Tuesday, June 28, 2016

When "structural unemployment" is actually a job creator---Bank teller edition.

One of the hardest things about teaching an introductory principles course like AP Economics is that, to a large degree, you have to teach many basic concepts in a fairly rigid manner.  I suppose it is a function of the AP test at the end of the year that always looms large over our heads.

The term "structural unemployment" has several meanings and definitions, but the AP curriculum/test is specific in what they are looking for---workers who lose their jobs due to advances or implementation in/of technology.  It has been, in some form, a question on the AP test for some time.

Example: The rise of ATM's reduces the need for bank tellers.  I use this example when trying to make the concept concrete to students.

I recently came across this blog entry (AEI) that to some extent "debunks" the nominal notion of structural changes due to technological advancement as a job killer:
"""...What happened? Well, the average bank branch in an urban area required about 21 tellers. That was cut because of the ATM machine to about 13 tellers. But that meant it was cheaper to operate a branch. Well, banks wanted, in part because of deregulation but just for deregulation but just for basic marketing reasons, to increase the number of branch offices. And when it became cheaper to do so, demand for branch offices increased. And as a result, demand for bank tellers increased...."""
So, yes, ATM's did reduce the need for tellers at ONE specific bank.

However, an unintended consequence is a decrease in the opportunity cost of opening additional branch banks that resulted in the need for MORE bank tellers overall.

The short blog entry at the link above is worth a read for a teacher and/or student. It adds nuance and complexity to a basic concept we teach/learn in a fairly inflexible way.
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