How do we make America great when we don’t make anything?

How do we make America great when we don’t make anything? The Role of intangible capital in our economy.

by Scott Dennis

Recently Microsoft founder Bill Gates reviewed a new book looking at the expanding role of intangible assets in a global economy driven by the technology sector.  He takes time to mention that the authors

“..don’t act like there’s something evil about the trend or prescribe hard policy solutions.”

Although his review was meant to bring attention to this economic trend the Freudian slip by Mr. Gates should cause people to ask if an economy built on intangibles is good for people or not?

Capital that cannot be touched is not new, for instance value in branding has been part of the modern economy since the start (think Colgate or Cadburys) and patents which are essentially just ideas spelled out on paper were widely used in 19th century France. The question that leads to concern is when value of a company becomes almost entirely intangible how can its true value be measured? Let’s use Toyota as an example an auto manufacturer that still lives in the standard economy because it follows the following economic logic:

The total cost production increases as supply increases because it takes a certain fixed amount of labor and materials to make the cars. The labor and materials are a type of capital inherently required to make Toyota cars.

Now imagine that Toyota was originally conceived as a brand of computer software, perhaps a large amount of resources are put into the initial launch of their product but the cost of production does not increase as supply increases because unlike cars each additional unit of software costs virtually nothing to produce. In today’s economy it is likely that the Toyota brand as a software company could very well be more valuable and in a shorter time frame than the company that has produced high quality tangible automobiles.

At this point let’s stop to consider that with the cost of capital requirements for production diminishing and only one (Exxon Mobil) of the top highest valued companies in the world actually working with a normal cost to production ratio in 2018, is this a good trend for our economy and if so who benefits the most?

The first thing that may come to your mind as you compare the tops ten list from 1998 to 2018 is how much human capital (labor) would be needed to run the 1998 group versus the top ten of today. With the exception of Amazon the top companies in 2018 employ roughly half the amount of people than in 1998, although the majority of the Amazon employees work in minimum wage warehouse positions with no union representation.  Even from an investors point of view this new configuration seems like it creates a lack of equilibrium because the most successful investors has always had a mix of profitable operating companies with predictable valuations due to ownership of capital (warehouses, machinery etc.) in order to buy up shares when the market slumps; this is a simplification of Warren Buffets “two buckets theory”.  With the new economy – investment dollars are “sunken”, that is to say if things go bad there is no capital to sell in order to offset your losses. Certainly there are synergies, faster scaling and overflow opportunities with intangible companies

but the concern for workers is that the underlying business plan for these companies is to create and support a network of more and more gig economy platforms, eliminating jobs that provide security and real wage growth.

Certainly Uber and Lyft are good for a sector of workers but our whole system cannot be supported with this model.

If the role intangibles assets companies are going to change the equilibrium of our market economy what role does labor have in the valuation of intangibles?

Labor organizations need to find their footing in the form of political power and legal reform when it comes to dealing with the new economy.  There needs to be a firewall between the speculative stock of companies over leveraged in intangibles and public funds that support communities or even private ones that sustain colleges.  The overwhelming wealth gap needs to be addressed in terms of tax reform. If these companies are holding billions in cash it’s a clear indication that the system is warped, cash is simply a vehicle to purchase goods, services or build more capital not to horde. It is clear that intangible companies are not contributing enough to the community that makes their business possible.

Scott Dennis writes for the Blue Collar Think Tank

Follow @bcthinktank

Optomistic Perspective on Automation

The Robots Are Coming To The Workplace. What you need to know.
John Hawthorne guest contributor

In the history of business and manufacturing, automation has become commonplace. In many ways, people have been replaced by machines in the manufacturing, retail, restaurant, and corporate settings.

At the same time, opportunities have arisen for employees who specialize in programming, engineering, and maintenance of machines in all areas of commerce and industry.

So here’s the crucial question: Will automation kill or create jobs?

Will the robot uprising be a good thing or take our livelihoods?

Let’s dig a little deeper.

