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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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Cotton_mill.0There has always been a certain tension between the notion of increasing workplace productivity – an eternal necessity in business – and the counter-argument that it often means lost jobs.  As the conventional wisdom often shows, improved productivity via machines, computers and advancing technologies can sometimes run counter to the cause of the workers they displace.

But it’s often the case that increased productivity and advanced technology solutions mean those old jobs are replaced by newer, better jobs.  From centuries ago when industrial farm equipment displaced farm workers that eventually led to a huge spurt in factory workers, one technology often displaces another, and one job is often replaced by another.  Collectively, historically, the new jobs gained always have seemed to be adequate to replace, at least in numbers, the old jobs displaced.  True, this did not occur without much pain, particularly if you were among the displaced, and it took time as well.

But over time, job counts and workers have risen pretty consistently.

Today some question whether our particularly intensive and rapid displacement of many common jobs can be replaced quickly enough by the higher-level jobs that commerce and progress demand that we create.  We alluded to this in an earlier post titled So When Will You Be Replaced by a Robot?

Now the debate continues with the publication of a new book by James Bessen of Boston University Law School entitled “Learn by Doing: The Real Connection between Innovation, Wages and Wealth.”

In brief, (notes a recent review in the May 21 Wall Street Journal) Bessen notes how robots at the distribution center have eliminated some jobs while creating new ones for production workers, technicians and managers.  Robots aren’t the problem, he says; it’s the lack of qualified workers, thus hinting at the larger problem today.  Those with “specialized skills” are in short supply.  His is a deeply contrarian view.

Conventional wisdom says that robots and technology do more harm than good by “destroying jobs and hollowing out the middle class.”  And we’ve seen how today in particular (again, note our earlier post) higher level jobs from bank tellers to truck drivers and warehouse workers are all at risk.  But then, we’ve also seen that, for example, when ATMs arrived, the ranks of bank tellers remained level for many years, as more branches required more people despite the ATMs to handle the increased and more complex business brought about.  In other words, things only sometimes – but not always – play out as expected by the so-called conventional wisdom.

In “Learning by Doing” Bessen “combines policy arguments with a practical sense of the workplace” as WSJ reviewer Tamar Jacoby points out.  Bessen points to the advent of desktop publishing, largely the result of innovation at Apple which, while eliminating keyboarding jobs at many firms, replaced them with jobs for programmers, product designers and customer service.

Historically, he recalls that Karl Marx wrote of the doom of the English handloom weavers as a “horrible tragedy” but which, in fact, begat the power loom, “the best thing that ever happened to the textile industry and its workers.”

And so the debate rages – far longer at least than a mere blog post can tally.  In the end, both the weavers and the desktop publishers did just as Bessen’s title suggests: they learned by doing.  They found ways to use technology more productively.  They adopted it to their specialized needs.  In a long and painful learning curve, jobs were displaced, but other, higher-skilled jobs replaced them.

Indeed, this time it may be “different.”  The pace of change may be simply too fast today.  But given historical precedent dating back centuries, it’s still hard not to be optimistic.

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“The arrival of hundreds of millions of cheap, diligent Chinese workers in the global economy saw America trade blue-collar jobs for low cost T-shirts and toasters,” according to a recent (July) article by Tom Orlik in the Wall Street Journal.  The lesson in these and other demographic changes for manufacturers today comes as no surprise: brace for change.

In roughly the first decade of this new century, the U.S. manufacturing sector shed nearly 5 and a half million jobs.  Meanwhile, China’s labor force is said to have already plateaued in size and will soon start to shrink.  Manufacturing wages there have risen over 20% just last year, outstripping productivity improvements.  Import prices from China to the U.S. are rising, thus crimping American spending power and gradually fueling inflation.  (On the plus side: as noted one of our recent posts, the rising trend in foreign wages has resulted in the return of some manufactureing jobs to U.S. shores.)

Yet, to make matters worse, millions of “cheap and diligent Chinese graduates” will be vying for positions soon in the global labor market, thus exerting further pressures on Americans’ wages and our competitive position.  A big increase in the global supply of highly skilled workers in the coming two decades will likely have an even greater impact on the U.S. than the surge in low-skilled workers of the recent past. 

As a result, there’s a very real possibility – likelihood, really — that professional wages and employment in the U.S. will come under increased competitive pressures.  (Fortunately, language and cultural barriers may dent the impact of China’s professional workers in the global workplace, unlike their factory worker parents did.)

On the other hand, one benefit we may derive from this demographic surge: rising incomes in China, and the other Asian nations with whom we increasingly compete, “should also help U.S. workers by creating more demand for [our] high value exports,” according to Orlik.

Still, the outlook remains clear: brace for change.  First, America’s blue collar workers lost their shirts (and jobs), during China’s first stage of recent, major economic development.  In the next stage, the U.S. needs to be wary of the same results for its white collar jobs.  Is it only a matter of time?  Or we will find ways to spur advancements through higher education that will preserve our high-wage, high-value jobs?

 

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As a champion of manufacturing – where our clients are mostly employed and employers — our blog occasionally touches on the touchy topic of outsourcing.  Recently, an article in Bloomberg Businessweek that chided the current presidential candidates for ‘pandering’ for votes over who was the worst offender when it came to outsourcing jobs, brought a more realistic view into focus.  In fact, it shows up just how misguided so many pundits today are.  And where employment trends are heading.

Economists who study these things tell us that companies create jobs outside the U.S. for more than job labor/cost saving reasons – though that is one valid reason.  But companies also create jobs – especially larger companies – because it’soften necessary in order to pursue sales opportunities in those new markets.  They want to be close to the economies that are growing the fastest, and to have access to ‘local’ resources, and to staff who understand the local culture. 

As Businessweek points out in its July 16th issue, companies that don’t hire locally in foreign markets “for some patriotic reason… would be at a disadvantage to European and Asian competitors, which would probably cause market share to drop and eventually result in U.S. layoffs.”

And, truth be told, outsourcing has had benefits: It’s meant less expensive goods for U.S. consumers.  Meanwhile, workers in Asia are becoming more like Americans and are increasing demand for U.S. made goods.  Outsourcing, the article points out, also “allows more advanced industries to replace outdated ones.” 

Meanwhile, a combination of rising wages overseas, a strengthening Chinese currency, and the availability of low-cost natural gas have actually caused some jobs to flow back to the U.S. – a phenomenon known as insourcing.

The politicians leave the impression that companies are bad for outsourcing, and if only they’d stop doing so, the jobs would come back.  But the truth is more complicated.  For one thing, automation has eliminated jobs – that’s just companies becoming leaner, more efficient.  Overall employment in manufacturing is down significantly from years past (even as firms become more efficient, as they must, to survive).  Meanwhile, middle-skill (and middle-wage) occupations are declining rapidly – and as The Boss once famously said… “and boys them jobs ain’t coming back.”

There are many who believe that improved education in science and math is one key to long-term employment prosperity.  Retraining workers to perform higher skilled tasks would be another.  This seems to be a conversation heard less often than the political rhetoric – and a problem a whole lot harder to solve.

 

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