Procyk 1

Luke Procyk

ENGL 1001

5/11/2022

Professor Ferrara

Investigating the rationale behind opposition to innovation

It often seems that the sentiment towards innovations is split. Many reasonably feel that

the continuous development of new technology will only bring benefits, however, there are some

who fear that innovation will only bring ruin towards their livelihoods, and derail their plans for

the future. Although it is rational for some to feel concerned about your job security, innovations

meant to decrease the amount of labor in a job often end up increasing employment in that field

because innovations that cut costs allow for businesses to expand their reach and hire more

workers in their field, job layoffs rarely come solely from one factor, and the fact that the large

majority of innovations cannot overturn the human aspect of most careers, while still

significantly improving productivity.

In most cases, it has been repeatedly found that as innovation has been introduced across

a job sector, there is an initial decrease in employment, followed by an upward trend of

employment in the long run. These observed phenomena are known as the Displacement effect,

and the Compensation effect, and describe the effect innovation has on employment. One clear

example of these effects in action is explained by David Autor, in his informative Ted talk on the

Displacement and Compensation effects and other economic trends explaining reasons why

innovations should correlate with fears to job security. He uses the example of the

implementation of automated teller machines, better known as ATMs, explaining that these

machines “had two countervailing effects on bank teller employment. As you would expect, they
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replaced a lot of teller tasks. The number of tellers per branch fell by about a third. But banks

quickly discovered that it also was cheaper to open new branches, and the number of bank

branches increased by about 40 percent in the same time period. The net result was more

branches and more tellers.” (Autor 2:29-3:01). This data, although only from one specific

example, demonstrates that the Displacement and Compensation effect does have tangible merit.

It demonstrates that when compared side by side, displacement has a short, but intensely felt

decline in employment, followed by a compensation that provides increased employment in the

long run. The initial dip seems like a plausible source for the fears surrounding innovation,

because when a substantial number of employees get laid off, it is certain that many would

complain about their changed situation.

Another time the Displacement and Compensation effect was empirically seen in action

was during research done on the countries of Bangladesh and Pakistan. Both countries are

considered to be in a developing stage. Abdul Waheed, who authored this research, is quick to

clarify that this data accounts for many different variables, including the size of businesses, and

different types of businesses. Waheed concludes that the “results corroborate the arguments of

those who assert a positive effect of process innovation on employment growth instead of a

negative influence; the latter may be more dominant, but our empirical analysis validates the

former. This means that the short-term “displacement effect” of the labour saving characteristics

of process innovation is weaker than the long-term “compensation effect” which works through

price reduction and in turn demand expansion.”(Waheed 124). His explanation of the related

effects provides recent and tangible evidence also substantiates the claims Autor makes on

innovation’s impact on labor. Furthermore, the initial downturn of employment is the main focus
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of innovation opponents, given that the compensation effect both takes much longer to manifest

itself and in the fact that the compensation effect doesn’t take place all at once.

Much of the reasoning behind opposition to innovation revolves around painful memories

relating to the long term economic changes from the 1970s and 1980s that brought the US

manufacturing industry to its knees, and resulted in the creation of the Rust Belt. The decline of

American manufacturing came as a result of many factors, whether being foreign countries

catching up to the US, or countless other factors at play, its effects were far reaching. In its wake

many communities were left ruined or with an uncertain future. In the aftermath of this economic

turmoil, Susan Houseman, an economic academic sharing her work on The Brookings Review,

wrote on takeaways from this catastrophe. Houseman found that steelworkers in particular had

been hit the hardest by the decline of manufacturing, finding that “American steelworkers who

lost their jobs experienced long periods of unemployment on average. A special survey

conducted by the BLS found that steelworkers had the lowest reemployment rate of any category

of worker. Of those permanently laid off between 1979 and 1983, only 46 percent were working

again by January 1984, 40 percent were still looking for work, and the remainder had left the

labor force” (Houseman 44). It could be argued that as a result of this outcome, many opponents

of innovation see this as substantial proof that finding a new career is not a viable option for

many of those hit hardest by layoffs. However, it’s unclear whether steelworking unemployment

for long periods was due to a lack of other jobs in their vicinity, or a lack of skills that were

transferable to other sectors.

