The Time Crucible, Perception of risk in the age of Corona Virus
Scott Dennis 10 April 2020
Why do we pay our rent or mortgage at the beginning of the month? How long will it be necessary to self-quarantine during the corona virus pandemic? When will experts be able to provide the public with a vaccine for covid-19? Will the number of dead and infected begin to reduce once the curve is flattened over the next few weeks?
As I write the world is in the grip of a global pandemic related to a novel virus, but perhaps even more essentially- a worldwide panic about time and uncertainty. As this article moves forward with age and is looked back upon, the major question that will be answered is what trade-offs society was willing to make to relieve the anxiety around uncertainty and what changes took place during what I would call the “time crucible”, where waiting for all of us is the daily focus. For too many people in society there is no time to philosophize on this question because as the popular expression says “there ain’t nothing going on but the rent” and this has been an ongoing problem for most of their lives. Now the circle has widened and a much larger group of citizens are putting in jobless claims and are asking themselves if this cycle of work and money attached to time is really sustainable?
The confusion with our present system can be demonstrated in any typical New York apartment building with a mix of rent stabilized and market rate rents. One individual who has lived in the building for twenty years can be paying $500 a month; the new neighbor next door can be paying $3000 a month for the same size flat but feel like they are getting a deal in comparison to other rental prices in the area. It is common for a management company in our example to offer the twenty year resident one hundred thousand dollars to move out of the building because they know in time they will make a return on the new market value of rent. Perhaps the building owner is shielded by all of this volatility because the mortgage on the building was paid off thirty years ago. Everyone in this story has their own perspective of time and its effect on value. Suddenly during the pandemic period everyone in our apartment building scenario is now in limbo because the activity of society that greased these gears of simple capitalism has stopped and the time crucible has formed around all the parties involved. I could write ten thousand words on the history of rent control in New York during the 20th century, it is a bitter tale of legislative struggles against unfettered rentier capitalism. Basically all blue ribbon committees that have studied rent in densely populated cities have found the obvious, when real estate rent is not controlled; the prices will skyrocket to the benefit of the few over the many. In normal times one might throw their hands up in resignation of this fact but I submit that during this pandemic there will be more scrutiny by the middle class and the weighing of risk in the economy may change.
Fairly soon unique social trade-offs will have to be made, basically society will have to venture out with some new protocols but without a proven solution to the virus. Some of us will continue to stay inside until they see our friends and family (masks on) at the park or restaurant and the urge will be too much not to join in. Already there are images of people in China who were hit early on by the virus out and about. There will still be individuals that get sick and die but the media will move on to the next thing to worry about, getting the economy working again. Here is the take away however; people will begin to realize that this tight rope walk has been the same one they have been on for many years. Families in America have been one major health crisis away from disaster for a generation or more. The rationale for the time and money system that prevails on us now begins with perception management, the idea that financial capital is the heart of all risk and then the enforcement of financial instruments like debt and rent payments must be upheld to make the risk profitable. A by-product of rejoining the rat race may well be the awakening of the average citizen to their own risk and reward scenario. Their own health and the ability to produce work may begin to be more clearly viewed and valued as their own source of capital at least as important as an investor’s equity. Only time will tell.
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
The Future of Work|| Robots, AI, and Automation
Author Darrell M. West
A Review by Scott Dennis
If you have never considered the impact of automation on the workplace, this quote from a top technology CEO provides an opening salvo from Darrell West’s “The future of work” and should get your attention. “We will soon launch a robot that can perform tasks currently done by people with a high school education or less. The robot will only cost $20,000.00”. Throughout the reading of this important book I refer back to this quote and meditate on my trepidation for friends and fellow citizens that fall into this category.
The future of work is an insightful analysis of the precarious state that our society finds itself in. West describes industries’ heedless adoption of automation technology balanced by everyday workers that find themselves with little or no voice about change impacting their livelihoods. At the fulcrum are policy makers that are under informed about the impact of technology on their constituents. Politicians are also faced with the conundrum of accepting corporate funding from companies that will eventually pressure social programs by putting their citizens out of work.
The chapters of the book are intuitively ordered into the categories of “accelerating innovation”, “economic and social impact” and “an action plan” so that a logical and nuanced understanding of the technological challenge to society can be understood by any reader. Importantly possible strategies to avoid social catastrophe are offered for policy makers and activists alike to consider. In “accelerating innovation” West takes the reader on a tour of the technological advances that have infiltrated our daily lives. These advances have made our lives easier in many ways, robots that can perform dangerous or monotonous tasks, machine learning breakthroughs that have evolved into our faithful personal assistants or even something more intimate. Imagine an autonomous vehicle that could safely drive you and your children to appointed destinations in the morning and perhaps make some money for you as a driverless taxi when you are not using it. Autonomous driving and many other innovations discussed in the book are only possible through a chain of technologies being controlled by artificial technology or “AI”. Advances in AI are akin to a modern day space race with enormous corporate and national budgets employed to keep ahead of the curve. West quotes a 2017 statement from China’s state council to “build a domestic AI industry worth almost $150 billion by 2030”. The key take away from this discussion of deep learning machines is what kind of data sets are we providing AI and can ethics truly be programmed into what are essentially electronic brains? The author wisely advocates for a policy of transparency and a vigilance regarding the decisions humans are making during this nascent moment in the history of robotics.
