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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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… of jobs being lost to the new wave of automation, robots and artificial intelligence, total aggregate employment in our nation continues to increase relentlessly, even with bumps along the way.  In other words, robots are not going to steal all our jobs.

With Elon Musk recently warning that robots will “do everything better than us,” and a 2013 paper from the Oxford Martin School claiming that 47% of all jobs are at high risk of falling to computerization in the coming decades, the fact is that jobs are constantly changing, shifting and evolving.  It’s nothing new, and it’s nothing that we – especially those involved in U.S. manufacturing – need panic over.

A recent analysis by the Information Technology & Innovation Foundation quantified the rate of job destruction and creation for every decade going back to 1850, based on census data.  Among other things the report showed that 57% of jobs that workers did as recently as 1960 no longer exist today (adjusted for workforce size).  The largest losses were suffered among office clerks, secretaries and telephone operators.  That’s a lot of Mad Men era folks out of work, right?   And let’s not forget elevator operations, bowling pin setters and gas station attendants.

The point is, we have a long tradition of losing jobs due to automation, but invariably we see new jobs take their places.  More often than not today, robots, artificial intelligence (AI) and the like are often automating discrete tasks more than they are jobs.  By 2055, McKinsey predicts, more than 50% of all work-related tasks will be subject to automation.

So why, with this long history of job attrition, do some continue to insist that the sky is falling, or that this time is different… that we are headed to some jobless future of mass unemployment?

The gist of the doomsayers’ argument voiced by many futurists and experts, according to a recent article in the Wall Street Journal (7-22-17) seems to be that the new wave of AI computers and robots can “do virtually any job that humans can do, so everyone’s job is on the chopping block.”  AI is getting so intelligent, the logic goes, that it’s smart enough to recognize cats, drive cars, identify cancers and translate across languages, notes the Journal.  So won’t it soon be capable of doing anything a person can?

Not so fast.  What these tasks have in common mostly is finding patterns within large data sets.  It would be a mistake to extrapolate from this big data analysis some giant leap in duplicating human intelligence.  Today’s AI is often just straining through massive bits of data, whether it’s recognizing a face or putting bunny ears on your selfie.  They are no more a threat to “human primacy” says the Journal, than “automatic looms, phonographs and calculators, all of which were greeted by astonishment and trepidation by the workers they replaced when first introduced.”

Moreover, as wealth continues to increase (as it historically always has) those consumers are likely to allot a growing share of their income to personal services, the very sector where face-to-face interactions are critical to the value delivered.  Says the article’s author, Stanford AI Professor Jerry Kaplan, “the irony of the coming wave of artificial intelligence may be that it heralds a whole new era of personal service.”

And that means: plenty of jobs.  After all, once over 90% of us were farmers; today it’s 3%.  And unemployment is near an all-time low, while employment is at an all-time high.  Meanwhile, standards of living around the world continue to improve as we shuffle jobs from one category to another in the familiar cycle of creation and destruction.

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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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automation_2We introduced the fear of the rise of machines and artificial intelligence (A.I.) as reviewed by the editors of The Economist in our prior post, where we ended up asking the question: What will it mean?  We’ll parse through what economists and others are saying in today’s post, which attempts to answer the larger question of whether smarter machines are causing (or poised to cause) mass unemployment.

Machines today are imposing on even the highest tech jobs, such as those produced by Enlitic, a startup involved in deep learning in the medical field, which has produced a system for scanning lungs for abnormalities.  In a test against three expert human radiologists, Enlitic machines were 50% better at classifying malignant tumors.  Another of the company’s machines which examines x-rays to detect fractures outperformed human experts, and the firm’s technology is already being deployed in 40 clinics.  That’s just one example of how white collar jobs can now be automated.

It turns out that what determines whether a person can be replaced by a machine – thus becoming highly vulnerable – is “not so much whether the work concerned is manual or white-collar, but whether or not it is routine,” notes the editors.  Thus, a highly trained and specialized radiologist may in fact be in greater danger of being replaced by a machine than his own executive assistant.

Among the most vulnerable, 47% of U.S. jobs are said to be at “high risk” of potential automation.  A 2013 tally published by Carl Frey & Michael Osborne on job susceptibility to computerization found the following had at least a 50% probability of being replaced:

  • Telemarketers (99%)
  • Accountants and auditors (94%)
  • Retail salespeople (92%)
  • Technical writers (86%)
  • Real estate sales agents (86%)
  • Word processors & typists (81%)
  • Machinists (65%)
  • Commercial pilots (55%)

Among the least vulnerable:

  • Recreational therapists, dentists, athletic trainers, clergy, chemical engineers, editors, firefighters, actors, health technologists and (of course) economists.

Clearly, a substantial risk exists across a broad swath of the employment spectrum.  Some, like Sebastian Thrun of Stanford, say this is only the tip of the iceberg.  Martin Ford, a software entrepreneur and author of “Rise of the Robots” warns of the threat of a “jobless future,” noting that most jobs can be broken down into a set of routine tasks, and are thus increasingly vulnerable to A.I. and machines.

As we noted in our prior post, these sorts of job-obliterating threats have been around since at least the Industrial Revolution, when the Luddites protested against machines and steam engines that they felt would destroy their livelihoods.

Such declarations have reappeared regularly since, in the 1930s-40s, in the 60s, and most recently with the advent of personal computers in the 80s.  Invariably, the progress of technology has always ended up creating more jobs than it destroys.  Once something can be done more quickly and cheaply, it is.  But that in turn “increases the demand for human workers to do the other tasks around it that have not been automated.”

