fears of structural unemployment.
You don't have to look far these days to find reasons:
Self-driving cars on our streets, self-sufficient solar-powered
homes moving off the electrical grid, robotic-assisted surgeries
taking place in our hospitals and, of course, possible home
deliveries by drones are examples that show where we're headed.
In fact, recent technological advances are reshaping virtually
every aspect of our lives and it's not just routine repetitive
tasks that are being automated. The theme even made it onto the
agenda last month in Davos as economists, including Larry
Summers, lined up to warn how technological disruption will
result in unforeseen political, economic and social risks.
In the context of today's globalized economy and
hyper-accelerated technological advances, it is true that
emerging technologies can be extremely disruptive to entire
industries, and clearly there are time lags when workers struggle
to be retrained. More concerning is the fact that the 10-year
rolling correlation between labor productivity and payrolls
in the late-2000s, at least raising the possibility of a paradigm
shift in the long-held relationship between productivity and
employment, or at least a time when disruptions may be acute.
It doesn't take a great leap of faith to foresee increasing
upheaval resulting from widespread joblessness - as we can
already see in parts of the world - and as history has taught us.
Even Vonnegut's Calhoun undergoes a Luddite transformation akin
to that seen in the Industrial Revolution, but he ends up
rebuilding the machines he smashes - symbolizing the futility of
rejecting progress outright.
This dilemma isn't new and as Britain discovered in the 19
century, the way to address rising inequality is to invest in
education that provides relevant critical skills. It has long
been understood that productivity advances actually correlate
with added employment, as economic growth from increased
productivity creates more job opportunities over time.
Source: Rob Carlson. "Diffusion of New Technologies,"
So what do we do? First, it's important to note that Fed
Policy hasn't meaningfully helped with current joblessness.
Instead, QE was effective at dulling volatility and raising asset
prices. For investors, the QE taper will now mean rising
volatility in both equities and rates markets. In addition,
technological advances may help keep inflation muted in the years
ahead, which could be a positive if accompanied by stronger
As a nation, we need to find ways to create opportunities for
Americans being displaced in today's economy. This includes
addressing our entitlements issue, to relieve pressure on the
budget to make more productive investments; lending initiatives
aimed at small businesses that create new and entry-level jobs;
expanding and making permanent R&D tax credits; and making
smart investments in infrastructure with private sector
It requires additional emphasis on education and retraining,
as workers will need to increasingly be flexible and adaptable in
the new economic environment. Ultimately, it means gaining the
skills and frame-of-mind required to effectively live alongside
the machines we've already invited into our lives.
Rick Rieder, Managing Director, is BlackRock's Chief
Investment Officer of Fundamental Fixed Income, is Co-head of
Americas Fixed Income, and is a regular contributor
. You can find more of his posts