Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate.
A new study finds that people living in the midst of disruptive technological change may be happier and more optimistic than you think.
The introduction of new technologies—from the steam engine in the 19th century to the moving assembly line in the 20th century to robotics in the 21st—is both economically potent and terribly disruptive. This is the process that the economist Joseph Schumpeter long ago dubbed “creative destruction,” the means by which new technologies disrupt old industries and generate entirely new ones.
While economically revolutionary, creative destruction can be socially painful, altering our social and economic structures and throwing large numbers of people out of work. Today, for example, we worry that robots will soon be able to perform more and more jobs currently performed by humans. One might think that such periods of rapid technological change would lead to widespread social disruption and considerable unhappiness.
But a new study by Princeton economist Angus Deaton and his collaborators Philippe Aghion, Ufuk Akcigit, and Alexandra Roulet finds just the opposite: Places that have highest levels of creative destruction and job turnover also have the highest levels of subjective well-being or happiness.
To more completely understand this process, the study uses a basic measure of job turnover—based on job creation and job destruction—from the U.S. Census’ Business Dynamics Statistics, as well as data on employee hires, separations, employment, and turnover from the Census’ Longitudinal Employer-Household Dynamics series. The researchers’ gauge of happiness comes from two sources: the CDC’s Behavioral Risk Factor Surveillance System survey, which asks respondents “how satisfied” they are with their lives; and from the “Cantril Ladder of Well-Being,” collected as part of the Gallup-Healthways Wellbeing Index, which asks participants to rank their current and predicted future well-being on a one to 10 scale. The study develops a series of very detailed regression models to test the effects of creative destruction on happiness across U.S. metro areas.
The researchers find that people in metros with higher rates of job turnover are, on balance, happier than those in cities with little creative destruction. Indeed, the study finds that when unemployment is held constant, a 10 percent increase in a metro’s annual job turnover rate leads to a 1.5 percent jump in happiness levels. This may seem insignificant, but a metro would have to see its per capita income rise by nearly 50 percent to see a similar happiness bump, as a Gallup summary of the study points out.
Interestingly enough, the study’s authors find that people feel even more positively about creative destruction when asked about their future happiness rather than their current well-being. The chart below, from the Gallup summary, shows this strong connection between job turnover and predicted future happiness. Perhaps people believe that it’s the short-run effects of job destruction that are most painful, or that technological change tends to bring better economic outcomes in the long run.
The link between metro creative destruction and well-being is even stronger in places with more economic growth, and where industries are less vulnerable to outsourcing. Perhaps people in these places feel that they are on the cusp of progress. Or Gallup puts it, it may be that people “can see the reasons behind the creative destruction, and understand the long-term benefit, [and] because people know that the future is likely to benefit them and not others.”
Of course, creative destruction can be painful, especially when job destruction occurs without job creation and simply leads to high rates of unemployment. But the study’s authors largely find that the positive effect of creative destruction outweighs the negative effect of unemployment. In other words, happiness is more closely linked to a metro’s creative destruction rate than unhappiness is to its unemployment rate.
The study also finds that unemployment benefits can play a role in offsetting the negative effects of job-destruction on happiness. When the researchers control for various factors like the unemployment rate, they find that happiness of people experiencing job destruction is higher in states with more generous unemployment benefits and lower in states with stingier benefits. This is likely because people are less worried about the job-destroying effects of technological change when there is social safety net they can count on. (It may also explain why American workers are so nervous about technological change today, given the shrinking social safety net).
Ultimately, the study turns on its head the conventional wisdom on the effects of technological change on people’s attitudes. While pundits are constantly wringing their hands over the displacing effects of new technology, it appears that the outlook in places that are experiencing the most job turnover is actually sunnier. This does not mean that technological change does not pose challenges—it very clearly falls unequally on different classes of workers and on different kinds of places. But despite all of this—despite the very real job-destroying effects of technologies like steam power, the Internet, and robots—Americans still hold on to the basic belief that technological change can make their futures brighter.