What can a new lawnmower tell us about labour markets?
A few years ago Gulnara and I made a video on unemployment. Although this was a particularly unpopular video, it was actually one of our favourites - and we keep thinking about ways we want to expand the story of our friend JM.
In this video we give examples of how JM, a lawn mower man, could end up unemployed. A key example we gave was the creation of autonomous lawnmowers. We were then shocked when we walked into a store to see the following:
So what does the existence of automated lawnmowers tell us about JM, and how does it help us think about labour markets?
All the ways to mow a lawn
As you can see from this Frankenstein image from Dall-E, there are many ways to mow a lawn.
Use a hand mower.
Use an electric push mower.
Use a ride on mower.
As we move down this list we are using a technology that can cut an amount of grass more quickly, and with less human effort.
These tools, or capital equipment, allows a person to cut more grass using one hour of their time. As a result, an individual can complete a task more quickly - and them (or their employer) will invest in these tools if the cost of capital items is sufficiently low that the saved labour cost is attractive enough.
However, more complex tools also require greater knowledge. It’s pretty easy to use a pair of scissors - but a ride on lawnmower requires maintence, knowledge of how to drive, and knowing when and where to change mowing settings. This implies that individuals have skills that allow them to do tasks using specific capital items/productive processes.
But now a new technology has appeared.
The automated lawnmower and our lawnmower man
The lawnmower man from our video - JM - had invested in a good lawnmower (physical capital), relationships with customers (intangible capital), and the skills to utilise these (human capital).
The relatively cheap consumer lawnmower strands all of this capital - JM’s customers can now replace JM with a robot, and within a year they have saved money.
JM could cut how much he charges, or only serve the small part of the market that doesn’t trust robot lawnmowers. But either way, the return he receives on his capital is now much lower.
If JM was renting the machine, and if people simply reached out to him on a platform without relationships, then his income would have solely been a result of his skill at performing tasks. As the new technology can perform the task at a lower cost, his return on this skill will now be lower.
And if its low enough he’ll be forced to drop out of lawnmowing and find something else to do.
However, remember that JM also has a number of more general skills that he can use in the labour market. If his human capital remains fully intact after job loss, the real question becomes how well job opportunities match his skills.
Next steps for JM
The art of lawnmowing may have lost some of its allure, but that does not mean that JM does not maintain any skills from his background with the rotary blade.
He dealt with customers, he managed his own accounts, he learned about repairing machinery, and he understood how to deal with difficult situations.
The routine task of walking around with a lawnmower may have been replaced, but the non-routine task of managing relationships with customers is something JM will need to do in many other jobs.
More importantly, JM has a number of general skills that can be shared across jobs - skills that he will still earn income for when finding his next job. Specific skills associated with lawnmowing have lost value - but how much of his earnings was really a function of being a good lawnmower, rather than being good at running a business and managing relationships?
This question about the skill content of tasks, and the ability for people to substitute when there is a shock to the return to skills, is a key one in labour economics.
In fact this is a key motivating factor for much of the wage scarring work that was mentioned last week.
If people are facing shocks that lead to a sharp decline on the return to their skills, we would expect to see long and persistent earnings scars for these individuals.
JMs journey will depend on how well he can substitute to a new job in a world of technological change. In fact, it will depend on how well any of us can adjust - even economists.
But even in the absence of significant human capital loss, if JM is compelled to rush into a new job match, he may find a poor job match or sort into a relatively unproductive job. Even absent a loss of skills, this can create long and lasting earnings scars for our friend JM.
His next steps now depend on the labour market and social support policies, both in terms of the community network around him and the decisions of central government. However, we’ll leave that as a discussion for another time.