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Here's a startling fact:

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in the 45 years since the introduction
of the automated teller machine,

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those vending machines that dispense cash,

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the number of human bank tellers
employed in the United States

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has roughly doubled,

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from about a quarter of a million
to a half a million.

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A quarter of a million in 1970
to about a half a million today,

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with 100,000 added since the year 2000.

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These facts, revealed in a recent book

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by Boston University
economist James Bessen,

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raise an intriguing question:

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what are all those tellers doing,

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and why hasn't automation
eliminated their employment by now?

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If you think about it,

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many of the great inventions
of the last 200 years

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were designed to replace human labor.

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Tractors were developed

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to substitute mechanical power
for human physical toil.

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Assembly lines were engineered

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to replace inconsistent human handiwork

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with machine perfection.

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Computers were programmed to swap out

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error-prone, inconsistent
human calculation

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with digital perfection.

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These inventions have worked.

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We no longer dig ditches by hand,

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pound tools out of wrought iron

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or do bookkeeping using actual books.

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And yet, the fraction of US adults
employed in the labor market

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is higher now in 2016

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than it was 125 years ago, in 1890,

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and it's risen in just about every decade

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in the intervening 125 years.

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This poses a paradox.

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Our machines increasingly
do our work for us.

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Why doesn't this make our labor redundant
and our skills obsolete?

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Why are there still so many jobs?

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(Laughter)

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I'm going to try to answer
that question tonight,

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and along the way, I'm going to tell you
what this means for the future of work

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and the challenges that automation
does and does not pose

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for our society.

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Why are there so many jobs?

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There are actually two fundamental
economic principles at stake.

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One has to do with human genius

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and creativity.

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The other has to do
with human insatiability,

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or greed, if you like.

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I'm going to call the first of these
the O-ring principle,

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and it determines
the type of work that we do.

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The second principle
is the never-get-enough principle,

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and it determines how many jobs
there actually are.

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Let's start with the O-ring.

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ATMs, automated teller machines,

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had two countervailing effects
on bank teller employment.

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As you would expect,
they replaced a lot of teller tasks.

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The number of tellers per branch
fell by about a third.

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But banks quickly discovered that it
also was cheaper to open new branches,

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and the number of bank branches
increased by about 40 percent

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in the same time period.

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The net result was more branches
and more tellers.

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But those tellers were doing
somewhat different work.

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As their routine,
cash-handling tasks receded,

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they became less like checkout clerks

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and more like salespeople,

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forging relationships with customers,

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solving problems

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and introducing them to new products
like credit cards, loans and investments:

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more tellers doing
a more cognitively demanding job.

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There's a general principle here.

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Most of the work that we do

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requires a multiplicity of skills,

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and brains and brawn,

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technical expertise and intuitive mastery,

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perspiration and inspiration
in the words of Thomas Edison.

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In general, automating
some subset of those tasks

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doesn't make the other ones unnecessary.

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In fact, it makes them more important.

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It increases their economic value.

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Let me give you a stark example.

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In 1986, the space shuttle Challenger

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exploded and crashed back down to Earth

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less than two minutes after takeoff.

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The cause of that crash, it turned out,

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was an inexpensive rubber O-ring
in the booster rocket

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that had frozen on the launchpad
the night before

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and failed catastrophically
moments after takeoff.

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In this multibillion dollar enterprise

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that simple rubber O-ring

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made the difference
between mission success

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and the calamitous death
of seven astronauts.

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An ingenious metaphor
for this tragic setting

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is the O-ring production function,

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named by Harvard economist Michael Kremer

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after the Challenger disaster.

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The O-ring production function
conceives of the work

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as a series of interlocking steps,

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links in a chain.

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Every one of those links must hold
for the mission to succeed.

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If any of them fails,

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the mission, or the product
or the service,

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comes crashing down.

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This precarious situation
has a surprisingly positive implication,

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which is that improvements

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in the reliability
of any one link in the chain

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increases the value
of improving any of the other links.

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Concretely, if most of the links
are brittle and prone to breakage,

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the fact that your link
is not that reliable

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is not that important.

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Probably something else will break anyway.

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But as all the other links
become robust and reliable,

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the importance of your link
becomes more essential.

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In the limit, everything depends upon it.

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The reason the O-ring was critical
to space shuttle Challenger

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is because everything else
worked perfectly.

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If the Challenger were
kind of the space era equivalent

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of Microsoft Windows 2000 --

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(Laughter)

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the reliability of the O-ring
wouldn't have mattered

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because the machine would have crashed.

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(Laughter)

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Here's the broader point.

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In much of the work that we do,
we are the O-rings.

