38% of U.S. Jobs at Risk of Automation by 2030

Today we bring you three articles, all written within the last week, on the effect of automation on the American workforce from three different newspapers. The first two from The Los AngelesTimes and The New YorkTimes are in agreement that the effect could be devastating, and soon. The author of The Wall Street Journal article, a former hedge fund manager, argues that it will be beneficial.

By SAMANTHA MASUNGA, March 24, 2017 for The Los Angeles Times

More than a third of U.S. jobs could be at “high risk” of automation by the early 2030s, a percentage that’s greater than in Britain, Germany and Japan, according to a report released Friday.

The analysis, by accounting and consulting firm PwC, emphasized that its estimates are based on the anticipated capabilities of robotics and artificial intelligence, and that the pace and direction of technological progress are “uncertain.”

It said that in the U.S. 38% of jobs could be at risk of automation, compared with 30% in Britain, 35% in Germany and 21% in Japan.

The main reason is not that the U.S. has more jobs in sectors that are universally ripe for automation, the report says; rather, it’s that more U.S. jobs in certain sectors are potentially vulnerable than, say, British jobs in the same sectors.

For example, the report says the financial and insurance sector has much higher possibility of automation in the U.S. than in Britain. That’s because, it says, American finance workers are less educated than British ones.

While London finance employees work in international markets, their U.S. counterparts focus more on the domestic retail market, and workers “do not need to have the same educational levels,” the report said. Jobs that require less education are at higher potential risk of automation, according to the report.

Other industries that could be at high risk include hospitality and food service and transportation and storage.

Analysts have said truck driving probably will be the first form of driving in the U.S. to be fully automated, as long-range big rigs travel primarily on highways — the easiest roads to navigate without human intervention.

But robots won’t necessarily replace so many human workers. The report highlights several economic, legal and regulatory hurdles that could prevent automation, even in jobs where it would be technologically feasible.

For one, the cost of robots — including maintenance and repairs — could still be too expensive compared with human workers. And in the case of self-driving vehicles, questions remain about who is liable in an accident.

In other words, moving robots outside of a controlled environment is “still a big step,” said John Hawksworth, chief economist at PwC in Britain. . . .

Automation could end up creating some jobs, the PwC report said. Greater robotic productivity could boost the incomes of those behind the new technology, which Hawksworth said could flow into the larger economy. (Uh-huh, we’ve heard that before—something about boats and a rising tide?).

Sectors that are harder to automate, such as healthcare, could also see a rise in jobs, he said.

Robots Are Winning the Race for American Jobs

Another article, this one from The New York Times, concludes that Americans are losing jobs today and will, increasingly, in the future. See if you can spot the human worker in this photograph of a fully automated manufacturing plant.

By CLAIRE CAIN MILLER, March 28, 2017 for The New York Times

. . . The industry most affected by automation is manufacturing. For every robot per thousand workers, up to six workers lost their jobs and wages fell by as much as three-fourths of a percent, according to a new paper by the economists, Daron Acemoglu of M.I.T. and Pascual Restrepo of Boston University. It appears to be the first study to quantify large, direct, negative effects of robots.

The paper is all the more significant because the researchers, whose work is highly regarded in their field, had been more sanguine about the effect of technology on jobs. In a paper last year, they said it was likely that increased automation would create new, better jobs, so employment and wages would eventually return to their previous levels. . . .

But that paper was a conceptual exercise. The new one uses real-world data — and suggests a more pessimistic future. The researchers said they were surprised to see very little employment increase in other occupations to offset the job losses in manufacturing. That increase could still happen, they said, but for now there are large numbers of people out of work, with no clear path forward — especially blue-collar men without college degrees.

“The conclusion is that even if overall employment and wages recover, there will be losers in the process, and it’s going to take a very long time for these communities to recover,” Mr. Acemoglu said.

“If you’ve worked in Detroit for 10 years, you don’t have the skills to go into health care,” he said. “The market economy is not going to create the jobs by itself for these workers who are bearing the brunt of the change.” . . .

The paper also helps explain a mystery that has been puzzling economists: why, if machines are replacing human workers, productivity hasn’t been increasing. In manufacturing, productivity has been increasing more than elsewhere — and now we see evidence of it in the employment data, too.

The study analyzed the effect of industrial robots in local labor markets in the United States. Robots are to blame for up to 670,000 lost manufacturing jobs between 1990 and 2007, it concluded, and that number will rise because industrial robots are expected to quadruple.

The paper adds to the evidence that automation, more than other factors like trade and offshoring that President Trump campaigned on, has been the bigger long-term threat to blue-collar jobs. The researchers said the findings — “large and robust negative effects of robots on employment and wages” — remained strong even after controlling for imports, offshoring, software that displaces jobs, worker demographics and the type of industry.

Beats Rosie the Riveter, eh? Her modern-day counterpart

Robots affected both men’s and women’s jobs, the researchers found, but the effect on male employment was up to twice as big. The data doesn’t explain why, but Mr. Acemoglu had a guess: Women are more willing than men to take a pay cut to work in a lower-status field. . . .

Take Detroit, home to automakers, the biggest users of industrial robots. Employment was greatly affected. If automakers can charge less for cars because they employ fewer people, employment might increase elsewhere in the country, like at steel makers or taxi operators. Meanwhile, the people in Detroit will probably spend less at stores. Including these factors, each robot per thousand workers decreased employment by three workers and wages by 0.25 percent.

