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Posts Tagged ‘automation’

Despite the fact that we implement some very cool technology solutions – or perhaps because we do – we are ever-sensitive to the impact that technology has on people.  When our company began 30 years ago, we knew we could make companies much more efficient – the same principle that drives us today.  And a more efficient company has a much greater likelihood of staying that way, and staying in existence.

Still, as we flash forward thirty years hence, it’s important to pay attention to some of the job implications of technology.  Automation is a huge boon to the world’s workers, but only if companies and governments can manage the disruption that is often created.

According to a McKinsey Global Institute estimate, as reported recently in The Wall Street Journal, 375 million workers worldwide will “need to find new occupations or lose their livelihood to automation by 2030.”

That astounding figure represents roughly one in every seven workers on the planet, and the time line is only about a dozen years if the McKinsey folks are right.  One of its principals, Susan Lund, remarked that “The question is, what are we going to do to manage the transition for the people who do lose their jobs?”

While those of us in the tech sector bear responsibility to varying degrees for that displacement, it comes down to the choices made by policy makers and business owners about how to support those displaced workers.  This can take many forms, including investments in continuing education, training, new job-creation and the infrastructure-type projects that can support them.

Adopting automation tools, adjusting wages and reconciling regulatory issues all have an effect.  Ultimately, those higher wages create even greater incentives for companies to automate and innovate.  The transitioning of the affected workers creates a lot of potential for unrest – and remember, this isn’t just a national issue, but a global one.

In a sign of looking at the future in a whole new way, some countries are already experimenting with universal basic incomes – cash grants that provide a fiscal foundation in workers’ lives.  The idea is to see if, given a subsistence income, the basic support infrastructure can be put in place to free up workers to aspire to newer, higher or more entrepreneurial heights.  Or whether they’ll simply lose work incentive and just drop out altogether.

Support for displaced workers, Ms. Lund points out, can include guidance, career and skills coaching, and providing things like transportation and child care.

McKinsey estimates that about 15% of all hours worked globally could be automated by 2030 by using technology that is currently available.  “60% of all occupations could be at least partially automated with current tools,” though only 5% are at risk of total automation, they add.

Machine learning… artificial intelligence… and other advanced forms of automation are real, and arriving now.  Like past waves of technological evolution, they have the power to create more jobs than they replace.  As we noted in a recent post, it’s already happening as we transition from fewer retail workers to even more warehouse and logistic jobs.  This, as we noted, is already delivering higher paying jobs than the ones replaced, and more of them, which benefits all classes and sectors as the indirect result of technology’s contribution to higher productivity.

That increased productivity is what job growth, job creation and the benefits of automation are all about.  It’s why thirty years ago we made “Productivity” the first word in our company name.  And why the message is as important now as it was then.

 

 

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19 million employment positions in the U.S. will be automated out of existence in the next 15 years… while employers will create 21 million new roles.  So says Ben Pring, director of the I.T. services and consulting firm Cognizant Center for the Future of Work, in a new book titled “What to Do When Machines Do Everything.”

The question becomes – on both ends – what jobs go and what jobs will replace them?

We’ve already seen the massive disruption in retail, and autonomous vehicles are fast approaching, portending a grim future for certain transportation positions.  Taxi drivers have already been obliterated by the likes of Uber and Lyft.

For the future jobs, Pring and colleagues suggest titles as esoteric and wide-ranging as “gender diversity officer,” “virtual store Sherpa” and “personal memory curator.”  Don’t think so?  Then how about lower tech alternatives like “walker-talkers”: contract players (or “gig workers” as they’re commonly known today) who can answer calls to assist and provide companionship for the growing number of the elderly expected in the years ahead.

Robots, artificial intelligence and the march of automation give concern to many that machines will replace people.  But to a large extent we’ve been saying that since the industrial revolution replaced agriculture as the chief means of earning a living.  In fact, many studies have concluded that these new technologies will create still newer jobs – and in even greater numbers than the ones they replace.  To some, it feels like one of those watershed “industrial revolution” (or perhaps, info-data revolution) moments.

Recent efforts to control ‘fake news’ are just one example where AI can do part of the job, but it still takes real live humans to do the hard parts, like making the subtle discernments.  Facebook alone is hiring 10,000 such human curators, to manage the sprawl of news bots and fake news creators.  It seems that humans will have an active role in building and, especially, running AI tasks for a good while.  Just as in retailing, store jobs have been replaced by even more warehouse fulfillment jobs (usually at higher pay), jobs replaced by the various new forms of automation will be replaced by newer forms of work – which means that jobs lost are translated into new– and often better — jobs created.