Jobs Lost to Automation In the United States

 

Before we start panicking and declaring robots to be evil, let’s look at the statistics. While it’s clear that robots and Artificial Intelligence (AI) have displaced some workers in the past, the effect on the US economy is relatively minimal. There are currently between 1.5 and 1.75 million industrial robots operating around the globe, according to the International Federation of Robotics.

The auto industry accounts for 39% of such robots, followed by the electronics industry at 19%, metal product manufacturing at 9%, and the plastics and chemicals industry at 9%, according to MIT economists Daron Acemoglu and Pascual Restrepo.

This translates into “one more robot per thousand workers” reducing the aggregate employment to population ratio by about 0.34%. In other words, every new robot added to a given commuting zone reduces employment by 5.6 workers. And the researchers project that the number of industrial robots will reach between 4 and 6 million by 2025.

If the total number of industrial robots quadruples by 2025, the researchers expect 0.94 to 1.76% lower employment-to-population ratio and 1.3 to 2.6% lower wage growth between 2015 and 2025. Technologies such as artificial intelligence, machine learning, and robotic automation will erase 16% of US jobs by 2025.

So while the current numbers aren’t staggering, the future is a bit concerning. If sixteen percent of US jobs are eliminated by robots, that’s quite a few people on unemployment.

Jobs Lost to Automation vs Outsourcing
Automation is not the only factor in unemployment in the United States. Job outsourcing helps US companies be more competitive in the global marketplace. They lower labor costs by hiring in emerging markets with lower wages. That lowers prices on the goods shipped back to the United States.

The main negative effect of outsourcing is it increases US unemployment. Currently, 14 million outsourced jobs are almost double the 7.5 million unemployed Americans. In other words, outsourcing is just as destructive to the economy as automation.

Automation Can Create More Jobs

Getty Images

However, automation can create more jobs as well. For example, when the industrial revolution replaced work that was normally done in a long, drawn out, and tedious ways (such as weaving machines replacing individual seamstresses), those who were displaced learned how to operate the machines. Textile workers were most often those displaced seamstresses.

The industrial revolution taught the world that as traditional jobs disappear, we need to ensure that people of all ages are sufficiently educated to work in the emerging roles in the immediate future.

The changing times demand new skills, new mindsets, new competencies, and new institutions. While there are certainly soft and hard skills from the past that should remain staples in education (like personal communication, collaboration, basic mathematics, writing skills, etc.), it would benefit the country to also consider adding curriculum in robotics, computer science, and engineering.

Though many school systems have these capabilities and are implementing such programs, not all have the funding or resources to make such changes.

Just as with every new industrial age, the age of robots will lead to more jobs. Kallum Pickering, analyst with Berenberg, has pointed out a large hole in the argument that artificial intelligence (AI) will lead to vast numbers of workers joining the ranks of the unemployed:

“Producers will only automate if doing so is profitable. For profit to occur, producers need a market to sell to in the first place. Keeping this in mind helps to highlight the critical flaw of the argument: if robots replaced all workers, thereby creating mass unemployment, to whom would the producers sell? Because demand is infinite whereas supply is scarce, the displaced workers always have the opportunity to find fresh employment to produce something that satisfies demand elsewhere.”

Most employers and analysts generally agree that there should be measures in place to reduce the impact of jobs lost to automation, like education programs for re-skilling workers who will lose their jobs.

So does automation cost jobs? Sure. Every industrial revolution initially displaces a portion of workers. But automation will also create many new jobs as displaced workers adapt to the changing economy.

What Jobs Will Automation Create?

A Deloitte study of automation in the U.K. found that 800,000 low-skilled jobs were replaced by AI and other automation technologies. But, 3.5 million new jobs were created as well, and those jobs paid on average nearly $13,000 more per year than the ones that were lost.

Positive, worker-friendly outcomes like this illustrate a more complete range of possibilities for automation. Technology is changing the way we work — this is undeniable. These changes can improve people’s lives and lead to a more creative, intellectually engaged workforce. AI is most often used to perform mindless, repetitive tasks, which means that employees can spend more time on complex tasks for which they are suited, such as interacting with customers or brainstorming innovative new ideas.