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Yes, ATMs could do
certain cash-handling tasks

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faster and better than tellers,

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but that didn't make tellers superfluous.

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It increased the importance
of their problem-solving skills

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and their relationships with customers.

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The same principle applies
if we're building a building,

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if we're diagnosing
and caring for a patient,

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or if we are teaching a class

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to a roomful of high schoolers.

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As our tools improve,

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technology magnifies our leverage

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and increases the importance
of our expertise

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and our judgment and our creativity.

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And that brings me
to the second principle:

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never get enough.

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You may be thinking, OK, O-ring, got it,

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that says the jobs that people do
will be important.

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They can't be done by machines,
but they still need to be done.

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But that doesn't tell me
how many jobs there will need to be.

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If you think about it,
isn't it kind of self-evident

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that once we get sufficiently
productive at something,

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we've basically
worked our way out of a job?

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In 1900, 40 percent of all US employment

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was on farms.

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Today, it's less than two percent.

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Why are there so few farmers today?

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It's not because we're eating less.

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(Laughter)

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A century of productivity
growth in farming

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means that now,
a couple of million farmers

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can feed a nation of 320 million.

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That's amazing progress,

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but it also means there are
only so many O-ring jobs left in farming.

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So clearly, technology can eliminate jobs.

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Farming is only one example.

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There are many others like it.

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But what's true about a single product
or service or industry

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has never been true
about the economy as a whole.

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Many of the industries
in which we now work --

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health and medicine,

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finance and insurance,

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electronics and computing --

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were tiny or barely existent
a century ago.

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Many of the products
that we spend a lot of our money on --

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air conditioners, sport utility vehicles,

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computers and mobile devices --

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were unattainably expensive,

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or just hadn't been invented
a century ago.

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As automation frees our time,
increases the scope of what is possible,

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we invent new products,
new ideas, new services

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that command our attention,

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occupy our time

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and spur consumption.

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You may think some
of these things are frivolous --

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extreme yoga, adventure tourism,

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PokĂŠmon GO --

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and I might agree with you.

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But people desire these things,
and they're willing to work hard for them.

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The average worker in 2015

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wanting to attain
the average living standard in 1915

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could do so by working
just 17 weeks a year,

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one third of the time.

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But most people don't choose to do that.

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They are willing to work hard

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to harvest the technological bounty
that is available to them.

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Material abundance has never
eliminated perceived scarcity.

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In the words of economist
Thorstein Veblen,

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invention is the mother of necessity.

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Now ...

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So if you accept these two principles,

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the O-ring principle
and the never-get-enough principle,

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then you agree with me.

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There will be jobs.

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Does that mean there's
nothing to worry about?

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Automation, employment, robots and jobs --

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it'll all take care of itself?

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No.

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That is not my argument.

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Automation creates wealth

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by allowing us to do
more work in less time.

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There is no economic law

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that says that we
will use that wealth well,

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and that is worth worrying about.

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Consider two countries,

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Norway and Saudi Arabia.

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Both oil-rich nations,

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it's like they have money
spurting out of a hole in the ground.

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(Laughter)

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But they haven't used that wealth
equally well to foster human prosperity,

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human prospering.

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Norway is a thriving democracy.

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By and large, its citizens
work and play well together.

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It's typically numbered
between first and fourth

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in rankings of national happiness.

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Saudi Arabia is an absolute monarchy

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in which many citizens
lack a path for personal advancement.

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It's typically ranked 35th
among nations in happiness,

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which is low for such a wealthy nation.

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Just by way of comparison,

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the US is typically ranked
around 12th or 13th.

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The difference between these two countries

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is not their wealth

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and it's not their technology.

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It's their institutions.

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Norway has invested to build a society

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with opportunity and economic mobility.

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Saudi Arabia has raised living standards

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while frustrating
many other human strivings.

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Two countries, both wealthy,

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not equally well off.

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And this brings me
to the challenge that we face today,

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the challenge that
automation poses for us.

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The challenge is not
that we're running out of work.

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The US has added 14 million jobs

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since the depths of the Great Recession.

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The challenge is that many of those jobs

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are not good jobs,

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and many citizens
cannot qualify for the good jobs

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that are being created.

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Employment growth in the United States
and in much of the developed world

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looks something like a barbell

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with increasing poundage
on either end of the bar.

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On the one hand,

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you have high-education, high-wage jobs

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like doctors and nurses,
programmers and engineers,

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marketing and sales managers.

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Employment is robust in these jobs,
employment growth.

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Similarly, employment growth
is robust in many low-skill,

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low-education jobs like food service,

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cleaning, security,

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home health aids.

