Where Will the New Jobs Come From?

Humans, it seems, are always on the verge of obsolescence. There is no innovation without opposition from two groups: people who lose their jobs and people who think about mass unemployment and ask, “Where will the new jobs come from?” The devil is in the details, but at least in principle, redistribution should be able to win the first group’s assent. The second group of professional and amateur hand-wringers need to be persuaded. While economists cannot say with confidence exactly which new jobs will appear where, and while we have to acknowledge that the adjustment to a new economic reality will be very difficult for some people — even in the long run — we can paint with a very broad brush and see where new opportunities are most likely to present themselves.

Technological innovations and falling trade barriers make many people more productive, which raises their real earnings. It also means slightly lower prices for everyone. We use this new wealth to create opportunities in high-skill, medium-skill, and low-skill occupations. If you’re scoring at home, ask what you would do with an extra $100, think about the new opportunities this would create, and consider some common objections.

Health Care and Education

More health care is one of the first things many people would buy. New opportunities appear as innovation puts more dollars in their pockets and makes those dollars go further. Some people who previously gritted their teeth and dealt with foot pain, bleeding gums, or eczema use their innovation-and-trade-induced savings to see podiatrists, dentists, and dermatologists. More people get eye exams, hearing tests, psychiatric evaluations, and physical therapy. In the short run, medical specialists’ earnings rise. Someone schedules the shoulder surgery they have been putting off. In the long run, the higher prices draw more people into these fields (whether licensing laws will let enough people into them is another question).

People also buy more and better education. The return on investment in schooling is higher in an innovation-enriched society, and richer people can afford to spend more time and money studying the humanities. It’s easier to curl up with War and Peace when you can get more food, clothing, and shelter for less labor. Kids can spend more time learning when they don’t have to spend all day in a field or a factory to keep the family fed. Higher demand for education means higher demand for educators and, therefore, more opportunities for the highly educated.

An innovation-enriched society also means a higher demand for financial services. People demand more money managers when they have money to manage. Investing is easy: put your money in indexed mutual funds and hold until you need it. There are a lot of other decisions out there — planning when to make a big purchase, anticipating and budgeting for eventual large home expenses, getting end-of-life documents in order, doing your taxes, and so on — where a little professional help can be nice. The great economist Walter Williams once asked his wife how she would feel if he died. She would be devastated, she replied. Williams said he realized then and there that he didn’t have enough life insurance, because the right amount of insurance would have left her indifferent (he was joking — maybe). As great an economist as Williams was, perhaps he could have caught his “mistake” earlier.

Arts and Entertainment

Innovation and trade-induced enrichment mean a higher demand for entertainment and the arts. True, higher real incomes mean we have more time and money to spend watching professional wrestling (which I love), but it also means we have more time and money to spend going to see performances by world-class companies like Alvin Ailey American Dance Theater (which I also love). There is wheat among the chaff. It’s said that an economist, upon hearing his taxi driver say he’s an unemployed artist, replied, “No, you’re not. You’re an employed taxi driver.” A richer society might be more willing to pay for him to take up his paintbrush again. And John at the bar? Maybe there’s enough new demand that he could be a movie star.

Medium-Skill Labor

It’s not like people are going to be able to switch into these industries overnight. A newly unemployed machinist isn’t going to be able to hang a shingle and take up work as a podiatrist overnight. There are alternatives, though, with skills that might be easier to learn.

Take construction. If there wasn’t so much red tape, or if we let people think more expansively about what constitutes “housing”, we would build more housing in the United States. Even with the red tape, a lot of building and remodeling still happens. A richer world means more construction and more jobs for people in the building trades (which, in many places, is restricted by union rules and regulations which limit the supply of contractors, builders, and other specialists).

It used to be big news when a family in the neighborhood got a car. In so many households now, it’s just assumed that there’s at least one car for every licensed driver. These cars need maintenance and repair. That means people offer something valuable — money — in exchange for value.

Empirically, people tend to eat at restaurants more frequently the richer they get. This creates many low-skill jobs waiting tables or washing dishes, but it also creates many higher-skill jobs, because restaurants need to be owned and managed.

People also like to look nicer. More income from more innovation means people getting more and nicer haircuts. Someone who might have never been to a nail salon might use some of innovation’s bounty to get a manicure or pedicure. Part of looking nicer involves being healthier, so some people get gym memberships, and others go so far as to hire personal trainers. They don’t just want to look nice. They want to live in nice spaces, so there’s a new demand for interior designers. They want nicer outdoor spaces, which creates new opportunities for landscapers.

