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Robots, China and the Failure of Economics Reporters

The failure of economics reporters in major news outlets to make simple logical connections is truly astounding. The Washington Post gave us another great example of this failure in a piece on robots replacing workers in a Chinese warehouse.

The gist of this story is that this warehouse, which only has four workers overseeing dozens of robots, could be the wave of the future. At one point the piece tells us that the consulting firm McKinsey projects that almost one-third of jobs could be replaced by automation by 2030.

While this is presented as something ominous, this replacement of workers by technology is known as “productivity growth.” The loss of one-third of all jobs in 12 years would translate into productivity growth of just over 3.0 percent annually. This is roughly the pace of productivity growth we saw in the long Golden Age from 1947 to 1973, a period of low unemployment and rapid wage growth.

Also, if the McKinsey projection on productivity growth proves correct, then the Trump administration’s growth target of 3.0 percent annually will be easily reached. (The Congressional Budget Office projects productivity growth around 1.7 percent annually.) GDP growth is the sum of productivity growth and labor force growth. With the latter likely to be in the range of 0.4 to 0.6 percent annually, GDP growth will be well in excess of 3.0 percent if the McKinsey projection on productivity growth proves correct.

It is absolutely astounding that the Post somehow does not connect predictions of rapid automation with projections of GDP growth. This is definitional, it is not something subject to debate. In its defense, the Post is hardly alone in this failure.

This piece also includes a bizarre discussion of China’s “labor shortage.”

“The country’s one-child policy, which was in place from 1979 to 2016, shaved down today’s number of young job seekers, giving workers more leverage to ask for higher pay and better benefits.

“Government officials have admitted the policy stifled population growth, making it tougher and more expensive for companies to fill vacancies.”

Why should China’s government have to “admit” that it pursued a policy that has helped to give workers more bargaining power so that they can share in the country’s economic gains? Many people might think this is the goal of economic policy.

This article originally appeared on Dean Baker’s Beat the Press blog.

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Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

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