Creativity is what distinguishes humans from machines. And not just the capacity for creative work, but the ability to reimagine what jobs might look like in the near future and beyond.

Here are three examples of companies using automation to create jobs and help their leaders develop better businesses:

Panera Bread

Panera Bread announced in April of 2017 that it would create 10,000 delivery driver and in-café jobs in response to the popularity of its delivery service. High customer demand for ordering soups and sandwiches through the chain’s AI-powered digital platform led the company to decide to expand the service to 40 percent of its stores. The company said that its drivers would enjoy “daytime hours and competitive wages”.

The Marlin Steel Factory

The Marlin Steel factory in Baltimore is a classic case of automation driving innovation. When Chinese manufacturers undercut Marlin Steel’s prices for its core wire basket product line, the company was forced to pivot. Marlin Steel purchased robotic wire-forming machines and began focusing on making high-quality precision products for companies such as Boeing and General Motors. It also hired more people and increased wages, attracting workers whose diverse backgrounds complemented the computer-aided production processes around which the factory now revolves.

Boxed

When AI and robotics replaced the need for 100 fulfillment workers at Boxed’s New Jersey facility, the online grocery startup retrained and promoted them into different departments. Some of the workers became trainers teaching coworkers how to use the new fulfillment systems, while others transitioned into customer service roles. A number of former temporary workers became full-time employees and enjoyed a 13% pay increase.

These companies have made the choice to embrace technology and make it work for them and their employees. The fear of automation should not be a driving factor in the decision-making process of any company. Careful study and understanding of how to best utilize resources, including human resources, are the lifeblood of a successful business.

Are There Other Benefits of Automation?

There are multiple impacts in the use of automation across many industries.

The first is that production costs are reduced, which allows more consumers to purchase a company’s products.

The second will be the demand for skilled labor. As more robots and AI apparatuses are integrated into business, the demand for skilled workers who can operate, repair, and maintain such devices will increase.

The third is the possibility that wages will increase for the workers. If companies can make more money with the same number of workers, they can pay those workers better.

The fourth is that automation allows humans to become more innovative and spend more time being creative. If humans aren’t bogged down by routine tasks, they will find something better to do.

Finally, we may need automation.

QZ notes:

As the birthrate in many countries declines, the share of the working age population will shrink. To maintain today’s GDP, those workers will each need to be more productive than workers today, and they’ll need to improve at a faster rate than they have in the past. Even if productivity continued to improve at the same rate that it has throughout the last 50 years—within which the computer and the internet both became mainstream tools—it wouldn’t be enough of an improvement to sustain GDP. Automation technology could be the answer. According to a McKinsey analysis, it could raise global productivity by as much as 0.8% to 1.4% annually—but only if humans keep working, as well

Should We Fear A Robot Apocalypse?

While automation is becoming more commonplace, so are the opportunities for the worker to learn new skills and possibly earn a higher wage. Mundane, routine tasks will be taken over by robots, AI, and other forms of automation; this will allow workers to expand their innovation and creativity. Such opportunities will allow the job market to change and grow to fit ever changing technology.

So while the idea of increased automation may seem frightening on the surface, it actually heralds great things for the future. So bring on the bots!

How to get a billion people to work for free

How to get a billion people to work for you for free-Technology and private property.

Scott Dennis March 13, 2018

We have all heard the axiom that “knowledge is power”, when a clear view of how power is being wielded today emerges it is perhaps far more accurate to say that “data is power”. There are multi-million dollar businesses that provide data protection services, but what about the data that we freely hand over or that we are unaware that we are providing? An informed citizen needs to understand how this data is being retrieved, by whom and for what purposes. Let me start to lay out the concept of how data is retrieved with a personal story. In 2007 I was part of a group of managers who had the responsibility of hardening the security of a port facility. At regular intervals we would invite stakeholders such as the fire department, police and the local military representatives to stage a drill that introduced possible scenarios that could affect the port and we responded based on our particular role. One year we had a special group of guests from the labs at the Defense Advanced Research Projects Agency (DARPA) to observe the exercises. They explained that they were there to monitor our decisions in response to the ever worsening artificial scenarios playing out during the exercises. These Naval Intelligence researchers were early adopters to the theory that artificial intelligence was never going to reach its potential without useful data sets.

