The Rational Reason to Fight Against New Technology Shocks
Autoworkers and Hollywood writers are vying to secure the best deal they can, while they can.
What do autoworkers and Hollywood actors and writers have in common? For one, they both went on immensely disruptive strikes this year, which lasted months and crippled production and supply chains at large (at the time of writing, the United Autoworkers Union (UAW) had just reached a deal with Chrysler parent Stellantis, which included a 25% pay hike for workers, along with improved retirement benefits. While in Hollywood striking actors were in the process of reviewing a final offer from studios). But perhaps more importantly, both were galvanized by recent macro-technology shocks, which unions correctly perceive as credible threats to employment, wages, and benefits in these sectors.
For autoworkers, the technology shock has been the rise in electric vehicle (EV) demand and manufacturing in the United States, which requires fewer parts and more automated processes. Since 2020, demand for EVs has accelerated and by 2023 the IEA forecasts that EVs will account for 60% of new cars sold globally. And for Hollywood actors and writers, it was Generative AI, which though still unable to mimic the creativity of top fiction writers (see paper on LLM performance against New Yorker fiction pieces), can surely crank out prosaic scripts for family favorites such as Two and Half Men or the Marvel Franchise.
Increasing adoption of these technologies will no doubt create many new tasks/jobs that previously did not exist. For example, it is projected that the United States will need more than 100 battery cell manufacturing sites by 2035 to support demand for new EV vehicles, which could easily translate to the creation of hundreds of thousands of new jobs in the car manufacturing sector over the next decade.
Nevertheless, both technology shocks—EV production and Generative AI—spell bad news for many workers as they effectively reduce the demand for labor in the production process in the traditional car manufacturing and film production industries respectively.
In an ideal labor market, workers whose tasks are rendered obsolete by technological change would retrain, upskill, and seamlessly re-allocate their labor supply towards different jobs or newly created jobs. But in reality, the bulk of these workers will not have the skills, aptitude, or desire to do the “tasks of the future.” And even if they did, I wouldn’t bet on their success— history is replete with failed programs to train workers.
In this context, the unions are behaving perfectly rationally—i.e., they are attempting to get the best deal they can, while they can. After all, workers don’t know what future jobs will look like, where they will be located or whether they’ll be qualified for them.
A Historical Example
Indeed, past technological shocks support this view. Take the case of the Mckay Sticher, a positive technology shock that disrupted the shoe-making business in the late 19th century and which was the subject of a new, ground-breaking job market paper out of the University of Chicago.
Specifically, the author of the study finds that in counties that were most exposed to the arrival of the Mckay Sticher (the machine was first introduced in New England in 1861), 70% of traditional shoemakers left the shoe-making business altogether—for reference there were 130,000 shoemakers in the United States in 1860. What’s more, the author finds that shoemakers in counties more exposed to the Mckay Sticher were more likely than other craftsmen to become laborers and farmers (traditionally very low paying jobs) and were estimated to have lost wealth equivalent to 1.3 years of wages by 1870.
Perhaps most strikingly, the author finds that the children of shoemakers when compared to the children of other craftsmen were less likely to follow the family trade, more likely to enter low-paying manufacturing work, less likely to own a home and less likely to be full-time students.
In short, not only did shoemakers lose from the arrival of the Mckay sticher, but their children lost out as well. This is not to say that autoworkers, Hollywood writers and actors will necessarily follow the same trajectory.
What the example illustrates is that technology shocks can lead to persistent negative and potentially multi-generational effects for a host of workers, a reality that should not be taken lightly by unions, businesses, and policymakers.