Rapidly improving mobile technology creates an interesting first-world problem: making it all work together, especially if your family has a bunch of Amazon, Apple, Google, and Microsoft accounts with different settings and login credentials. Contextualized tech support — “I’m a middle-aged dad who wants all this stuff to play nicely together” — might be worth hundreds of dollars an hour. Innovation, trade, and (importantly) flexible labor markets might mean new opportunities in customer service. Imagine calling a customer service line and speaking quickly to a human being who can pick up on the exact problem you are trying to solve instead of navigating endless automated phone trees. Embracing innovation, trade, and economic freedom would make that more likely.

Low-Skill Labor

Innovation also leads to more opportunities in fields that require fewer skills. The richer people get and the more opportunities they have, the more likely they will be willing to pay someone else to clean their house, wash their clothes and cars, cook their food, and scape their lands. Abundance translates into more to fall back on for the skilled worker who loses a job, but can put food on the table cleaning houses and washing cars. It also creates more entry-level work for people who need to get just a little experience in the workforce and learn the habits of highly effective people. They might start out in low-skill McJobs. They aren’t likely to stay there.

The World of Side Hustles and Hobbies

“But you don’t know that. You can’t guarantee that will happen,” a critic might object. Right. I don’t, but I think it’s pretty odd to assume people would just bury their new earnings in the yard — and even then, the rising productivity would reflect itself in lower prices. A little bit of introspection goes a long way.

So why don’t we see more dynamism? Why do we see people leaving one job and taking a long time to find a new one? Part of the answer is that working legally is getting harder every year. A lot of jobs require licenses, which are special permission from the government to ply a trade. Occupations are heavily regulated. Commerce is taxed. All these impede the market’s adjusting to sudden and disruptive change as quickly it would otherwise. Describing his early career, the pro wrestler Jon Moxley said he would work wrestling shows when he was booked rather than go work his minimum-wage job, even if it meant being fired, because he knew he could always get another minimum-wage job. That’s unfortunately not true of everyone, and it’s less true the higher we make those minimum wages.

There are even more ways to pick up some of the fruits of innovation-enabled higher productivity that don’t involve switching careers. Monetizing hobbies and taking on side hustles is easier when more productive people surround you. More traveling people means more demand for travel bloggers, so your passion for Disney World could become a way to pick up a little extra cash helping novices and noobs. Some people spend some of their excess income collecting things they’re passionate about. Maybe you won’t be able to make a full-time career out of it, but if you know more than anyone in the world about elevators, medieval Legos, Memphis pro wrestling, or basketball sneakers, you might be able to earn a few dollars on YouTube or eBay helping people who share your passion — or a few dollars doing the technical work for YouTubers and podcasters.

Conclusion

Intelligent machines probably aren’t coming from your jobs or wages. Automation doesn’t mean the end of work. We don’t need industrial policy to save American manufacturing. We don’t know exactly what tomorrow’s opportunities are — I don’t recall anyone telling me in high school and college in the 90s that companies would need to develop social media strategies — but we can be pretty confident there will be something.

The critic sneers, “I see, so it’s okay to close a factory and cause someone I can see their livelihood because I’m supposed to have blind faith that someone I can’t see will be able to afford shoulder surgery now?” This is why people hate economists: we can’t say specifically what will happen to whom because we do not and cannot have all the relevant knowledge that would allow us to be so precise. That is a feature, not a bug: in a commercial society where so much of the action happens in markets, everyone’s knowledge and preferences get reflected in market prices and, ultimately, outcomes. But to paraphrase what economist Thomas Sowell has said about the efficacy of the marketplace, I don’t have blind faith. I have evidence.

In the twentieth century, innovation, immigration, and international trade reduced the fraction of Americans working in agriculture from about 80 percent to about 2 percent. We didn’t have mass technological unemployment and starvation as a result. Entire new industries sprang up, and what today counts as “poor” by American standards is unimaginably wealthy. When my grandparents were young, it was big news when someone in the neighborhood got a car. When my parents were young, it was big news when someone in the neighborhood got a color TV. When I was young, it was big news when someone in the neighborhood got a Nintendo. It’s big news for my kids when one of their friends gets a smartphone.

We don’t know where the new jobs will come from, but we know they will come from somewhere — and finding out is exciting.

Courtesy of AIER