AI is dumb unless we teach it about ourselves

The kind of work that DARPA was doing that afternoon falls under a thirty year old application of technology called a decision support system (DSS). Over the decades government and the corporate world has applied these technological structures more for the facilitation of organizational processes than actual decision making. However the revolutionary scaling of how organizations can now collect data into so called knowledge warehouses has made actual decision making possible. Look at it this way, if you wanted your Artificial Intelligence to help you make decisions ten years ago then you were doing field work or surveys and keying  in the data. Now imagine that information pipeline scaled to the level of the global internet with billions of people offering information about themselves and their behaviors.

What We Share

Recently January 28th has been named data privacy day; this is an effort to raise awareness on how to protect your private data. In my opinion it is a holiday similar to Valentine’s Day, asking you to think about security but actually a commercial for the vendors supplying protection measures. It is far more important for individuals to have a sense that their information is private property and act accordingly when interacting with their own data cloud. Even when we interact with our social media we are doing some of our most vigorous sharing of data.

Researchers have been suggesting that every Facebook user (now numbering one billion people) can be seen as digital workers inputting an estimated 20 minutes a day of their own private information, liking, commenting and clicking on ads. That is more than 300 million working hours of free digital labor per day.

The take away here is that free data sets are flowing to private AI, which will compete directly with workers in the near future. Some improved measures of protection will be enacted on May 25, 2018 with the enactment of the GDPR in Europe which mission is according to their website.

“The aim of the GDPR is to protect all EU citizens from privacy and data breaches in an increasingly data-driven world that is vastly different from the time in which the 1995 directive was established.”

So far there are no equivalent measures being considered in the U.S. as of yet, but it is important to get the word out on digital privacy so that we can move toward protecting citizens from zealous technological applications.

Scott Dennis Writes for Blue Collar Think Tank
www.bluecollarthinktank.com
@bcthinktank

Robots Don’t Pay Taxes

Robots don’t pay taxes

-Scott Dennis May 15, 2017

“Winning an election is a good-news, bad news kind of thing. Okay, now you’re the Mayor. The bad news is that you’re the Mayor”. –Clint Eastwood

Where I live tells a story about how people feel about their taxes. We are north of New York City along the Hudson River and walking distance from a small village that really wants nothing to do with its larger neighbor. Our municipality of nearly 200,000 people has an ongoing problem with its budget and even gets chastised by the State Comptroller for being too optimistic with their projected revenues and not realistic enough about the cost of their appropriations. So does this mean that the Mayor and his administration don’t know how to run government, or are their other factors that we can point to as citizens? The small neighboring village I mentioned is the model for what has been happening for decades to the tax base of cities and is a hint to a larger looming challenge of technology on our economy. What our country has seen following post-war desegregation of housing and education and other civil rights victories, racial clashes and the conservative politicking against taxation generated a rapid exodus of higher-income white people from urban centers to suburban enclaves like the one walking distance from my home.  These suburbs slowly developed separate school districts and incorporated as separate towns, taking a significant tax base away from urban centers and contributing heavily to disinvestment famously from places like Detroit, Cleveland, and St. Louis but this has also been the case in our New York towns. Generally speaking the communities we live in survive by taxation revenues in the form of sales tax, real estate tax and fees for the use of city facilities. So woe to the city manager who has to decide how best to use the funds they have to make a community livable, with the best education for the children and free of pot holes, especially because their job is getting even harder with the onset of technology in major industries.

“Our technological powers increase, but the side effects and potential hazards also escalate”. Alvin Toffler

 

Technology and the Community

Imagine an opening ceremony for a new factory that has been automated for full efficiency and to minimize labor. The Mayor that is proudly cutting the ribbon should ask themselves, “will the robots be paying taxes?”.  This is not simply a modern Luddite position on technology rather a question of how we will be able to support our communities going forward.  Data on American labor over the last three decades has shown that there has been a steady rise in employee productivity but that wages have remained stagnant. The parallel to the shift of affluent citizens to suburban alcoves with manufacturing profits moving to shareholders is clear, off shore bank accounts are the new safe havens.  As workers are displaced in record numbers the most dramatic effect will be on services provided by our towns and unlike the challenges facing cities now, a technology revolution may be irreversible.