It’s also important to note that increased innovation had very little to do with the decline

of manufacturing in the US, but a lack of innovation may likely have been one of its causes. It is

plausible that not reinvesting into the steel industry may have let it stagnate, while foreign
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competition chose to utilize these changes. Regardless of innovation’s involvement in US

manufacturing decline, it definitely motivated an uptick in innovation, in order for the remaining

manufacturers to become on par with the rest of the world again. According to the ITIF, the

Information Technology and Innovation Foundation, made comments on the lowest rate of job

layoffs in the past 20 years, as of September 2021. They made aware the caveat that “job security

does not necessarily translate into prosperity. On the contrary, economic disruption is often a

driver of growth, as companies adopt more efficient technologies and new business models to

gain market share.”(Radu). These developments would certainly be true in the aftermath of

industrial decline, with the remnants of these former manufacturing juggernauts needing to adapt

in order to survive. One of the easiest ways they could succeed in this was by innovating, not just

by new technologies, but also new practices and strategies.

One aspect on this topic often overlooked by opponents of innovation is the human aspect

of jobs. While many jobs are affected by innovation, most of their benefits come from removing

segments of the job requirement, gradually changing what was needed to be part of a certain

profession. Returning to the example of bank tellers and ATMs, David Autor’s talk also touches

on this insight. He acknowledges that “Yes, ATMs could do certain cash-handling tasks faster

and better than tellers, but that didn't make tellers superfluous. It increased the importance of

their problem-solving skills and their relationships with customers. The same principle applies if

we're building a building, if we're diagnosing and caring for a patient, or if we are teaching a

class to a roomful of high schoolers” (Autor 6:00-6:25). These shifts made many careers shift

from more monotonous work, to doing work that is more engaging in the sense that human

interaction, or people skills were more important. Negotiating and the usage of persuasion are

two of the most important aspects of many careers, and have now become and will continue to be
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more significant as a career trait. It’s clear from these trends that careers with ‘people skills’ have

less to fear about innovations, as these would not fundamentally change their livelihoods.

In addition to these claims, a survey done by Luke Procyk also yields more evidence that

the primary benefit gained from innovation was increased productivity and the shifting of what

was needed from certain fields to better reflect the human aspect. He surveyed people within the

Fairfield University community, asking questions that would gauge their level of concern on the

innovation issue, as well as how they had been affected by those changes.When respondents

were polled about specific innovations that made improvements in their occupations, one

anonymous respondent referenced the “Finance industry was radically changed with the use of

spread sheet programs. The analysis process was greatly sped up and improved with the ability to

manipulate data” (Procyk). Computer programs like Microsoft Excel, accelerated the processes

of the numerical data. It made the whole calculation process more compact and easier to

organize.This reasonably could have allowed more time and resources to analyze the

non-financial benefits related to whether or not to take a particular deal, in other words a task

that became more focused on intangible factors.

The research gathered makes it clear that many of the points opponents against

innovation make are far less entrenched and unmovable compared to the first glance. Their

arguments were based on the idea that innovation often caused unemployment, which according

to the data was true, however due to economic forces there is demonstrably a net increase in the

number of jobs in any given field. They also argued that these changes would cause the same

cascade of events that created the Rust Belt, however it was reasonably inferred that a lack of

innovation was one of the potential causes of decline. In addition to countering many points

raised against innovation, it was also proven that innovation mainly removed parts of job
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processes that changed how the job was being done, such as how spreadsheets allowed more

time and resources to investigate more non-financial factors around different dealings.
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Works Cited

Waheed, Abdul. “The Employment Effect of Innovation: Evidence from Bangladesh and

Pakistan.” The Pakistan Development Review, vol. 56, no. 2, 2017, pp. 105–26,

https://www.jstor.org/stable/26875189. Accessed 9 May 2022.

Houseman, Susan. “Job Security and Economic Adjustment: Lessons from Steel.” The

Brookings Review, vol. 5, no. 3, 1987, pp. 40–46, https://doi.org/10.2307/20079985. Accessed 9

May 2022..

Radu, Sintia “ITIF.” Despite Automation Fears, Jobs Are More Secure Today Than at Any

Time in the Past 20 Years, ITIF Finds, Information Technology and Innovation Foundation,

13 Sept. 2021, https://itif.org/.

Autor, David. “David Autor: Will Automation Take Away All Our Jobs?” TED, Sept. 2016,

https://www.ted.com/talks.

Procyk, Luke “The impact of automation and innovation”, SurveyPlanet.com, 19 April

2022, https://s.surveyplanet.com/gajrytlt