How Automation Will Impact Jobs

automation jobs

Concerns about technology replacing workers isn’t new, but digitization is dramatically reducing transaction costs and helping spread the changes farther and faster than before.

Will a robot run my organization in 10 years? Maybe. I know a chief executive’s job, which requires a fair amount of problem-solving and creativity, is probably less susceptible to automation than middle-skill jobs such as machining and bookkeeping. At the same time, new research shows that most jobs have some proportion of tasks that can be substituted by workplace automation. Including a CEO’s job.

Concerns about technology replacing workers isn’t new. Over the past 200 years, mechanical looms replaced artisans, electric streetlights displaced lamplighters, cars replaced horses (thus limiting the need for blacksmiths) and personal computers diminished the need for typists. Technological advances have long taken a toll on specific professions and industries. They also raise our overall living standards.

The difference today is that digitization is dramatically reducing transaction costs and helping spread the changes farther and faster than before. Moreover, a new kind of automation—artificial intelligence—puts different kinds of jobs at risk than the mechanical automation of previous eras. Particularly affected are tasks that require cognitive skills, many of which are found in middle-skill jobs.

So we now see increased anxiety related to the impact of technology and automation on the future workforce, which is leading to a steady stream of academic and commercial research. MIT’s Andrew McAfee and Erik Brynjolfsson published The Second Machine Age in 2014, a relatively upbeat assessment of the impact of new technology on the workforce. In 2015, Martin Ford’s Rise of the Robots drew attention with its dire outlook and dramatic policy proposals, even winning the FT & McKinsey Business Book of the Year Award. Among Ford’s policy prescriptions: a guaranteed basic income for families (an idea introduced a half-century ago by President Johnson’s National Commission on Technology, Automation, and Economic Progress).

New Technology

In November, McKinsey Global Institute published a report suggesting that based on current technologies, most jobs (95%) won’t be jeopardized over the next five years. But new technology will change them. Authors Michael Chui, James Manyika, and Mehdi Miremadi looked at 2,000 distinct types of work activities in 800 occupations and found that 45% of work activities could be automated, affecting workers in a wide variety of roles. For example, up to 20% of the activities of a chief executive could be automated, such as analyzing operations data and reviewing status reports.

As MIT economics professor David Autor observes, this is part of the evolution and improvement of working conditions. In a 2014 study, he described how, because of Polanyi’s paradox—the concept that humans know more than we can describe—we’ll never be able to program a computer to mimic certain abilities. While robots can apply math to carry out routine tasks, humans must complement their robot “colleagues” with nonprogrammable capabilities, such as the ability to be flexible and use common sense to solve unexpected problems.

In 2015, Autor published a paper in the Journal of Economic Perspectives that explained why automation advances up to this point have not eliminated most jobs. His main premise: while workplace technologies may substitute for labor, those that cannot be substituted are generally complemented by it. For example, as the number of ATMs in the country quadrupled between 1980 and 2010, the number of bank employees increased. ATMs reduced the number of cash-handling tasks but technology provided new data on customers and thus new opportunities for banks to become more involved in relationship banking. Tellers became sales representatives.

Thirteen years ago, two prominent U.S. economists wrote that driverless cars couldn’t execute a left turn against oncoming traffic because too many factors were involved. Six years later, Google proved it could make fully autonomous cars, threatening the livelihoods of millions of truck and taxi drivers. Throughout much of the developed world, gainful employment is seen as almost a fundamental right. But what if, in the not-too-distant future, there won’t be enough jobs to go around?

That’s what some economists think will happen as robots and artificial intelligence increasingly become capable of performing human tasks. Of course, past technological upheavals created more jobs than they destroyed. But some labor experts argue that this time could be different: Technology is replacing human brains as well as brawn.

When politicians talk about jobs, they tend to focus on iconic, goods-producing industries, such as mining, steel production and auto making, that have traditionally been the hardest hit by global competition and technological progress. Lately, though, the loss of manufacturing jobs in the U.S. pales in comparison to the much larger losses in parts of the services sector.

Productivity Gains

While automation may be a question of engineering, job loss is even more a question of economics notes The Economist. A key part of the agriculture story is that people were unwilling to purchase all of the food that farmers were capable of producing, even though food was getting cheaper. But not all industries share this with agriculture.

Suppose that the automation in agriculture had only been for chicken farming and not for any other food production. Chicken would have gotten cheaper relative to beef, fish, vegetables, fruit, etc., and that would have caused people to buy more chicken and less of other types of food.

Many — even most — of the extra chickens produced would have been purchased by consumers, and there would have been less need to reduce employment in chicken farming.

The most dramatic job losses would have occurred in the food industries like beef and fish that were not automated and that compete with chicken. In other words, jobs that are difficult to automate from an engineering perspective may be exactly the jobs pushed to extinction by automation because they cannot compete.

It all depends on the competitive landscape and how willing are consumers, encouraged by lower prices, to absorb the extra output made possible by automation.

Autor points out we’ve seen automation in agriculture and manufacturing replace “physically demanding, dangerous, and menial work,” creating safer, less onerous working conditions for many in the middle class. Moreover, many productivity gains from workforce automation have increased the demand for goods and services, in turn increasing the demand for new forms of labor.

Change is upon us. As McKinsey’s authors advise, in this era of rapid technological changes, the smart approach is to keep track of the speed and direction of automation, understand the needs and requirements to stay competitive, and determine where, when and how much to invest in automation.

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