mac web design software

TECHNOLOGY AND THE LABOR MARKET

    Technology development is growing at a very fast pace. Its application into the means of production is making the processes more efficient and more productive. But at the same time, it is also bringing fears of negative impacts for people due to the potential of technology to replace human labor. For example, Carl Benedikt Frey and Michael Osborne, researchers from the University of Oxford Martin School, state that 47 percent of the US workforce is at risk of automation in the future (Frey and Osborne, 2013). Developing countries are even more susceptible to automation than high income countries like the US. You can see in the chart below, countries like Ethiopia could reach up to 85% susceptibility to computerization of the labor market. Similarly, China has high susceptibility of 77%, and India is at 69%.


    One of the reasons that countries of the developing world  have higher susceptibility to automation is that cheap labor is still abundant in these countries. However, once the price of labor increases, firms are likely to revert to automation to compensate for the increase in labor costs. This is something that will not only happen in the developing world, but also in high income countries like the US. We can recall, for example, some reports from the Wall Street Journal about the reaction of some fast food chains and retailers to the demands of an increase of the federal minimum wage to $15 an hour. Companies like McDonalds, Wendys and Walmart are looking into automation to balance the future increase in labor costs. Ordering a Big Mac through a tablet, instead of a human being through the counter, might be the norm sooner than later. 

The fears of machines replacing human labor are not a new phenomenon. Dean Baker, founder economist from the Center of Economic and Policy Research (CERP), refreshes our memory by pointing out that this conversation was a trend during the fifties and sixties, and reports were written about the best way to react in case of mass unemployment caused by robots (Baker, 2014). In the United States, for example, a report called “Unemployment and the Impact of Automation” was issued by the House of Representatives Committee on Labor and Education in 1961 (Impact of Automation on Employment, 1961). The trend of technological improvements have continued since then, however, no mass unemployment has occurred. Why should we be worried now? What is different this time?

    Citi Group, in conjunction with the University of Oxford Martin School, issued a report called “Technology At Work”, which is part of their Global Perspectives & Solutions (GPS) series (Frey and Osborne, 2015). In this report, they suggest that the impact of technology on the economy (and labor specifically) is different now because of three main reasons:

  1. The pace of change in technology has accelerated
  2. The scope of the technological change has increased
  3. Unlike innovations in the past, the benefits of technological change are not being widely shared, meaning, productivity and real wages are no longer growing at the same pace. Productivity has kept increasing but real wages have flattened, and inequality has increased.

    It is really not difficult to see how technology is changing the labor market. Here are just some examples of what technology can accomplish today:


Meet the pizza vending machine

The 3D printer that prints (or builds) houses in 20 hours

Amazon's drone delivery "Primer Air". What are Fedex and UPS going to do?

Google's driverless car. Here is an extensive review by Forbes Magazine about the Google Driverless car and its economic, environmental, legal and societal impacts.

Warehouse Automated moving carts

Meet Baxter, the robot that can learn to perform any task and that costs $3.40/hr

    As one can see, the list includes tasks that one could have never imagined could be accomplished by a computer or machine. What will happen with the thousands of UPS and FedEx drivers (and why not, USPS drivers as well) when driverless trucks (or drones) deliver the packages to our front door? What will happen with the amount of journalists needed to write articles when software like Narrative Science get better (and cheaper)? 


    The Citi report, however, suggests that there are some obstacles that technology has not been able to solve, such as Creative intelligence, social intelligence, and perception and manipulation. These are three potential bottlenecks to expanding the scope of automation (Frey and Osborne, 2013). Will developments in Artificial Intelligence take care of these particular scenarios? Machines have entered into realms that require attention to details and vast amounts of data processing that only our brains could do. Based on the accomplishments that we have seen with technology, it is hard to give a NO for an answer. 

    Technology has always eliminated jobs and created new ones. The conventional thinking is that as workers are displaced by machines, workers move to work for other industries. It would sound something like this: 

“For example, back in the day, the elevator man was displaced by the automated elevator that didn’t require an operator anymore. He then went to look for another job, let’s say, the post office.”