“We will soon launch a robot that can perform tasks currently done by people with a high school education or less..”
The section on Economic and Social Impact opens with the utopic musings of author Edward Bellamy, in his vision of the 21st century automation has led to shortened work weeks and happy citizens who can spend their leisure time mentoring the young. The betterment of themselves and their community has become their focal point in life because their basic needs of housing, food and health care have been met. Here West takes the positive view suggesting that despite the fact that we are in a time where health benefits and secure careers are a more distant reality for workers that it takes a societal change about the very nature of work to shift to a more equitable economy. The shared or collaborative economy is defined by services exchanged peer-to peer, usually through an electronic platform, the major example being Uber drivers. Employees enjoy time flexibility and a certain amount of autonomy but give up the certainty of the health care support system. In order for these models to be sustainable West argues there will have to be unionization or at the very least agreed upon minimums in remunerations for these “new collar workers”. There are now millions of Americans joining in this type of work, popularly known as the “gig” economy. The future of work does a good job of introducing the reader to a host of models that could help restore the traditional benefits arrangement of full employment, the key concept to all of them being the notion of portability of benefits. The idea is laid out this way, since corporations are moving towards limited contracts workers then benefits such as medical leave and retirement should move with the employee instead of the employer; this creates a new social contract between company and worker. Regardless of which scheme is adopted the most heated area of debate is who will pay to support this shift in the economy? Assorted tax proposals are discussed within this book with one common conclusion, namely that the wealthy will have to give up something to help those displaced. Reading between the lines here the reader must ask themselves, who is actually benefiting from cutting back workers and technological efficiencies? In our lifetimes have we not seen the focus of business move from rank and file workers to the shareholder? Whatever the outcome it is clear that working citizens will have to leverage the power of democratic and educational institutions to regain their seat at the table of our shifting economy.
In the section “Action Plan” West asks if our political system is up to the challenge of structural change, even a casual observer of the present state of deadlock in the beltway the answer seems dubious. Unlike political struggles in the past however inaction concerning displacement of workers due to automation will increase the distrust of democratic institutions West agues. Anyone experiencing the tumults of the twenty four hour news cycle would have to agree. The book draws on some of the best economic historians to outline a fascinating new legal structure referred to as “Republic 2.0” where the various initiatives for change could have a chance to flourish. The basic understanding is that politics cannot be separated from economy and that even the amending of the U.S. constitution to reflect a people first attitude in the new economy must be considered. The future of work is required reading for anyone concerned about their place in the future labor force, once read it should serve as a guide for equitable change for activists and policy makers alike.
Mr. Darrell M. West is Vice President of the governance program at the Brooking Institute
Scott Dennis is the Executive Director of the Blue Collar Think Tank @bcthinktank
Budgeting for Fraud-A China Hustle Review- Scott Dennis April 2018
“Greed is the lack of confidence of one’s own ability to create.” V. Bonta
The documentary China Hustle is asking an important question: is fraud an essential part of capitalism and if not who will enforce the rules? Normal working people continue to ask this question in the light of the 2008 recession, stories of offshore accounts for the wealthy and almost monthly fines issued to bad actors within the American financial system such as Wells Fargo who may in fact consider fines for fraudulent behavior as the cost of business. It is a story that needs to be told because American workers presently have pension funds investing in Chinese assets that may well be fraudulent and ultimately worthless, hurting Main Street as well as Wall Street.
The film begins at the intersection of catastrophic losses during the great recession and the allure of China as a savior for investors looking to rebound. All of the key figures in the film are from the financial sector and the viewer can imagine how much doubt they must have had about the financial system as the great recession unfolded and how eager everyone was to look the other way at the panacea of earnings from Chinese companies. The way this manifested itself is through reverse mergers, the film gives a good overview of this legal loophole that was used to merge small Chinese companies with American shell companies with the intent of avoiding scrutiny on their way to being traded on U.S. exchanges. China Hustle claims that nearly 80% of Chinese companies being invested in by everyday people are reverse mergers and viewers will credit the filmmakers to alert us to this fact, it’s helpful for regular investors to look into these types of mergers as part of their own due diligence.
The filmmakers make an argument that Chinese and U.S. markets have a inherit problem working together that is cultural at its core. The Chinese business climate they claim is relationship based to the point of being feudal a reflection of a weak legal system. Although the viewer may be aghast at the willingness of Chinese companies to defraud American investors, it should be noted that China’s foray into the free market is still in its infancy. That said the ire should be saved for the lack of government oversight of these types of investments by SEC and the Congress. The most effective cinematic device is when director Jed Rothstein lingers on the faces in the interviews, they all look a little lost and disgusted by the situation. One of the investors that raised the alarm on China was Dan David; we see his frustration cataloged in the film as he attempts to get Washington’s attention regarding the dangerous exposure the American economy has to Chinese investments. The film is worth seeing for average people in order to remind them to do some homework when it comes to foreign investment, because the more opaque the opportunity is the more serious the risk.