 

The table above is a 2013 snap shot of probabilities that your job will be displaced by technology in some way. I would like to add drivers (long haul, delivery, postal) to this list with a probability in the high ninety percentile with the onset of autonomous vehicles. In the graphic showing the most common profession by state (courtesy of NPR) what is illustrated clearly is how widespread the job displacement in the driver category would be;  every policy maker should be thinking of these drivers in terms of effect on their tax base. It will take a sustained effort to tell the stories of people displaced in the workplace by technology, Blue Collar Think Tank is a non-profit working to let these stories be heard and facilitate stakeholder meetings to create holistic strategies for the labor force.

www.bluecollarthinktank.com

@bcthinktank

Scott Dennis writes for the Blue Collar Think Tank.

Workers Identity in a robotic world

Workers Identity in a robotic world

By Scott Dennis Jan 18, 2017

 

 “If a man is called to be a street sweeper, he should sweep streets even as a Michelangelo painted, or Beethoven composed music or Shakespeare wrote poetry. He should sweep streets so well that all the hosts of heaven and earth will pause to say, ‘Here lived a great street sweeper who did his job well.”

“No work is insignificant. All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.” – Dr. Martin Luther King Jr.

 

Dr. King brought to light our nations struggle with racial inequality, in his many brilliant speeches he carved a narrative that helped to solidify an identity for the oppressed. If you listen closely to the logic of his discourse you find an economic model at the heart of racism. In the American south land owners intentionally created enmity between the races to frighten poor whites into accepting lower wages. The equation was simple to understand, work for pennies or we will get slaves to replace you. For the millions of workers facing obsolesce due to technology this may sound familiar.

Years later Dr. King would point out anecdotally that the southern white policemen that locked him in jail were bringing home the same pay as a black rail car operator in Chicago, the racial advantage was an illusion held onto by racists who could not face the reality of belonging to the larger multi-racial group called the working poor. As a society we have to ask ourselves if anything has changed and if the wonders of our technological advances are lifting all people up or creating a new procariat, or class of people as economically “precarious” as King faced in his time.

What is the identity of a worker?

It is important to note that a workers identity is looked at in a very different way by government and policy makers versus an individual’s own thoughts on how they relate to work. Everyone reading this has their own opinion on what work means to them ranging from a disgruntled factory worker, to a middle manager looking for inspirational leadership as well as contented academics nestled in the ivory tower. Policy and corporate decision makers see things in a different context. With the economic downturn in 2009 concerns about workers could be summed up from a passage taken from Dennis Snower’s Keil Institute study (May 2013).

“..workers can adopt either an elite or underclass identity. An elite worker has a pro-work ethic, with a low disutility of work and a high disutility from being unemployed. This gives the worker a strong incentive to take up work and thereby raises her job finding rate. Conversely, the underclass worker has an anti-work ethic, with a high disutility of work and a low disutility from being unemployed, leading to a lower job finding rate.”

Studies like these are most common when the system is seen to be broken as was the case in 2009. In the simplest terms work has always needed labor and industry makes it their business to drive the narrative to understand where the attitudes of the people are and to control them when possible. Groups like Blue Collar Think Tank are taking action by thinking through strategies for workers with changing identities in the face of technology.

All labor that uplifts humanity

As you toil in your cubicle you might not think that your work helps to uplift humanity, but it does in the practical sense of your taxes being used to improve infrastructure, provide a social safety net for those in need or your contributions to schools and the institutions of your faith. Community bonds are strengthened through friendships at the workplace and when you understand the inherit dignity of work a creative zeal can spark inspiration in even the most mundane occupation. This is why we are at a cross roads in the face of uncontrolled automation, we could suffer the erasure of the workers identity unless we take a determined and holistic approach. In 1879 Henry George anticipated this state of affairs when he wrote in Progress and Poverty:

“The fact is that the work which improves the condition of mankind, the work which extends knowledge and increases power and enriches literature and elevates thought, is not done to secure a living. It is not the work of slaves driven to their tasks either by the task, by the taskmaster, or by animal necessity. It is the work of men who somehow find a form of work that brings a security for its own sake and a state of society where want is abolished.” 

