Industrial Revolution comparisons aren’t comforting as job cuts loom large

The shift out of agricultural jobs brought significant problems. This time probably won’t be different with automation, and that’s exactly why we should be concerned

People at work in a factory, making vices in 1771. Photo: Getty Images/Hulton Archive



Consider, for instance, the history of wages during the Industrial Revolution. Estimates vary, but it is common to treat the Industrial Revolution as starting around 1760, at least in Britain. If we consider estimates for private per capita consumption, from 1760 to 1831, that variable rose only by about 22%. That’s not much for a 71-year period. A lot of new wealth was being created, but economic turmoil and adjustment costs and war kept down the returns to labour. (If you’re wondering, “Don’t fight a major war” is the big policy lesson from this period, but also note that the setting for labour market adjustments is never ideal.)






The shift of jobs away from agriculture also poisoned economic policy. Typically the US government spends more than $20 billion a year subsidizing farmers, even though virtually all economists think those expenditures are wasteful. The European Union is worse yet. Although Europe has pressing problems with bank solvency, Italian and Greek debt, and refugees, an estimated 38% of the EU budget will be going to farm subsidies. Farms as a share of total employment are quite small (about 2%), but farmers as an interest group have not gone away, even hundreds of years after agricultural employment started to decline.

It is possible a similar logic may play out with the jobs that will be rendered obsolete by automation. That is, we may decide to subsidize and protect those jobs for centuries to come, to the detriment of long-run economic growth.

When it comes to automation, my all-things-considered view is still “full steam ahead,” and I might have felt the same way and bit the same bullet, had I been alive in the late 18th century. But invoking the Industrial Revolution today is not going to ease my worries. Bloomberg

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