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
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 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.
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.
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 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
The McKinsey Global Institute has published a sweeping overview of the looming effects of technology on the global workforce. The 160 page report is a well-researched and honest attempt to predict the future of our relationship with technology. We say relationship because as the report dives deeper into the comprehensive ways that technology envelops our lives, the question is not merely about “robots taking our jobs” but rather more like a landscape where we need to make many compromises if this marriage it going to work out. We can forgive McKinsey’s researchers for being overly optimistic describing their data in this way “the results reveal a rich mosaic of potential shifts in occupations in the years ahead…” a quote that could be taken straight out of a Human Resources handbook on employee termination. It helps to have a positive spin when writing about this issue because things could go very badly for us, but they are not fait accompli.
The Blue Collar Think Tank promotes the holistic introduction of technology into the work force and we agree with the McKinsey report that the front lines of a successful transition lay with employers and also the way the employees see the very idea of work. We would advise an additional component to this which would be increasing workers control over their workplace. The McKinsey report points out that the introduction of new technology can be expensive and time consuming, suggesting that employers may even decide that automation doesn’t make economic sense. The conundrum of rising productivity resulting conversely in flat wages in America suggests otherwise; corporate managers seem to believe that jumping on the tech train is inevitable and they collude with shareholders against workers on these decisions. The labor force needs to have more of a say in IT policy that will adversely affect their paychecks, sweeping reform of corporate by-laws will be required for this to work, perhaps with a requirement for members of unions to be equal equity partners.
The McKinsey researchers are quick to point out that they could be underestimating the negative impacts of automation in the workplace noting that policy makers may be slow to respond to the challenge, that workers will not have replacement jobs quickly at the ready or the ability to gain new skills which will create a downward pressure on wages. We believe that the epicenter for the political change needed to address these issues will be in mayor’s offices nationwide. Who doesn’t know a grade school teacher who is forced to buy her own supplies for students because the district is perpetually underfunded? With a conservative estimate of 15% of the workforce displaced a massive strain on tax revenues on already crumbling municipalities will bring the problem to a head. This will eventually pit policy makers against employers that are overzealous with automation, because after all robots don’t pay taxes.
Please read McKinsey’s full report here: https://tinyurl.com/ydhgaz8l
Scott Dennis Writes for Blue Collar Think Tank @bcthinktank
“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.
It is early days in the world of block chain technology, so why worry about its effect on jobs? If you buy into the hype that is being dealt from bit coin fueled startups all the way to IBM’s New York headquarters then you would believe that the impact of blockchain will be no less as important as the internet. The internet is the world’s greatest printing press, disseminating information globally with limits however in its ability to trade items of value in a secure way. A new way of trading is essentially the promise of blockchain, employing the same technology that makes crypto currency detached from the usual gate keepers of money, developers imagined an open ledger where business transactions are ultra-transparent with an incorruptible digital trail. With blockchain the only element missing is the kind of trust that traditional banks currently enjoy, which advocates hope will come over time.
Will jobs be lost?
If champions of blockchain compare it so closely to the internet then in may be helpful to analyze its future impact on the job market by asking “has the internet been a job creator or destroyer?” As of this writing Snap Inc. a company that lives online is having its IPO rolled out and it will be put up on the bookshelf of e-businesses throwing off billions of dollars on paper. Despite the high profile earnings of similar companies and their millions of users the jury is still out on how the internet has affected workers. The Economic World Forum has this to say in regards to internet effect on employment:
“According to calculations, current trends could lead to a net employment impact of more than 5.1 million jobs lost to disruptive labour market changes over the period 2015–2020, with a total loss of 7.1 million jobs—two thirds of which are concentrated in the Office and Administrative job family—and a total gain of 2 million jobs, in several smaller job families.”
On the other hand McKinsey & Company has leveraged its resources to come up with an alternative perspective:
“The Internet’s impact on global growth is rising rapidly. The Internet accounted for 21 percent of GDP growth over the last five years among the developed countries MGI studied, a sharp acceleration from the 10 percent contribution over 15 years. Most of the economic value created by the Internet falls outside of the technology sector, with 75 percent of the benefits captured by companies in more traditional industries. The Internet is also a catalyst for job creation. Among 4,800 small and medium-size enterprises surveyed, the Internet created 2.6 jobs for each lost to technology-related efficiencies.”
Why the confusion?
Analysts can come up with very different perspectives when asking questions about new technology because jobs need to be seen as different labor families, grouped into clerical, industrial, managerial for example. Technologies like blockchain will mean different things to different people or labor families. What we can say for sure is that blockchain has some important goals to improve market transactions, if you are working as an intermediary along a logistics, trade or other commercial chain the target is squarely on your back. This is how blockchain offers added value fiscally, by blowing away an assortment of gate keepers that are seen as expensive and potentially unreliable. The near term question will be if the assurances of security and transparency are enough of a tradeoff to cast off many traditional jobs, only time will tell.