So as Dr. King famously asked where do we go from here? It starts as it did then with understanding who we are in these changing times so that the interests of humanity can be heard above the churning of technological progress. Asking not always can we do this thing but should we and what are the consequences? The new identity of the worker should echo George’s quotation to bring security for its own sake. Workers will need to be more organized in the future to get to that point and will also need to unmask those who want to divide them for their own interests so that the mistakes of the past will not be repeated.

Scott Dennis writes for www.bluecollarthinktank.com @bcthinktank

The Power of funding a cause

giving

The power of funding a cause

By Scott Dennis November 3, 2016

 

The private sector has been good to many of us, even in uncertain times most have managed to place their children into good schools and keep a roof over their head. For those who have achieved this American dream or built on the hard work of their blue collar parents an important expression of this good will is becoming a charitable donor. The ability to write off charitable donations on your taxes may make the process easy but the decision on what cause to support can be a challenge. There are many important and personal motivations for giving and most follow a trend, the five reason that capture the mind sets of the philanthropist are:

  • I want to make a difference in people’s lives
  • Supporting people I know and care about gives me satisfaction
  • I have an emotional attachment to a cause
  • I want to leave and legacy or a memorial to someone important
  • It’s the civic duty to of those who have prospered to give back

 

What are non-profits?

It is important to the potential gift giver to know that non-profits are not created without the hard work of many dedicated people. The incorporation of a 501c3 (the IRS designation of a not for profit enterprise) can be a complex and costly venture, with very little financial return for those doing the leg work. Every group regardless of size is required to communicate their message, form a board of directors that supports the mission, create a business plan, calculate budgets and execute a smart marketing strategy; sounds like a private sector business! The key difference is that a non-profit is selling ideas, not products; ideas that have the potential to become engines of profound change in society. The way to get involved is for donors to add their names to the data bases of think tanks, charities or community projects that they feel strongly about.

What should you look for in an organization?

Since valuable time is being invested in a project that will promote the donor’s interests, it is vital to get to know the leadership. Typically an executive director or development officer will work to motivate gift giving, but it is also a best practice to research who is on the board of directors. A donor should ask themselves how the board members are supporting the mission. Do they all contribute money, time and contacts? Are they at the very least experts that are driving the narrative of the non-profit? Creating a relationship with the organization means showing up at events, taking the time to meet with the leadership and providing input when needed. This level of involvement should culminate in a firm understanding of the mission as well as the practical needs of keeping the non-profit’s operations going.

The ask

If the relationship between donor and the non-profit plays out correctly the director will eventually ask for a financial contribution. This can be a difficult and awkward moment for all sides as is often the case when it comes to money. By this point the nonprofit will have done their best to analyze the donor in terms of their accessibility, affinity for the project and capacity to give. A donors past behavior will dictate the scope of the gift request, have they attended all the events, have they given consistently and are they open about their capacity to give? As a potential donor it is right to expect that the non-profit leadership have viewed them as important enough for a relationship to be cultivated over time. When a financial gift is requested a firm grasp of how donations will be used to advance the goals of the organization should be clear and operational needs transparent. Providing a donation for your cause is a constructive investment of anyone’s time and money. Whether it is fulfilling a civic duty or helping people you feel connected to, the support of a non-profit is where prosperity in America comes full circle.

