Technology does not replace workers overnight

The rise of the robots is captivating economists, journalists, scientists and others as computing power, algorithms, data, and sensors are coming together to revolutionize what machines can do. And while machines will definitely replace workers in certain professions, they wont do it overnight. Instead, I think there are three reasons that the substitution will happen quite gradually. Lets look at ATMs as an illustrative example.

Here is an analysis by James Bessen that shows the number of bank tellers over time. Bank tellers rose quickly in the 60s and 70s and hit about 500,000 bank tellers in 1980. There are about 515,000 bank tellers today as can be seen in data from the BLS. Between 1980 and today the number of bank tellers has essentially been flat.

Bessen's numbers above clearly indicate that bank tellers did not disappear overnight. Here are three possible and not mutually-exclusive explanations:

1) During the upswing part of business cycles, the vulnerable job will likely decrease slightly or remain close to flat and and wages could be stagnant. During the good times, firms prefer not to layoff people but rather work them out through attrition. Then, in a downturn, those jobs are cut and may not come back. You can see this in the first link above. As ATM exploded, you see the number of tellers basically flat through the 90s. Then, the recession in 2000 allowed a bunch of tellers to be cut. Then, again, a slight to gradual increase in tellers after that recession until 2007/2008. Then, the number of tellers has been on a downward trajectory since. In fact, there has been a drop of almost 90,000 (~15%) bank tellers from 2007 to 2014 (605K to 515K).

2) Another mitigating factor is that a new technology likely increases demand for the product/service (either because of lower prices or more convenience) and this causes the firm to expand that offering. When they expand that offering, depending on the product/service, they may need to hire a few humans and so this can attenuate the initial substitution effect of the technology

3) A third explanation is that the occupational demands of a bank teller likely have changed. Tellers have progressed from only depositing and withdrawing cash to also performing more advanced transactions, trouble shooting, and maybe even some sales. Hence, even as occupations replace workers, many workers in that occupation can and will improve their skills to remain viable. And in fact, other adjacent occupations could be negatively effected. For example, as bank tellers upskill to out-compete ATMs, they may replace some sales workers who are more expensive.