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 In many ways, people have been replaced by machines in the manufacturing, retail, restaurant, and corporate settings.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!

McKinsey Report on Tech a Wake Up Call

By Scott Dennis

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

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.

Humanity 2.0

humanity-2-0

Humanity 2.0 “Let the Robot be the couch potato: Keep Your Job & Expand Your Knowledge

“We live in a society absolutely dependent on science and technology but we have cleverly arranged things so that almost nobody understands science and technology. That’s a clear prescription for disaster.” Carl Sagan

By Scott Dennis October 18, 2016

How did you find yourself watching pharmaceutical commercials during the middle of the work week? The reason is that you are out of work and how to respond to this fact can be the toughest road that you ever traveled. But let’s not be so self-absorbed, what if the delivery man and the postal worker or the taxi driver all suddenly found themselves on the couch watching television with you, unemployed and disturbed by the multiple side effects of a new prostate drug? Harry Truman once said that “It’s a recession when your neighbor loses his job, it’s a depression when you lose yours” there is a radical change coming to our job market and ironically it is due to our own ingenuity.

Anyone reading this knows that technology has changed the workplace dramatically over the last thirty years and often for the better. However it is time for the human species to reflect on the decisions we make about how technology is applied and for whose benefit. Breakthroughs in Artificial Intelligence (AI) also puts pressures on us to make decisions about the role robotics will play in our lives before AI makes the decisions for us. If that sounds like a stretch consider how far new algorithms used by machines have come, they are now paired with annotated data sets that were unimaginable just a few years ago. That is to say the algorithm gives the technology rules on how to think and learn, but the amount of information in the cloud or from google provides virtually unlimited substance for learning.  This is why we have seen Watson become the Jeopardy! Champion or Deep Blue defeating the World Chess master Garry Kasparov.

In the short term this is a problem for labor but in the long run professional managers will also be greatly affected. Freshly minted MBA’s need to be aware that they will also have skin in this game of technology adversely affecting jobs. Experts in the field of labor history point out that in a rational market new jobs tend to be created with the churn of advancements in industry, however we in the labor market need to leverage political policy and labor law in case AI creates a distinctly “irrational” economy. Outlined here are a few ideas on how to avoid an increase in inequality and joblessness in our communities.

Understand there is a problem. Organizations like Blue Collar Think Tank and other nonprofits are laying out the issues for citizens to understand in a clear way, without the technical or legal jargon to confuse the issue.

Make corporations accountable. It can feel that decisions made to optimize or digitize work processes are made in a vacuum or behind closed doors. Publically traded companies should be compelled to have 51% of their shares held by an employees, through a fund or other legal frame work. With this scenario new capital expenditures in technology that will result in layoffs can be made with all stakeholders involved.

Buy in from the tech sector. Some of our greatest minds are makers in the very sector where these challenges to labor are emanating from. In the race to help humanity they may very well harm it. A good lesson can be learned from another cutting edge field, DNA genetics. What researchers have realized is that despite having the tools to manipulate our very genetic code they cannot come to agreement on what a “normal” healthy person should be. It’s the same for technology, the mantra should not always be “can we do it”, but perhaps “should we do it”.

Merge Human Resources and IT in the workplace. Information technology can be a distinctly inhuman arm of any company. This is ultimately what Carl Sagan was referring to when he mentioned “the clever arrangement where nobody understands technology”. In the same way HR stresses ethics in the workplace, technology that is used by employees need to come out of the server closet so that everyone effected by it understands it. This needs be a new workplace best practice as workers are influenced as much by IT as they are ethical concerns on the job.

Finally when thinking about these challenges it is helpful to maximize what is uniquely human for our future economy. Think about the power of a great orator to summon up emotions. Team work amongst co-workers that help communities achieve goals or entirely human motivations like the proper raising of our children. In the final analysis we may  realize that our technology is our most human trait after all.

Scott Dennis writes for www.bluecollarthinktank.com @bcthinktank contact@bluecollarthinktank.com

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