We’re running long, so we’ll conclude our thinking in our third and final post on this topic. Stay tuned…

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automation_1There is what appears to be a larger than usual fear these days about the ominous likelihood of our jobs being replaced by machines… or some artificial intelligence fueled automation hybrid capable of rendering many folks permanently unemployed.

Visions of driverless cars and trucks, A.I. (artificial intelligence) infused paralegals and robots on the shop floor have justly scared many into thinking that our post-industrial ‘knowledge revolution’ is leading to a hollowing-out of the middle class that will leave massive swaths of our populace grimly unemployed.

While this same sort of thing has repeated itself for centuries, when one revolution (agricultural, industrial, financial, knowledge…) replaces the prior one, only to see the old jobs replaced by newer, heretofore non-existent ones, this time, say the doomsayers, it’s different.

Or is it?

That’s the basis for a series of articles published recently in The Economist (6/25/16).  We parsed through them to get to the core of the matter, and we’ll share with you in our next couple of posts what leading economists think about the current jobs (or joblessness) situation, the new economy, and what it all means for you and me.

Technologists and economists alike today are debating the implications of A.I., a field which has held the promise of machines performing previously human tasks any day now… for about 50 years.  But this time, many say, that time really is getting close at hand.  A study out of Oxford in 2013 found that nearly half of all American jobs were at high risk of being “substituted by computer capital” soon.  Merrill Lynch recently predicted that within ten years the “annual creative disruption impact” from artificial intelligence could amount to $14 to $33 trillion, including a $9 trillion reduction in employment costs thanks to automation of knowledge work, and another $8 trillion in manufacturing and health care.  $2 trillion in savings alone from self-driving cars and drones are expected.

Most ominously, McKinsey Global says that in terms of both time and scale, artificial intelligence (think robots, among other form factors) is contributing to a transformation of society with roughly three thousand times the impact of the Industrial Revolution.

Now, as we noted, we’ve heard these concerns before, dating back hundreds of years.  Machines have been grimly viewed as the destroyer of jobs since at least 1821 when economist David Ricardo spoke of the “machinery question… and the influence of machinery on the interest of the different classes of society.”  In 1839 Thomas Carlyle railed against the “demon of mechanism” which was guilty of “oversetting whole multitudes of workmen,” as the Economist article points out.

Today, “deep learning” systems are allowing machines to accelerate their learning capabilities as never before.  In fact, “Instead of people writing software, we have data writing software” notes the CEO of NVIDIA, a chip company.  Systems are learning for themselves today, mining their data to get smarter faster, without the need for much human intervention.  The progress is real.  The results are real.  This stuff works, notes tech pioneer and venture capitalist Marc Andreesen.

The question then becomes: What will it mean?  We’ll take a look at a few of The Economist’s editors conclusions in our next post, so stay tuned…

 

 

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jobs_chinaWe noted in our prior post some of the facts and jarring effects of free trade and trade barriers upon American manufacturing employment.  Those effects are now being voiced in the pitched rhetoric of the latest electoral season.  Free trade, while a linchpin to global (including American) growth and well-being, creates winners and losers, as pointed out well in a recent article in The Economist (“Open Argument,” 4-2-16).

The question then, from an employment standpoint becomes, how do we help the so-called losers?  That is, what do we do about all those displaced workers?  Following are a few thoughts and ideas that might help move us forward:

  1. Look to Germany. While also absorbing the twin shocks of competition from China and from nations east of the European Union, Germany has continually managed to upgrade its workforce skills, thanks to a vibrant system of apprenticeships.  The U.S. still places too much emphasis on four-year education, and not enough on job and trade skills.
  1. Rethink labor market policies. Through job exchanges and courses, “more could be done to help workers who lose jobs find new ones,” note the Economist’s editors.  Easier said than done, to be sure, but historically our safety net is either too narrow (temporary unemployment benefits for a fixed period of time for the displaced… and then what?) or too broad (paying everyone including those in dying industries those same benefits without an eye to retraining in new, potentially more promising sectors).
  1. Relocation grants for workers hurt by trade. Many older, two-earner families may be disinclined, but lots of younger less-skilled workers might be well-served, and moving to newly vibrant employment areas does have a certain Darwinian logic.
  1. Create a system of portable benefits. Too often the displaced job-seeker finds employment not only at less pay but with reduced or no benefits (healthcare, pension, etc.), making the new position far less tenable than it might otherwise be if benefits were portable.  Perhaps even a system of wage insurance “might have merit,” say the Economist editors.
  1. Finally, retrain workers for the very different jobs of the 21st century.  As Ian Bremmer points out in a recent Time magazine article (“The Risk Report,” 4-25-16), while many manufacturing jobs have been re-shored back to the U.S. in recent years, there’s no debating the change that has been wrought through modernization and automation.  The new century’s workers must be trained in the new century’s jobs, and that includes embracing the new technologies, and providing the training that must accompany them.  Just as companies are embracing robots, 3-D printing, process improvements and modern ERP systems, workers need to be trained in the programming, maintenance and application of today’s newest tools.  There will be fewer of these jobs than the auto line-workers of the 1970s, but they will be better jobs, and

If economic disruptions and the perils of trade are destined to be a continuing part of our landscape in the changing face of global competition, then it’s high time that newer, more creative solutions have a place in that landscape too.  This country was built on a backbone of productive jobs, many in the manufacturing and industrial sector of the past century.  Through education and creativity, we can still create some of the most productive, highest paying jobs in the world.

But we won’t get there tomorrow mired in the thinking – and hot rhetoric – of yesterday and today.

 

 

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