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Simultaneously, employment is shrinking

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00:11:41,200 --> 00:11:45,256
in many middle-education,
middle-wage, middle-class jobs,

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like blue-collar production
and operative positions

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and white-collar
clerical and sales positions.

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The reasons behind this contracting middle

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are not mysterious.

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Many of those middle-skill jobs

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use well-understood rules and procedures

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that can increasingly
be codified in software

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and executed by computers.

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The challenge that
this phenomenon creates,

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what economists call
employment polarization,

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is that it knocks out rungs
in the economic ladder,

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shrinks the size of the middle class

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and threatens to make us
a more stratified society.

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On the one hand, a set of highly paid,
highly educated professionals

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doing interesting work,

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on the other, a large number
of citizens in low-paid jobs

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whose primary responsibility is to see
to the comfort and health of the affluent.

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That is not my vision of progress,

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and I doubt that it is yours.

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But here is some encouraging news.

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We have faced equally momentous
economic transformations in the past,

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and we have come
through them successfully.

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In the late 1800s and early 1900s,

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when automation was eliminating
vast numbers of agricultural jobs --

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remember that tractor? --

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the farm states faced a threat
of mass unemployment,

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a generation of youth
no longer needed on the farm

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but not prepared for industry.

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Rising to this challenge,

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they took the radical step

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of requiring that
their entire youth population

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remain in school
and continue their education

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to the ripe old age of 16.

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This was called the high school movement,

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and it was a radically
expensive thing to do.

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Not only did they have
to invest in the schools,

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but those kids couldn't work
at their jobs.

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It also turned out to be
one of the best investments

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the US made in the 20th century.

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It gave us the most skilled,
the most flexible

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and the most productive
workforce in the world.

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To see how well this worked,
imagine taking the labor force of 1899

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and bringing them into the present.

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Despite their strong backs
and good characters,

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many of them would lack
the basic literacy and numeracy skills

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to do all but the most mundane jobs.

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Many of them would be unemployable.

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00:14:01,840 --> 00:14:05,576
What this example highlights
is the primacy of our institutions,

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most especially our schools,

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in allowing us to reap the harvest

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of our technological prosperity.

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It's foolish to say
there's nothing to worry about.

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Clearly we can get this wrong.

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If the US had not invested
in its schools and in its skills

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a century ago with
the high school movement,

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00:14:23,440 --> 00:14:25,096
we would be a less prosperous,

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00:14:25,120 --> 00:14:28,736
a less mobile and probably
a lot less happy society.

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00:14:28,760 --> 00:14:31,496
But it's equally foolish
to say that our fates are sealed.

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00:14:31,520 --> 00:14:33,216
That's not decided by the machines.

316
00:14:33,240 --> 00:14:34,976
It's not even decided by the market.

317
00:14:35,000 --> 00:14:37,640
It's decided by us
and by our institutions.

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Now, I started this talk with a paradox.

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Our machines increasingly
do our work for us.

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00:14:43,640 --> 00:14:45,896
Why doesn't that make
our labor superfluous,

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00:14:45,920 --> 00:14:47,136
our skills redundant?

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00:14:47,160 --> 00:14:50,576
Isn't it obvious that the road
to our economic and social hell

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00:14:50,600 --> 00:14:52,800
is paved with our own great inventions?

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00:14:54,040 --> 00:14:58,216
History has repeatedly offered
an answer to that paradox.

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00:14:58,240 --> 00:15:01,856
The first part of the answer
is that technology magnifies our leverage,

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00:15:01,880 --> 00:15:04,496
increases the importance, the added value

327
00:15:04,520 --> 00:15:08,056
of our expertise,
our judgment and our creativity.

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00:15:08,080 --> 00:15:09,280
That's the O-ring.

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00:15:09,880 --> 00:15:12,616
The second part of the answer
is our endless inventiveness

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and bottomless desires

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00:15:14,120 --> 00:15:16,456
means that we never get enough,
never get enough.

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There's always new work to do.

333
00:15:19,960 --> 00:15:23,296
Adjusting to the rapid pace
of technological change

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00:15:23,320 --> 00:15:24,776
creates real challenges,

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00:15:24,800 --> 00:15:27,776
seen most clearly
in our polarized labor market

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00:15:27,800 --> 00:15:30,320
and the threat that it poses
to economic mobility.

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00:15:31,320 --> 00:15:33,760
Rising to this challenge is not automatic.

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00:15:34,400 --> 00:15:35,896
It's not costless.

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00:15:35,920 --> 00:15:37,336
It's not easy.

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00:15:37,360 --> 00:15:38,560
But it is feasible.

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00:15:39,120 --> 00:15:40,936
And here is some encouraging news.

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Because of our amazing productivity,

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we're rich.

