By Steve Beaman, The Beaman Intelligence Group
Every month Washington releases the jobs report, and the country reacts like it’s the economic scoreboard for the nation. If the number is up, politicians celebrate. If it’s down, pundits predict recession. Cable news panels spend hours debating whether unemployment ticked up or down by a tenth of a percent. But the truth is the jobs report is slowly becoming the wrong scoreboard.
The real economic story of the next generation will not be how many people are working. It will be how productive those people are—and increasingly, how much of the economy can function with far fewer workers than we once needed. But buried beneath those monthly headlines is a far more important question about the future of the American economy.
What happens when we simply need fewer workers? That question may sound unsettling, but it sits at the intersection of two powerful forces already reshaping our economic future: demographics and technology. Start with demographics. In 1960, the United States had roughly five workers supporting every retiree. Today that number is closer to three. Within a couple of decades, it could fall toward two workers per retiree. That matters because the modern welfare state—from Social Security to Medicare—was built when the workforce was far larger relative to the retired population. Fewer workers supporting more retirees places enormous pressure on government finances. Politicians rarely discuss this honestly because the arithmetic is uncomfortable. Either benefits eventually fall, taxes rise, or productivity increases enough to offset the imbalance.
And that’s where technology enters the story. For more than two centuries, technological progress has steadily increased the productivity of American workers. In 1900, about 40 percent of Americans worked in agriculture. Today fewer than 2 percent of the population produces vastly more food than the nation consumed a century ago. Mechanization transformed farming so dramatically that millions of workers moved into other sectors of the economy. Manufacturing experienced a similar transformation. Automation, robotics, and improved production techniques allowed factories to produce more goods with fewer workers.
Historically, when technology eliminated jobs in one sector, entirely new industries emerged to absorb displaced workers. Railroads, automobiles, aviation, computing, and the internet all created enormous new employment opportunities. But the technological wave now arriving, artificial intelligence and advanced automation, may be different. Previous revolutions replaced physical labor. AI is beginning to replace cognitive labor as well. Tasks once performed by accountants, analysts, programmers, marketers, and even some legal professionals can now be assisted—or partially performed—by intelligent software. A single professional equipped with modern AI tools can often produce the output that once required an entire team. This brings us to one of the most important economic concepts most people never hear about: productivity.
A nation’s economic output is determined by two things—how many people are working and how productive those workers are. If productivity rises fast enough, fewer workers can still generate greater economic output. Imagine an economy with 100 workers producing $100 of output each. Total output is $10,000. Now imagine technology increases productivity so each worker produces $150—but the workforce shrinks to 80 workers. Total output rises to $12,000 even though fewer people are working.
This is the quiet possibility emerging in the modern economy. Artificial intelligence and automation may dramatically increase output per worker. That productivity growth could offset the demographic challenge of a shrinking workforce. In fact, we are already seeing early signs of this shift. Technology companies today produce astonishing levels of output with relatively small workforces. Some generate well over $2 million in revenue per employee. Their value comes not from large numbers of workers but from software, intellectual property, and scalable digital platforms. This raises a deeper question for the future of our economy. If machines and software generate an increasing share of economic value, who receives the benefit? For most of modern history, income flowed primarily through wages. People worked jobs and earned paychecks. But in a world where technology performs more of the economic work, ownership may matter more than employment. Ownership of companies. Ownership of intellectual property. Ownership of digital platforms and productive technology. Those who own the productive assets of the future economy will capture much of its value.
Yet this shift does not necessarily mean fewer opportunities. In many ways, modern technology may empower individuals more than ever before. Just as the tractor allowed one farmer to feed hundreds of people, artificial intelligence may allow one entrepreneur or small team to create enormous economic value. The tools of productivity are becoming cheaper, more powerful, and widely available. Individuals can now build businesses, create content, design software, and reach global markets with resources that would have been unimaginable only a generation ago. That may ultimately be the most important economic shift of our time. The debate over jobs and unemployment will continue every month when the government releases its latest report. But the bigger story is unfolding quietly beneath those numbers. The future of prosperity will not depend simply on how many people are employed. It will depend on how productive those people are—and perhaps more importantly, who owns the tools that create that productivity. That is the economic question of the next generation. And while Washington argues over the next jobs report, the real transformation of the American economy is already underway.
