In the next couple of decades, technology will eliminate a lot of employment, as much as 40 to 60 percent of all jobs. Yet, mainstream media also tells us that unemployment is at a new low, and many industries cannot find enough workers with the right education. In construction, the lack of skilled workers has created a shortage of new homes. That doesn’t sound like employment Armageddon is just around the corner. Unless you understand the Automation Cycle.
The automation cycle goes something like this. First, we have a great economy and business expansion. Individual corporations struggle to meet demand and quickly run into constraints… not enough qualified workers, rising costs, lack of space for workers, higher risk for new staff (“last hired” is first terminated in a downturn, often with an expensive termination “package”). Managers try to supplement their staff with temp workers, new software, automation, etc. When that effort runs out of steam, managers experiment with outsourcing (domestically and offshore) and automation that replaces staff they cannot hire.
When the economy cools off, and demand falls, and the staff is terminated. Now, someone notices automation allows even deeper cuts to staff, and further cost reductions. This is how the automation cycle has worked since the 1970’s. Today, however, automation is smarter and more flexible. New rounds of automation are bigger, they dig deeper into more types of jobs, and can be successful faster. The automation cycle is now a never stopping cycle, in good and bad economies. When technology is introduced into a new business area it is usually to assist existing workers. But in every shorter time, technology designed to assist soon competes with human workers. It may take time, but technology ALWAYS takes over.
Old tech focused on physical work, like building a car. New tech focuses on learning and thinking, like driving a car. Artificial Intelligence (AI) is moving out of the laboratory and entering the “real world”, threatening millions of jobs. In the transportation industry… truck drivers, UPS and mail carriers, bus drivers, taxis… are expected to be replaced by self-driving vehicles. At the margins… on private logging roads, around mines, in seaports… robots already perform these functions. The shortage of qualified drivers (there is a shortfall of 150,000 truck drivers) will accelerate automation of 3 million driving jobs. And the 7 million construction jobs? New robots are just arriving on construction sites. In just a few years, most manual labor jobs will be performed by robots.
Doctors, lawyers, accountants, financial experts, programmers, professors, and other “knowledge” jobs have been targeted for replacement by AIs. Many of us use software to file our income tax, which replaced thousands of accounting jobs. High paying Wall Street jobs… choosing stock for an investment portfolio and writing stock research… are being taken over by AIs. How good are AIs? AI managed funds typically outperform those managed by humans, and charge lower fees. Replacement by AIs on Wall Street will accelerate. New regulations in 2018 have eliminated tradition fees, making human workers too expensive for a growing number of positions.
America will still need knowledge workers, but only the most knowledgeable. Artificial intelligence is taking over basic knowledge work that is typically done by humans with bachelors (34% of 25-29 year olds) and masters degrees (8%). In the next few years, a graduate degree or even a Ph.D. (2%) will be the minimum standard for any high paying job. How will the remaining 90% of Americans with less education find a job? Our educational institutions have three options:
https://en.wikipedia.org/wiki/Educational_attainment_in_the_United_States
- Do Nothing. It’s the easiest option! But when unemployment reaches 40, 50 or 60 percent, (voting) citizens won’t be able to pay their bills. Even Washington politicians realize this option won’t work.
- Provide Money: As unemployment rises, the government can replace lost income with a (very) long-term unemployment program or even UBI (Universal Basic Income), which provides every citizen (employed, unemployed, retired… it doesn’t matter) with a stipend. Eventually, much of the world may accept UBI, but in America, this requires too much of a political sea change for most politicians to support this type of program.
- Provide Training: In the past, this was the government’s “go to” solution for displaced workers, and will probably remain the default until it completely fails.
All options require significant government involvement and leadership. The default option… training… will not solve the problem no matter no matter how much money is thrown at this problem. First, politicians want to shrink social spending and have reduced investment in education over the past few years. Second, government training programs are short-term (weeks or months) and target blue-collar/union jobs. And, most union training programs shut down decades ago. The government has little experience developing or funding white collar jobs. Third, traditional training programs cost a few hundred to a few thousand dollars per student. Higher Education will cost $100,000 to $200,000 (or more) per student. Fourth and final is scale. 100 to 150 million American workers need to be reskilled. PLUS a workforce of 200 million needs a reliable national educational system that can maintain the skills of our 200 million-strong workforce.
This requires building tens of thousands of new universities, now! Today, we don’t even have a fraction of the teachers needed to staff these universities. This effort would literally cost tens of trillions of dollars. No one is ready to pay that bill. Especially without a guarantee that it is even possible to achieve this level of education. The average American, with less than a bachelors degree, would need as much as a decade of additional education. Yet without this education, robots and AIs will quickly replace humans as America’s workforce.
Education alone cannot effectively address the rise of intelligent machines. It’s too expensive, too slow, and too risky. Besides, not everyone will want the jobs that higher education offers. Many students hated school and weren’t very good at it. That’s just one of the reasons why 40% of Americans never went beyond a high school graduation. Half or more of all workers simply won’t want to spend the next five or ten years of their life in school. Even if it was completely free… which is highly unlikely.
America and other developed nations will need to look at alternatives. Whether it is the UBI or some other form of financial support, a lot of workers will need help to transition into the next economy. Will the next economy be machine centric or human-centric? Its too soon to say! But if developed nations do not put a financial support system in place soon, they may not be around to discuss how the new economy works!