344
00:15:44,400 --> 00:15:47,536
Of course we can afford
to invest in ourselves and in our children

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00:15:47,560 --> 00:15:50,896
as America did a hundred years ago
with the high school movement.

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00:15:50,920 --> 00:15:53,200
Arguably, we can't afford not to.

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00:15:54,120 --> 00:15:55,896
Now, you may be thinking,

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00:15:55,920 --> 00:15:58,776
Professor Autor has told us
a heartwarming tale

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00:15:58,800 --> 00:16:00,576
about the distant past,

350
00:16:00,600 --> 00:16:01,976
the recent past,

351
00:16:02,000 --> 00:16:05,296
maybe the present,
but probably not the future.

352
00:16:05,320 --> 00:16:09,256
Because everybody knows
that this time is different.

353
00:16:09,280 --> 00:16:12,096
Right? Is this time different?

354
00:16:12,120 --> 00:16:14,016
Of course this time is different.

355
00:16:14,040 --> 00:16:15,736
Every time is different.

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00:16:15,760 --> 00:16:19,376
On numerous occasions
in the last 200 years,

357
00:16:19,400 --> 00:16:22,176
scholars and activists
have raised the alarm

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00:16:22,200 --> 00:16:25,736
that we are running out of work
and making ourselves obsolete:

359
00:16:25,760 --> 00:16:30,376
for example, the Luddites
in the early 1800s;

360
00:16:30,400 --> 00:16:33,336
US Secretary of Labor James Davis

361
00:16:33,360 --> 00:16:35,776
in the mid-1920s;

362
00:16:35,800 --> 00:16:40,976
Nobel Prize-winning economist
Wassily Leontief in 1982;

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00:16:41,000 --> 00:16:44,256
and of course, many scholars,

364
00:16:44,280 --> 00:16:46,416
pundits, technologists

365
00:16:46,440 --> 00:16:48,280
and media figures today.

366
00:16:49,600 --> 00:16:52,920
These predictions strike me as arrogant.

367
00:16:53,800 --> 00:16:56,496
These self-proclaimed oracles
are in effect saying,

368
00:16:56,520 --> 00:16:59,936
"If I can't think of what people
will do for work in the future,

369
00:16:59,960 --> 00:17:02,856
then you, me and our kids

370
00:17:02,880 --> 00:17:04,595
aren't going to think of it either."

371
00:17:05,760 --> 00:17:07,694
I don't have the guts

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00:17:07,720 --> 00:17:10,896
to take that bet against human ingenuity.

373
00:17:10,920 --> 00:17:13,896
Look, I can't tell you
what people are going to do for work

374
00:17:13,920 --> 00:17:15,816
a hundred years from now.

375
00:17:15,839 --> 00:17:18,440
But the future doesn't hinge
on my imagination.

376
00:17:19,280 --> 00:17:23,056
If I were a farmer in Iowa
in the year 1900,

377
00:17:23,079 --> 00:17:26,616
and an economist from the 21st century
teleported down to my field

378
00:17:26,640 --> 00:17:29,160
and said, "Hey, guess what, farmer Autor,

379
00:17:30,000 --> 00:17:31,536
in the next hundred years,

380
00:17:31,560 --> 00:17:35,336
agricultural employment is going to fall
from 40 percent of all jobs

381
00:17:35,360 --> 00:17:36,576
to two percent

382
00:17:36,600 --> 00:17:38,600
purely due to rising productivity.

383
00:17:39,400 --> 00:17:42,560
What do you think the other
38 percent of workers are going to do?"

384
00:17:43,400 --> 00:17:46,216
I would not have said, "Oh, we got this.

385
00:17:46,240 --> 00:17:49,096
We'll do app development,
radiological medicine,

386
00:17:49,120 --> 00:17:52,096
yoga instruction, Bitmoji."

387
00:17:52,120 --> 00:17:53,656
(Laughter)

388
00:17:53,680 --> 00:17:54,966
I wouldn't have had a clue.

389
00:17:55,840 --> 00:17:58,336
But I hope I would have had
the wisdom to say,

390
00:17:58,360 --> 00:18:02,376
"Wow, a 95 percent reduction
in farm employment

391
00:18:02,400 --> 00:18:04,536
with no shortage of food.

392
00:18:04,560 --> 00:18:06,976
That's an amazing amount of progress.

393
00:18:07,000 --> 00:18:10,376
I hope that humanity
finds something remarkable to do

394
00:18:10,400 --> 00:18:12,280
with all of that prosperity."

395
00:18:13,120 --> 00:18:16,200
And by and large, I would say that it has.

396
00:18:17,960 --> 00:18:19,216
Thank you very much.

397
00:18:19,240 --> 00:18:24,295
(Applause)