Scott Dennis writes for www.bluecollarthinktank @bcthinktank

Robots and Forbidden Fruit

robotsforbidden

By Scott Dennis September 13, 2016

Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution…” –Stephen Hawking

There is a good chance that you are reading this article on a device that despite not existing just two decades ago you now find hard to live without. This technology gives you unparalleled access to a global market, a few clicks and your product is at the door in a few days or maybe a few hours; what could possibly be wrong with this level of convenience? Our culture is unique in that no group of human beings has ever had to cope with this level of social evolution brought on by technology, not even those who witnessed the dawn of the industrial revolution. Facing this reality many in the working class are instinctually asking, is the pace of change moving at the speed of progress or like a game of three card monte dealt out by sleight of hand?

A common graph used by economists when discussing the impact of automation on the working class looks very much like a fork in the road. It describes the labor force as being more productive yet receiving less wages relative to that productivity. The productivity line in the chart describes how efficiently anything coming to market is being produced, automation is key to making this output more streamlined when compared to the cost of production. The disconnect for workers is a how their take home pay and benefits do not grow and in many cases contract on average despite increasing revenues due to this improved productivity that they keep hearing about. This simple data set is the first step toward understanding what working class people in industrial societies are grappling with and how robots could be picking the forbidden fruit of human labor, their jobs.

index

Despite the massive implications of technological disruptions with the workforce and its secondary effects, the scholarly field studying this crisis is relatively small. These economists focused on working class issues are creating reliable mathematical models to understand the scope of technologies effect on labor. Leaders in the field such as Dr. Daron Acemoglu from MIT remind us that there have been many dire but incorrect predictions about technology creating widespread unemployment, beginning with Milton Keynes in 1930 and noted economic historian Robert Heilbroner in 1965.

There are many complex concepts employed in the economic research on this topic such as “Endogenous response of technology”, “Productivity Effects”, “Homotheticity” and the “Balanced growth path” (BGP) for the economy.  The concept that working class people can be most concerned with is the ability of capital to create more highly skilled jobs when automation is introduced. Many of the models do prove that technology creates jobs loss and income inequality in the short run but that in the long run equilibrium returns due to the historic habit of new more complex tasks being created for workers, the point being that humans would have an advantage over technology in these cases. These studies also suggest that external pricing forces can slow down the need for capital investment in automation. In a recent paper Dr. Acemoglu states that “Under reasonable conditions, there exists a stable balance growth path in which the two types of innovations go hand in hand.”

The mission for an initiative like the Blue Collar Think Tank is to place a spotlight on this last point, are the working class living under “reasonable conditions?”

bluecollarthinktankCanvas

The connectivity to the market place that we all enjoy through our smart devices, puts enormous logistical pressure on the supply chain to work a smoothly as possible. There is a leaning toward optimization in this sector that acts as an example and cautionary tale for many other areas where labor still has a foothold. In the ports the changes are already taking place with automated container carriers and robot trucks that move cargo around the freight yard without the help of a longshoreman. Massive warehouses hum with activity twenty four hours a day with just a skeleton crew. How about your friendly neighborhood delivery man? There are robotics teams around the country that are very close to rolling out robots to replace them, that would equate to over half a million good paying jobs when one accounts for all the companies involved including the US Postal Service.

What new positions will be opening up to create the equilibrium predicted by many economic models when entire classes of labor are forever occupied by automatons

that require no sick time or maternity leave? This time predictions of wide spread unemployment may come to fruition because of two realities that did not exist in the past. First is the imbalance between stakeholders within today’s corporations, shareholders dominate the corporate landscape, labor holds few of the cards and most of their rights as employees have been stripped to increase profit margins. Secondly is the rise of artificial intelligence (A.I.), which is the game changer in terms of the theory of equilibrium being found in the creation of complicated tasks. Algorithms with ever increasing intelligence have the ability to tip the balance between labor and capital, supplanting an ever growing spectrum of job categories.

The good news is that technology is a tool that can only be as harmful or helpful as we allow it to be. Effective solutions begin with education of the workers affected by technological change. For every corporation involved with extensive automation labor leaders need to identify the managers or committee that make the decision on capital that can lead to automation running too far ahead of new job creation. In this era we cannot afford to wait for the market to create the change needed, working class strategies must be generated and implemented by policy makers working in the interest of citizens, not just corporations.

Scott Dennis writes for bluecollarthinktank and @bcthinktank