Technology's Impact on Jobs

Skiing at Alta, Utah last week I noticed that RFID (radio frequency identification) cards have replaced traditional paper lift passes, which had to be scanned by humans like farmers counting stock.  The question that went through my mind in those winter mountains is this.  Is it better to have a simple, seamless passage through an RFID reader gate than have a (generally young) person standing in the cold doing what could be seen as boring 'mindless' work?

Of course, as most of us know, such jobs allow so-called 'ski bums' to support their passion.  And, from the resort's point of view (many ski areas still employ staff to scan tickets), the scanning transaction provides a valuable customer service interaction.  The staff member welcomes the skier to the mountain, sometimes with a smile and often nowadays with background data, including your name, which is a nice touch.  It personalises the interaction. You are no longer a stranger in a strange land.

That same week, those gathered at the World Economic Forum in Davos, Switzerland (possibly while skiing) were discussing why an economic recovery may not bring back more jobs, in large part because investment is increasingly being focused on capital rather than labor.  See, for example, the McKinsey article on, 'Why every leader should care about digitization and disruptive innovation,'  which includes this excerpt from a conversation between James Manyika, a director of McKinsey's Global Institute and Andrew McAfee, from MIT Sloan School's Center for Digital Business and the author of The Second Machine Age.  They begin talking about digitisation and carry on to discuss the impacts of technology on employment.

Disruption everywhere

"James Manyika: The reason disruptive technologies are very important to all leaders—whether they’re CEOs or policy makers—is because, for the first time, we now have technology affecting every single sector of the economy. Every sector, whether it’s retail, financial services, shipping, manufacturing, and even agriculture, now takes inputs and uses technology to drive much of what it does.

Andrew McAfee: By now we’re all familiar with digitized text, digitized audio, and digital video. One of the profoundly interesting and important things going on these days is that lots of other information is being digitized. Our social interactions are being digitized, largely thanks to all the different social networks and social media that we have. The attributes of the physical world are being digitized, thanks to all of these sensors that we have for pressure, temperature, force, stress, strain, you name it. Our whereabouts are being digitized, thanks to GPS systems and smartphones.

James Manyika: We also have other forms of digitization. Physical products and goods continue to be quite physical but are coming wrapped in data. Think about your container on a ship that’s tagged, and it turns out that even the actuarial models for how the tracking of that is valued and insurance contracts are constructed is different whether the thing is tagged and tracked versus not.

Andrew McAfee: If this encroachment really is taking place faster and more broadly than it ever has before, there are a couple of implications. There’s good news and challenging news here. The good news is that the variety and volume and quality of things that we’ll be able to consume will go up, and the prices will go down. The challenge comes from the fact that if this encroachment really is happening quicker, more broadly, and deeper than before, the phenomenon is that technology is going to race ahead, but it could leave a lot of people behind in the capacity of folks who want to offer their labor to the economy. And how we deal with that challenge and what we do about the fact that technology is racing ahead but leaving some people, potentially a lot of them, behind is one of the great challenges for our generation.

The employment challenge

James Manyika: Between the period of 2000 and 2008—2008 because that’s when the recession started, so we have a clean look—the US lost something like 5.8 million jobs in manufacturing. If you look at those jobs that we lost, only at most 20 percent of them were due to what you might call globalization, so offshoring and outsourcing. Whereas the rest of them, which is the majority, 80 percent of them, can be explained by looking at the effects of technology and the other key culprit, which is what happens to demand.

And we know that one of the things that happened in that period between 2000 and 2008 is that the demand growth for the outputs of manufacturing coming out of the US actually fell. So that was one of the big drivers for what then happened to employment. Where you had productivity growth without the demand growth, employment tends to suffer.

Andrew McAfee: There are a couple policy implications that come out pretty quickly. One is that over the longer term, we can’t rely exclusively on economic growth alone to solve all of our employment problems. Now, in the short term, economic growth is absolutely the best way to get the hiring engine kicked in again. The robots, the androids, the artificial intelligence can’t do everyone’s job yet by a long shot. So the right way in the short term to grow employment is to grow the economy. But over the longer term, it honestly feels to me like we might be in a situation where enterprises can grow and thrive and not need nearly as much labor as they’ve needed historically.

James Manyika: Certainly education will help. We know that there’s a big gap between what most economies need and what the educational training systems create to meet those needs.¹ But I would argue even that’s not enough. So, while I think it’s comfortable for policy makers—and, in fact, correct—to say, “Let’s focus on innovation and let’s focus on entrepreneurship and let’s solve education,” those are correct, but they may not be complete answers to how we tackle employment.

So think about what Uber and its like and its kin are doing. It’s making it possible for people who have cars to suddenly turn that into a potential income-generating opportunity. Think about what models and businesses like Airbnb are doing where people can then use assets that they have, like their houses or their flats, as ways to generate income. Those are just examples of ways where, if you think about it as an income-generation question as opposed to a full-time employment problem, you expand the possibilities.

Claiming the prize

Andrew McAfee: I foresee a big change coming in the way the very best organizations are making some of their key judgments, forecasts, predictions, decisions. The tough transition is going to be getting the people and the alleged experts out of the way, and teaching them to be a lot more humble and a lot more data driven.

The other very big change that’s coming is the fact that we have access—again via technology, networks, and very powerful devices—to a worldwide body of knowledge and talent and skill. And what we’re learning over and over is the truth of Joy’s Law, named for Bill Joy, one of the founders of Sun Microsystems. He said, “The smartest people work for somebody else.”

What we’re seeing is that when you can articulate the problem you’re working on or the challenge or the thing you want help with, and float it up so that the world’s community of innovators and problem solvers can work on it, you get very good results. You get them quickly and you get them from unexpected quarters. Thinking that all the expertise that you need is in-house or that you know where to go to go get the expertise or the help for the big challenge that you’re working on—that’s a really dangerous assumption."

The Economist coincidentally published the same week a cover story feature on technology's impact on jobs, including an excellent historical perspective.  See article.

As the following excerpt from that article suggests, the reduction in need for labour in a world of advancing technology is something most societies are not prepared for.

"INNOVATION, the elixir of progress, has always cost people their jobs. In the Industrial Revolution artisan weavers were swept aside by the mechanical loom. Over the past 30 years the digital revolution has displaced many of the mid-skill jobs that underpinned 20th-century middle-class life. Typists, ticket agents, bank tellers and many production-line jobs have been dispensed with, just as the weavers were.

For those, including this newspaper, who believe that technological progress has made the world a better place, such churn is a natural part of rising prosperity. Although innovation kills some jobs, it creates new and better ones, as a more productive society becomes richer and its wealthier inhabitants demand more goods and services. A hundred years ago one in three American workers was employed on a farm. Today less than 2% of them produce far more food. The millions freed from the land were not consigned to joblessness, but found better-paid work as the economy grew more sophisticated. Today the pool of secretaries has shrunk, but there are ever more computer programmers and web designers.

Optimism remains the right starting-point, but for workers the dislocating effects of technology may make themselves evident faster than its benefits. Even if new jobs and wonderful products emerge, in the short term income gaps will widen, causing huge social dislocation and perhaps even changing politics. Technology’s impact will feel like a tornado, hitting the rich world first, but eventually sweeping through poorer countries too. No government is prepared for it."

As technology brings new work opportunities for some, it also destroys jobs or at least disrupts the work of many others.  And, according to the commentaries above, there is no guarantee that a return to normal employment levels is likely in the near future.  If we think that technology is central to contemporary life, it is important to remember that work has always been tied closely to our search for meaning.  Gaining technology without losing jobs is a conundrum facing economies large and small around the globe.