How The Coming Wave Of Job Automation Will Affect You
One of the more interesting mental exercises related to predicting the future involves trying to fathom the impact the rise of robots will have on humanity.
We can be quite sure that in the proverbial blink, robots will be doing all the war fighting. After that, what’s the point? But does that then lead to the sort of robotic apocalypse so well envisioned in Terminator?
I also suspect it’s only a matter of time before the idea of sex bots goes from being an “eew” sort of thing to a household appliance. Well, at least in some households. After all, we already live in a world where every possible iteration of sexual proclivity is not just accepted but celebrated. So, who’s to deny the unmated a good snogging from the Yabadabdo Sexbot 2000?
In fact, in a recent survey, 1 in 4 adults aged 18 to 34 said they would “date” a robot. But what will the impact of bionic sex partners be on society—or birth rates, for that matter? It’s all but impossible to see through the fog to the answers.
We already have robo news reporters (you didn’t actually think humans write the crap passed off for news these days, did you?) Of course, as the news writing programs become more and more sophisticated, might the algorithms be tweaked to influence the masses to buy an advertiser’s product or, more onerously, to create a desired political outcome? You know, kind of how Google tried to get Hillary elected?
In terms of managing money, we already have robo traders and robo advisors. But what happens when these technologies become self-learning? Will the competing programs become so adept at exploiting kinks in the armor of Mr. Market that they will effectively nullify each other?
It’s also abundantly clear that self-driving cars will become the norm within the next decade. As someone who hates driving, that is a development I eagerly await. But imagine the sweeping changes self-driving cars will have on insurance, road building, car manufacturers, trucking, energy usage, the urban landscape, the taxi industry, government and regulations (will we still need driver’s licenses?), senior mobility, etc. It’s staggering to contemplate, and it’s just over the horizon.
I could continue, but as I am preparing for a trip to Tafí de Valle in the neighboring province of Tucumán here in Argentina tomorrow morning, I’ll shuffle toward the featured article of this week’s musings—a look at the impact of automation on the structure of the workforce by friend and associate Stephen McBride.
This is a particularly interesting topic on many levels. What percentage of the workforce is at risk of being replaced by automation? Where will the displaced find new jobs? What job skills will remain largely immune to automation? How will the US government, which is funded to the tune of 92% by income-related taxes, replace the lost revenue… a robot tax?
It’s a big topic, too big for a single Parade, but we must start somewhere. And with that, I turn the podium over to Stephen.
How the Coming Wave of Job Automation Will Affect You
By Stephen McBride
The 227,000 jobs added to the payroll in January marked the 76th straight month of expansion. The headline number is impressive. But if you dig a little deeper, you’ll find these jobs “aren’t what they used to be.”
Since 2000, the creation of full-time positions has slowed significantly. The private sector used to add full-time jobs at 2–3% per annum. In 2000, that number fell below 2%. Since 2008, it has been below 1%.
The majority of positions created since 2010 have been temporary. Around 20–50% of employees at the likes of Google and Walmart now fall into this category. With the explosion of contract workers, “workforce solution” firms now generate an estimated $1 trillion in revenue every year.
The declining quality of jobs has caused many to stop looking for work. The labor force participation rate is near the lowest level since 1978. Hordes of Baby Boomers retiring skews the data somewhat, but the rate for workers in their prime isn’t pretty either. Almost 12% of men aged 25–64 aren’t in the workforce—a near five-fold increase in 60 years.
So what has caused this shift?
Steven Berkenfeld, a managing director in the investment banking division at Barclays, summed up the thought process of companies hiring today: “Can I automate it? If not, can I outsource it? If not, can I give it to an independent contractor?” Hiring an employee is the last resort.
Over the past four decades, millions of jobs have been lost to automation. The manufacturing sector is a prime example. While productivity has increased, employment has fallen.
We can see this trend when comparing companies across time. The most valuable US firm in 1964 was AT&T. Then, it was worth $267 billion (in 2016 dollars) and employed 758,611 people. Today, Google is worth $370 billion and has only 55,000 employees.
Many workers have already been replaced by machines, but the number is only set to rise.
A 2013 study from the University of Oxford concluded that 47% of jobs in the US will likely be automated over the next two decades. And a 2015 report by McKinsey found that the majority of tasks performed in sectors like manufacturing and food service can be automated with currently demonstrable technology.
Technological advancement has created more jobs than it has destroyed in the past. However, the big problem is the lag time it takes to forge those new careers. Given the high cost of living in the US today, even a small lag could be financially devastating.
Let’s take a look at the implications of job displacement going forward…
The Missing Middle
Due to an inability to secure a full-time job, McKinsey estimates 20–30% of workers now partake in contingency work to supplement their income. Work in the “gig economy” can be fun, but it doesn’t provide a stable, reliable wage. Sure, one can survive on it, but it’s hard to get mortgage approval or support a family with it.
One of the reasons the US became an economic behemoth was its large middle class. With the loss of traditional careers, this trend is now in reverse. Over time, employment will likely become polarized as “Middle America” is hollowed out.
Lower-quality careers ultimately mean lower pay… and when incomes drop, people have less to spend. Given that consumption now accounts for 70% of economic activity, this is a matter of great concern. As the Fed has stated: Recoveries don’t die of old age. It’s usually falling demand that leads to their death.
Many Americans are unable to find full-time employment, but they are spending more trying to attain it. Outstanding student loans now total a whopping $1.4 trillion. This isn’t a problem if individuals have the ability to pay. But with 45% of recent college graduates underemployed and 10% over 90 days late on payments, it’s a big problem.
In 2013, the Department of Labor predicted 65% of school children will be employed in jobs that don’t yet exist. Therefore, many of the skills they are learning today will likely be obsolete in the near future.
And it’s not only job seekers who are affected. With dependency ratios collapsing, who will fund the pensions of the retiring Boomers?
Displacement does not only have economic consequences, it also has profound social consequences. A Gallup study found that having a job was the number one social value. Unemployment is linked to increased drug use and depression. It’s also positively correlated with crime.
While automation will have a major impact on the future of employment, the outlook is not all bad.
Machines may be rendering many skills useless, but creativity is where humans still have an edge. McKinsey listed “managing others” and “applying expertise” as the least susceptible to automation. Likewise, Deloitte identified cognitive skills as the most important to have going forward.
Machines may be advancing, but the future is likely to be one of collaboration, not competition. There will be serious challenges in the near term as many jobs are displaced by technology. But in the end, who would bet against the “ascent of man”?