Labor Day, a time to reflect on work present and future. The signs are here that robots and artificial intelligence will soon eliminate many jobs. But that’s not a new Labor Day story. Machines have been displacing human workers since the middle of the 20th century. This is the Age of Intelligent Machines. Work performed by professionals… lawyers, accountants, software developers, researchers, doctors, and highly paid positions… can be replaced by machines. Will 21st-century workers have anything left to do? Absolutely! Technology will not wipe out work, but it will transform the way we work!
Consider the 40 hour work week. In the early 20th century, American’s worked 60, 70 or more hours every week. After years of debate, Congress finally passed legislation for a 40 hour work week in 1940. The “40-hour revolution” was only possible because factories and farms had become dramatically more productive. The “dumb machines” of the last century made humans more productive, and that expanded the economy to a point where most workers could reduce their work hours. If technology drove the productivity that reduced the work week to 40 hours, shouldn’t the “intelligent machines” of the 21st century reduce the work week to… 30 hours?
Does that seem too optimistic? We’re not supposed to get “something for nothing”, but consider how productivity works. From the middle to the end of the 20th century, America indisputably had the most productive workforce in the world. American workers were undoubtedly well educated and trained, but the technology of American factories was head and shoulders above the rest of the world. According to Peter Drucker, an icon of 20th-century management, during the 20th-century productivity of industrial and agricultural workers increased 50 times.
The “dumb technology” of the 20th century made workers more productive, but these machines still needed workers to function. Machines make workers productive. When the financial books were closed at the end of the year, productivity and profitability usually rose, and unions and factory owners negotiated over how much of the profits should be shared with workers. Workers and unions were often unhappy with the size of their share, but they got a something and some acknowledgment that it takes skilled and dedicated workers to make a firm successful.
The “smart technology” of the 21st century will create even greater productivity, and in every field… just factories! And smart machines CAN run themselves. More jobs than ever will be more completely replaced. For the first time in history, a “worker” might mean a machine rather than a human being. While productivity (and profits) have skyrocketed in recent years, worker salaries have remained flat.
Improvements in productivity and profitability are no longer attributed to the workforce. Instead, it is investments… new products, new factories, automation, offshoring… that are made by executives and managers that are seen as the source of new profits. Not coincidentally, executive compensation in corporations is rising, but compensation for “worker” positions is falling. If productivity rises sufficiently in a modern corporation, it is more likely that workers will be laid off rather than given a raise.
This is the negative side of productivity. This is what we’ve been living with for the last 30 years. However, there is a positive side. Corporations replace people with machines to reduce costs. When a corporation replaces a human worker with a machine, the machine is cheaper and lowers the cost of the product. As more work is performed by robots, more products will cost less. A lot less.
Lets look at real-world examples. A $99 flash drive costs 1,000 times less per than a decade ago. That’s pretty close to free storage. This doesn’t just apply to electronics. The fees charged by financial firms have been dropping since the 1990’s. As more technology was adopted by Wall Street, fees fell. Financial firms now offer funds (that are almost entirely run by computers) with absolutely zero fees. This is the Wall Street equivalent of “free” digital storage. More fee-less funds and other financial services are on the way. Whichever products and services that make the greatest use of technology will win the race to a zero fee future.
Technology is about to be everywhere, and everything is about to become a lot cheaper or even free. If everything is cheap, we won’t need as much much money (or work) to pay for our “stuff”. Likewise, if corporations are also making much higher profits, we can add a “robot tax” to pay for the transition from a 40 hour to a 30 hour work week. If productivity rises far faster than we can possibly imagine, displacing even more workers, then it would create far greater productivity which merely accelerates the reduction in work hours. Instead of shortening the work week workers could get more vacations time, more holidays, more sick leave, universal maternity and paternity leave, and so on.
We are living through challenging times as we transition from the old world of work to the new world of work. But the future is still bright! We just need to make sure that we see our upcoming opportunities and use them… Happy Labor Day everyone!