In fact, according to Vanessa Fuhrmans in an article in the Nov. 16th Wall Street Journal, Pring and colleagues envision jobs that “involve helping companies manage artificial intelligence and automation” with “data detectives,” workers who dig into their firms’ data stockpiles and generate business recommendations.  This mirrors the “big data” movement today where companies (including ones right here in South Bend, Indiana) are employing Ph.D.’s and other so-called ‘rocket scientists’ to cleverly mine millions of bytes of computer and other machine-collected data, pawing through for trends that lead to sound business intelligence – and hence, the holy grail of competitive advantage to their owners.

In the end, as Pring concludes, “Work will change, but it won’t go away.”  Or as Bruce Springsteen once sang, “Them jobs are goin’ boys and they ain’t comin’ back.”

Ah, but newer jobs will – and the sooner we embrace them, the better for all.

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In our prior post we noted tech writer Greg Ip’s recent comments in an article in The Wall Street Journal, pointing out the little-known fact that automation today is actually creating more jobs than it is displacing.  We noted in particular the retail and banking sectors which, counterintuitively, have employed technology for their own gains, but in the process actually created greater hiring of people, due to the increased productivity that such automation has created.  Let’s continue to illustrate…

James Besson, an economist at Boston University created an early desktop publishing program in 1983 that great simplified typesetting and graphical design.  When Sears purchased his program, it eventually laid off 100 employees, and Mr. Besson worried about those job losses.

But it turns out customers used his software to expand the number of variety of their publications.  Supermarket chain A&P used it to publish dozens of versions of circulars in Atlanta with different promotions for different neighborhoods.  Mr. Besson learned that while typesetting jobs fell by about 100,000 in the 1980s, the number of designers eventually quadrupled to more than 800,000, making up for the losses many times over.

Of course, the disruption was still devastating to those whose jobs were lost.  The people displaced by automation – then as now – are rarely the same people employed in the new industries made possible by the new automation.  But over time, the net effect has been shown to be consistently positive.

Today, retail is the largest industry being displaced.  Yet evidence is beginning to show that e-commerce has probably added to overall employment.  While over the past decade about 140,000 jobs have been sliced from brick-and-mortar displacements, according to think tank Progressive Policy Institute, about 126,000 have been added in the e-commerce space.  However, that fails to count warehouse and fulfillment job gains, which have increased by 274,000 jobs during the same period.  And, they note, those jobs pay about 30% better than the ones they displaced.

As the WSJ’s Ip points out, this begs the question: “If online retailers, based on sales per employee, are much more productive than regular retailers, how can they on net add to total retail employment?  And how can they both pay more and keep prices low?”

Ip says the answer is complicated, but it comes down to this: E-commerce doesn’t just sell the same product as a store did at a lower price.  It “enables customers to peruse a vast array of products and select precisely the one they want and have it delivered in a day or two, saving the time, cost and inconvenience of visiting multiple stores.”  It’s estimated that saves the average adult about 15 minutes a week and uncovered the hidden demand for shopping from home.

None of this adds to price.  It simply results in people consuming more retail services, once adjusted for improved quality, than before.  Then, the e-commerce suppliers spur demand by using their greater efficiencies to absorb more of the delivery costs.  Amazon uses the margin it earns on goods to build and operate the logistics centers needed to profitably serve customers – and those centers are creating ever more jobs than they displace.  The day when Amazon will need fewer humans appears far off.  In fact, last month Amazon in a one-day nationwide job blitz accepted 100,000 applications and has already made 40,000 job offers.

The e-commerce boom is as real as the brick-and-mortar decline.  But the job displacements are turning out not to be doom and gloom, as the new jobs prove greater in number and pay than those displaced.

Just as it’s been happening for at least 500 years.

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For all the fears about lost jobs and the sea changes occurring in manufacturing and retail as the Internet changes everything in its path, it’s worth noting that each successive transition in society’s economic underpinnings – be it farming or steam engine, industrial revolution or information – eventually disrupts everything around it and then, inevitably, produces more opportunities, different challenges and, ultimately, more (and newer) jobs.  The Wall Street Journal’s tech writer Greg Ip points this out in a recent article.

Ip points out that as Amazon grows (and a few others), tens of thousands lose their jobs in retail.  Stores close across the community, state, country, and world.  But then again, to cite one of Ip’s examples, workers in former textile towns like Fall River, MA, find new beginnings.  There, Amazon planned to hire 500 workers for a new fulfillment center last year.  Already employment there has soared to 2,000.  And workers there are earning more than at previous retail jobs.

The demise of brick-and-mortar has been accompanied it seems by the less well-publicized boom in e-commerce that has actually created more jobs in the U.S. than traditional stores have cut.  And those jobs, it turns out, pay better because workers there, augmented by the latest in software and hardware technology, are so much more productive.