However, we face a situation where that argument might no longer be valid for two main reasons:

  1. The jobs that are the most susceptible to be replaced by automation are the routine, low to middle skilled jobs, with relatively structured tasks. Additionally, the job creation aspect of the new technology is mostly for moderate to high level skills, related to programming of the software of that machine, for example, or related to repairing it or research and development of new features. In essence, technology removes the need for many low skill workers, and creates the need for very few moderate to high skilled workers.
  2. Technology is evolving and replacing labor at a faster pace, increasing its spectrum and covering many industries at the same time. Imagine in a not-so-distant future, we see a truck driver that loses his job due to implementation of driverless trucks (or perhaps, he does not lose his job but sees his income go down due to decreased demand for human drivers). He then tries to find a job somewhere else, at a shipping warehouse, but then he sees that the warehouse has implemented an automated system for packing and shipping (like the one we saw in the example above) and, even though the warehouse is actually hiring human labor, the amount of positions available is very low, since they don’t need that many workers anymore. This scenario will translate into a higher competition among applicants for those few warehouse jobs, which will also translate into lower wages. 

    Therefore, even though human labor will still be needed to some extent, the amount of human labor required is going to decrease, bringing negative effects on wages, job security and availability of jobs openings. 

    Researchers Erik Brynjolfsson and Andrew McAfee from MIT wrote a book called "Race Against the Machine", which argue that technological unemployment is a real issue and agree that technology is developing at a faster pace than before, which is good for productivity, but bad for workers (Brynjolfsson and McAfee, 2011). In an interview with the TV show “60 Minutes” they stated that robotics and automation are one of the reasons why we have had a jobless recovery in the United States after the Great Recession. They mention also that Chinese workers are not exempt from the effects of technology and its impact in the labor force. US and European companies are bringing manufacturing facilities back to the US and Europe but not by hiring many workers. Instead, these firms are implementing technology and automated processes, and hiring a few workers to manage it. Western firms have a lot to gain with this move, with China being the biggest loser. But even in mainland China, manufacturing facilities have embraced automation, which will negatively impact Chinese workers. 

    Is technology a problem, then? Dean Baker, for example, points out that technology is not what causes the disruption, nor productivity increases. There is not an intrinsic characteristic of technology that brings the negative effects. We can see, during the Golden Age (1947-1973), productivity growth translated into higher wages and no mass unemployment occurred at this time. Baker suggests that the real problem is the failure (or absence) of policies and structures that deal with technology implementations what needs to be address so we can work together “with” technology instead of working against it (Baker, 2014).    

    The third point that makes this time different than other ones is the fact that the gains in productivity from technology have not been shared with the population. As we can see in the following chart from the Economic Policy Institute, workers have kept increasing output, which translated into growth in wages, but then the wages have flattened since 1973, with very minimum growth in real wages (if any) (Mishel, et. al, 2015). 

    Where have all the gains from productivity increases gone? The following chart suggests that the gains have gone to increase the income of the top 1% of the population. 

    One of the ways to revert this scenario is by implementing work-time reductions. If technology is increasing productivity and enabling us to produce what we need to produce in a shorter period of time, then let’s use that increase in productivity to reduce the amount of time we spend at work, instead of using it to work more and produce more output. 


    If wages would have kept pace with productivity, workers would have been able to choose whether they wanted to take that increase in higher income or more leisure. It would be up to each worker to decide. Of course, some of them would choose more income, but others would choose leisure. Since their income has kept up with inflation and they are able to afford paying their bills and treat themselves every once in a while without putting more hours of labor, it will send the signal to the other group that it is not necessary to increase consumption to achieve happiness. This scenario will begin to change the mentality our society has in regard to overconsumption and overproduction of goods. It all starts with reducing the work-day to a new standard. 


REFERENCES

SHARE THIS PAGE!

FACEBOOK COMMENTS WILL BE SHOWN ONLY WHEN YOUR SITE IS ONLINE