Sunday, May 1, 2016

Will Automation Take Our Jobs Away?

One of the big issues in this year’s presidential election is the loss of American jobs to foreign competition. And while especially Donald Trump and Bernie Sanders have stressed this as an issue, there is perhaps an even greater threat to jobs the world over in the way of automation that nobody seems to be talking about.

This is for good reason. It is easy to demonize the Mexicans or the Chinese or the various trade pacts and advocate solutions to the voters. But automation defies any simple political solutions to rally the electorate behind.

About a year ago, Martin Ford, a Silicon Valley software entrepreneur came out with Rise of the Robots: Technology and the Threat of a Jobless Future which provides both a fascinating and a somewhat disturbing reading experience. Think about it. What would happen to the world economy if a significant part of our population simply had no way of earning a livelihood? What do these people do to be able to eat and keep a roof over their heads?

Of course, it must be mentioned that the fear of automation permanently putting people out of work has been around for many decades if not centuries. But these fears have been always been shown to be unfounded. In perhaps the most noted example, agricultural jobs were mostly automated out of existence. But then came along manufacturing jobs to fall back on that needed to be filled.

Indeed, there are jobs in this Internet age that didn’t even exist a few decades ago. It has always been mainstream economic thought that the so-called Luddite Fallacy overlooks all of the new jobs that are created by new technology as old ones become obsolete.

But Ford argues (convincingly in my opinion) that with the exponential rise in computing power and artificial intelligence, mankind is in a race to stay ahead of technology that it simply cannot win. And we must come up with solutions sooner rather than later on how we are going to deal with all of this. The reader is invited to view this video link to hear Ford summarize the ideas presented in his book.

Because of the exponential advances in computer technology, algorithms can already be devised to do tasks that were thought to only be doable by humans. For example, there are programs that can effectively grade test essays along with programs that can generate articles for publication in magazines or on the Web. As another example, it was unclear whether a chess program would ever be able to compete against the world’s best human players. Thanks to their increased (and just about flawless) raw computational power, it is now the world’s best humans who cannot compete any more with the best programs. And then there is IBM's Watson who defeated Jeopardy! champion Ken Jennings. There are countless other amazing computer automation skills that are detailed in the book for the interested reader.

While less educated workers will obviously be affected by automation, even the more skilled workers are losing their jobs to what is known as offshoring. This is from Rise of the Robots - Page 115:

Highly educated and skilled professionals such as lawyers, radiologists, and especially computer programmers and information technology workers have already felt a significant impact. In India, for example, there are armies of call center workers and IT professionals, as well as tax preparers versed in the US tax code and attorneys specifically trained not in their own country’s legal system but in American law, and standing ready to perform low-cost legal research for US firms engaged in domestic litigation.

The plight of unemployment for many recent law school graduates along with their crushing amount of student debt has been written about a lot lately. These students have traditionally started their careers doing legal research grunt work in preparation for moving up the career ladder. Now less research work needed domestically means that fewer graduates are needed.

So it appears that jobs that are susceptible to automation tend to naturally go to lower wage countries until they too become either partially or fully automated. Ford quotes a 2013 University of Oxford study that estimates that close to half of all US jobs are susceptible to automation within the next two decades. Here's the link to that study.

And as Ford explains...
…advances in artificial intelligence make it even easier to offshore jobs that can’t yet be fully automated.
But some jobs in manufacturing are actually returning to America – but with much less pay and much more automation.
So if the job prospects for the less educated are grim and with prospects for more educated workers starting to deteriorate, the usual suggested solutions are looking pretty inadequate.
The all-purpose standbys, retraining and education, will not be effective if indeed automation does clean us out of too many jobs. Retrain for what job? Education to move up the skills ladder makes sense at first blush. It is safe to say that there will always be jobs that require a high enough skill level to resist automation. But how many of these jobs exist and how many people have the aptitude to do these jobs? It is for these reasons that Ford says the skills ladder is more accurately described as a skills pyramid.
“Oh if only everyone could go to and afford college” is the refrain. Indeed, Bernie Sanders proposes offering free public college education to all Americans like as in other countries. But we already have too many people attending college who aren’t suited to college level learning. This is from Rise of the Robots - Page 251:
Overall, about 20 percent of US college graduates are considered overeducated for their current occupation…In Europe where many countries provide students with college educations that are free nearly so, roughly 30 percent of graduates are overqualified for their jobs. In Canada, the number is about 27 percent. In China, a remarkable 43 percent of the workforce is overeducated.
So what would work? Ford advocates a Basic Income Guarantee for all Americans as a safety net program, an idea that surprisingly, Friedrich Hayek, an icon for the right has strongly supported.
But it is safe to say in today’s political climate, the idea of paying someone for doing nothing is a non-starter. So how about paying our unemployed to help rebuild our severely crumbling infrastructure? The government can borrow the money at record low interest rates. While this may not solve the long term problem posed by technological unemployment it will at least buy us some time to come to an agreement on how to address this very serious issue.
For a country as wealthy as ours, there is far too much poverty. It has been said that the best antidote to poverty is a job that pays a living wage. The push for $15 an hour is meeting with success in different parts of the country. The basic principle is simple. Someone who is willing and able to work full time should not have to live in poverty.
Of course, there is the argument that raising wages will lead to more of those jobs becoming automated. But at Foxconn in China which is infamous for its low pay and toxic working conditions that have actually led to some suicides, they are still planning to bring automation in to replace most of these workers. The takeaway here is that being willing to work for slave wages isn’t going to prevent that job from being automated if that is the employer's intention all along. (In many cases, the lure of automation for employers isn't necessarily about saving money - it is more about control.  Robots don't get tired or sick or complain about how they are being treated.) So for the workers that are left, we might as well ensure that at least they won’t have to live in poverty.
So what is the endgame here if automation explodes as is feared? Those who want to eliminate as much human labor as possible from the workplace need to be careful what they wish for. Machines are not consumers! The never-ending push to produce products as cheaply as possible by eliminating human labor eventually runs into a destructive dead end when the supply of consumers dries up! Much of the retail sector (except the high end retailers catering to the affluent) is already struggling with many having to close stores.
Despite the Republican blather about our corporations being the ‘job creators', most of us realize that the real job (and profit) creators are consumers like us who buy their products. So while technological progress is inexorable, wise men will know that killing the goose that lays the golden eggs is not the answer. And from this, maybe we can hopefully find some solutions for the future!