China, the world leader in high-speed rail technology, has just opened a new 172km route which hurtles passengers across the Chinese countryside at speeds of 350km per hour without a driver!
This is the latest breakthrough in autonomous driving which is likely to be a huge industry in the coming decades. The economic benefits to private industries which rely on the transportation of goods and people are potentially huge. Not only could firms save vast amounts on reduced labour costs, there is also the added benefit that transportation networks can run 24 hours a day, leading to big increases in productivity.
There is however a dark side to the technological progress in autonomous driving. At present, millions of people are employed around the world in jobs where they drive a vehicle of some kind, from planes, to trains, to taxis and trucks. The trucking industry in the US alone employs around 3 million people. A report by Goldman Sachs in 2017 predicted that when autonomous driving reaches its peak in the coming years, the rate of job loss in the US could be as much as 300,000 workers a year.
This issue is a very real example of market failure in the world’s largest economy. The trouble is that millions of truckers are ill-equipped to move into other jobs as they have a very specific set of skills. This is referred to as factor immobility; where factors of production, in this case labour, are unable to move freely between one use and another. With no other jobs for these truckers, this could lead to mass unemployment, reducing levels of income tax for the government, and requiring more government expenditure on unemployment benefits. Unemployment on this scale could also lead to increased crime, decreased levels of consumption, and increased burden on healthcare providers.
Governments around the world will need to put plans in place to avoid this looming crisis, and work on strategies to retrain these workers with new skills so they can re-enter the workforce. If they don’t, the benefits of driverless cars and trains could be far outweighed by catastrophic consequences.
Think like an Economist!
Q1. What is market failure?
Q2. Explain why labour might be immobile.
Q3. What other jobs are likely to be negatively affected by technological progress in the coming years?
Q4. Assess the impact that autonomous driving technology is likely to have on the standard of living of people living in your country.
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