The findings fuel the debate about whether technology will help people do their jobs more efficiently and create new ones, as it has in the past, or eventually displace humans.

David Autor, a collaborator of Mr. Acemoglu’s at M.I.T., has argued that machines will complement instead of replace humans, and cannot replicate human traits like common sense and empathy. “I don’t think that this paper is the last word on its subject, but it’s an exceedingly carefully constructed and thought-provoking first word,” he said.

Mr. Restrepo said the problem might be that the new jobs created by technology are not in the places that are losing jobs, like the Rust Belt. “I still believe there will be jobs in the years to come, though probably not as many as we have today,” he said. “But the data have made me worried about the communities directly exposed to robots.”

In addition to cars, industrial robots are used most in the manufacturing of electronics, metal products, plastics and chemicals. They do not require humans to operate, and do various tasks like welding, painting and packaging. From 1993 to 2007, the United States added one new industrial robot for every thousand workers — mostly in the Midwest, South and East — and Western Europe added 1.6. . . .

The next question is whether the coming wave of technologies — like machine learning, drones and driverless cars — will have similar effects, but on many more people.

Bill Gates vs. the Robots

Here is the diametrically opposite point of view voiced by a former hedge fund manager in The Wall Street Journal. Take your choice.

Bill Gates at Peking University in Beijing, China, on March 24. PHOTO: REUTERS

By ANDY KESSLER, March 26, 2017 for The Wall Street Journal

Bill Gates, meet Ned Ludd. Ned, meet Bill.

Ludd was the 18th-century folk hero of anti-industrialists. As the possibly apocryphal story goes, in the 1770s he busted up a few stocking frames—knitting machines used to make socks and other clothing—to protest the labor-saving devices. Taking up his cause a few decades later, a band of self-described “Luddites” rebelled by smashing some of the machines that powered the Industrial Revolution.

Apparently this is the sort of behavior that would make Mr. Gates proud. Last month in an interview with the website Quartz, the Microsoft founder and richest man alive said it would be OK to tax job-killing robots. If a $50,000 worker was replaced by a robot, the government would lose income-tax revenue. Therefore, Mr. Gates suggested, the feds can make up their loss with “some type of robot tax.”

This is the dumbest idea since Messrs. Smoot and Hawley rampaged through the U.S. Capitol in 1930. It’s a shame, especially since Bill Gates is one of my heroes.

When I started working on Wall Street, I was taken into rooms with giant sheets of paper spread across huge tables. People milled about armed with rulers, pencils and X-Acto Knives, creating financial models and earnings estimates.

Spreadsheets, get it? This all disappeared quickly when VisiCalc, Lotus 1-2-3 and eventually Microsoft Excel automated the calculations. Some fine motor-skill workers and maybe a few math majors lost jobs, but hundreds of thousands more were hired to model the world. Should we have taxed software because it killed jobs? Put levies on spell checkers because copy editors are out of work?

Mr. Gates killed as many jobs as anyone: secretaries, typesetters, tax accountants—the list doesn’t end. It’s almost indiscriminate destruction. But he’s my hero because he made the world productive, rolling over mundane and often grueling jobs with automation. The American Dream is not sorting airline tickets, setting type or counting $20 bills. Better jobs emerged.

Mr. Gates may be worth $86 billion—who’s counting?—but the rest of the world made multiples of his fortune using his tools. Society as a whole is better off. In August 1981, when Microsoft’s operating system first began to ship, U.S. employment stood at 91 million jobs. The economy has since added 53 million jobs, outpacing the rate of population growth.

Even better, the Third World is rising out of poverty because of improved logistics from personal computers and servers. This has dramatically lowered the cost of basic food, energy and health care. None of this happens without productive tools—doing more with less.

What’s most disturbing is that the Luddites never totally went away. How many times have we been subject to proposals that would tax progress? ObamaCare’s regulations froze the medical industry. Its 2.3% medical-device tax was even worse, discouraging investment in one of the few innovative health-care sectors. Mileage standards on automobiles were a waste of resources contributing to the moronic Detroit bailout in 2009. Even a carbon tax is Ludd-like, raising the cost of energy to slow its consumption.

There is a murmuring movement out of Europe known as “degrowth.” If this sounds to you like a cabal of cave dwellers, you’re not that far off. Degrowth Week in Budapest last summer featured enchanting sessions like this one: “Popular competence building against the Technocracy.” Channeling Ludd, industrial insurgents and sustainability samurais want to keep things the way they are, like the eco-protesters at Standing Rock. The site degrowth.org is clear about the movement’s unproductive goals: Consume less and share more.

OK, but do you want to give up Google Maps, Snapchat and future innovations? Pry them out of my cold dead thumbs. Surely Mr. Gates knows that his charitable foundation’s efforts to eradicate malaria and other diseases require a lot of productive capital and hard work. I can’t picture him clamoring to tax robots that lower the cost of malaria drugs or mosquito nets. That kind of tax would kill off the next wave of disease-killing productivity.

I don’t think Mr. Gates wants to be the poster boy for the degrowth movement. He knows how hard progress is. After PCs, Microsoft missed the start of every subsequent technology trend: browsers, video streaming, search, smartphones and cloud computing. Today the company is playing catchup with neural computing, which drives image recognition and other robotic cognitive skills. This type of innovation, even if it destroys jobs near-term, needs to be nurtured and encouraged. Burden progress with taxes, and degrowth is what you’ll get.

 Mr. Kessler, a former hedge-fund manager, is the author of “Eat People” (Portfolio, 2011).

 

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