Throughout history automation often creates more jobs – and better-paying ones –than those it displaces.  Ip points out the critical reason, a point often lost in all the bad press and noise:

“Companies don’t use automation simply to produce the same thing more cheaply.  Instead, they find ways to offer entirely new, improved products.  As customers flock to these new offerings, companies have to hire more people.”

The underlying angst over job displacements goes back 500 years as each successive new generation of revolutionary technology displaces the former, along with its adherents and workers.  It is interesting to note that in 1589 Queen Elizabeth I refused to grant the inventor of a mechanical knitting machine a patent for fear of putting knitters out of business.  More recently, in the 1930s economist John Maynard Keynes warned of tech unemployment due to the modern ability to economize the use of labor faster than new users for labor could be found.

These fears have repeatedly proven baseless.  When ATMs first appeared in the 1970s it was thought to lead to fewer branches and fewer staff.  Wells, Fargo itself predicted as much for the new cost-cutting technology initiative.  And indeed, the average branch used one-third fewer workers by 2004.  But… ATMs made it so much cheaper to operate a branch that banks ended up opening 43% more branches!  The result: today, banks employ more tellers than they did in 1980 and those jobs have expanded into more interesting roles that ATMs can’t duplicate today, like “relationship banking.”

We are in a watershed period for technology, with its pace increasing steadily.  This is scary stuff.  People are rightly concerned.  But if the past is prologue to the future – and it often is – there will once again be silver linings.

This topic is, we think, important enough to extend into a follow-up post, which we’ll do in our next one. Stay tuned…

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automation_3We’ll conclude with our third post in a series derived from a recent group of articles published in the June 25, 2016 issue of The Economist discussing artificial intelligence, the rise of machines, and the potential impact on jobs in the future.

In our prior post, we ended by noting that in prior revolutions (like the Industrial Revolution) it’s always been true that as old jobs were replaced by automation new jobs sprang up in their place to perform other tasks that could not be automated.  History is full of examples, such as farming, weaving and one more recent entry: the ATM.

When ATMs were thought to be the death knell for bank employees a couple of decades ago, bank tellers did indeed see their average number fall from 20 per branch in 1988 to 13 in 2004, according to The Economist’s editors.  But… that reduced the cost of running a branch, and in turn banks opened more branches.  The number of urban branches rose by 43% during that time, so the total number of employees actually increased.  Rather than destroying jobs, ATMs changed the work mix for bank employees, and they moved away from routine tasks towards sales and customer service, tasks machines could not do.

The same pattern can be seen across industry with the rise of computers; rather than destroying jobs, technology redefines them, often in ways “that reduce costs and boost demand.”  Between 1982 and 2012, employment actually grew faster in occupations that made more use of computers, according to a study by James Bessen, an economist at Boston University School of Law.  More computer-intensive jobs ended up replacing less computer-intensive jobs.  Thus, jobs were reallocated more than replaced.  It’s true across a wide range of fields.

One low note: only in manufacturing did jobs expand more slowly than the workforce did over the period of the study.  That had more to do with business cycles and offshoring to China during that time period than with technology, Besson notes.

While in the end we can’t predict which jobs will be replaced by technology or what jobs will created in the future, “we do know that it’s always been like that” says Joel Mokyr, an economic historian at Northwestern Univ.  Think about it: Who knew 100 years ago that there would be jobs like video game designer or cybersecurity specialists?

So while the truck driver of the future may be no more, we can only speculate about what heretofore uninvented job may take that one’s place.  Remember, 100 years ago there was great concern about the impact of the switch from horses to cars.  While the horse jobs went away, countless new jobs were created at motels, fast food joints, and travel agencies (now another in a dying breed of jobs).  Tomorrow’s autonomous vehicles, the editors note, may also greatly expand the demand for food product delivery.

So who is right: the pessimists who say this time it’s different and machines really will take all the jobs (the techie sentiment) or the optimists “who insist that in the end technology always crates more jobs than it destroys?” as the editors question.  The truth, The Economist concludes, probably lies somewhere in between.  AI, they note, will not cause mass unemployment but it may speed up the trend toward computerized automation at a faster pace than heretofore known.  It may disrupt the labor market – it’s happened before, certainly – and will require as always that workers learn new skills.

These are difficult transitions, though not necessarily as Besson notes “a sharp break with history.”  But regardless of your viewpoint, most agree: what’s required is that companies and governments make it easier for workers to acquire new skills and to switch jobs as needed.  In the U.S. in particular, we have far to go in this regard, and there is indeed a role for government, education and the private sector.  Hard change will be required.  But then, like job displacements and replacements themselves, they create their own necessary forms of reinvention.  Always have, always will.

But the pace of change has never been faster, and therein lies the ultimate jobs challenge for the next generation of jobs and security both here and abroad.

 

 

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