Automation And The German Underwear Effect  

I have many friends that love technology. So naturally my Facebook timeline keeps serving me articles on machines taking over all the jobs in the world. I see headlines like ‘Machines will take away your work!’all the time. Most of these articles however, make only half the argument. They could benefit from the German underwear story to understand what is missing from the picture that they paint.

But first, does automation lead to job losses? Of course it does. If a machine produces 100 units of output which is the work of five people, then it is likely that it would replace at least four of them. That however, is true only if 100 units of output are produced. The world does not work that way. The higher productivity of automation creates its own demand.

Nowhere is this better illustrated than in Germany of the 1950s. Labour saving devices, like washing machines and dishwashers, were introduced in bathrooms and kitchens across that country. People expected that the leisure time of German housewives would increase sharply. This did not happen and it was because people changed their standards of cleanliness! As Frank Trentman writes:

I have seen people’s expectations in India change over my lifetime. I didn’t know anyone who had an Air Conditioner, when I was growing up in the 70s and 80s. Today many households in metros have at least one unit and some more than three! I am guessing that even as automation reduced per unit labour in AC factories, the total output in those factories went up immensely. More importantly, many people are now employed in installing and servicing these units. And all these people demand other goods and services. Services like personalised Yoga teachers for example. In the 80s of Udaipur, if you wanted to learn Yoga, you went to a camp with around 200 other people to learn from a single teacher. Now, a teacher comes to your home and teaches you!

Job destruction is very easy to see but new jobs are very difficult to imagine. Two decades back nobody would have thought that there would be professional video game players just as nobody would have imagined in the 1950s that so many German men would change their underwear daily!

Automation destroys jobs but the higher productivity creates demand for more goods and services, in turn creating more jobs. So the key question is if automation will destroy jobs faster than the new jobs created? Only data can answer this question.

However, in India, most employment surveys measure work (kaam) and not jobs (Naukri) and work -especially unpaid or low paid work  —  can reduce with prosperity. Workers can make a choice of not taking low paid work. There are other issues with surveys as well which we have detailed. Then there is the fact that with its youthful population, more people are entering the workforce than are leaving. Put this all together and it is very difficult to know the net impact technology has on job creation.

So next time you share an article on jobs destruction by machines, do remember the Germans and their underwear habits!

(This piece was originally published on the author's blog at medium.com and has been republished here with permission.)