Technology and the Work Force

“Automation, in my view, is coming along just in time to address this coming period of labor shortages.” That is Hal Varian speaking. He is the chief economist at Google, addressing a symposium hosted by the Council on Foreign Relations.

Demographic trends foretell serious shortages of working age populations in developed countries. (See here)   People born in the United States between 1946 and 1964, the “Baby Boomers,” are retiring at the rate of four million per year. The birth rate during that boom period averaged approximately 24 births per thousand population. By 2016 the U.S. rate had fallen to 12.2 per thousand. In Europe the 2016 birth rate averaged 10.7.

How automation and the aging workforce will interplay is addressed in two recent studies. A report prepared for the World Economic Forum (WEF), The Future of Jobs 2018, predicts that more than half of today’s work will be performed by machines by 2025, compared to today’s 29%. Based upon surveys of human resource officers, the report projects numbers of jobs gained and lost due to automation. Globally, excluding agriculture, between 2018 and 2022, 1.74 million jobs will be created by automation, approximately 75% more than the number of jobs lost.

An early 2018 article in The Wall Street Journal  reported predictions from other analyses. “Analysts at Forrester Research Inc. predict that over the next five years, about 4 million jobs will be lost in the U.S. as a result of artificial intelligence and related technology, including software robots. Gartner Inc. has said that artificial intelligence will create 2.3 million jobs in 2020, while eliminating 1.8 million.”

A second study, produced by Professor Ken Goldberg of the University of California, Berkeley and Tata Communications of India, “Cognitive Diversity: AI and the Future of Work,”  sees Artificial Intelligence as able to enhance job satisfaction in many jobs, eliminating mundane tasks and enabling more creativity. The report also asserted that previous technological innovation has not necessarily had expected negative effects on employment. Rather, it has redirected employees such as bank tellers and cashiers to other tasks.

For more developed countries, automation is likely to result in reshoring of some jobs – that is, bringing jobs that can be automated back to the countries that out-sourced the jobs to countries with cheaper labor. As the demographic destinies blog post reported, there is an increasing shortage of working age population to support retirees. Reshoring automated jobs will not address that problem. As additional jobs are replaced by automation, the WEF expects major issues to arise related to “re-skilling” employees.

Based upon input from business executives of global companies, the WEF report has an optimistic outlook for rising middle classes in emerging markets: “even if factory automation and labour augmentation in advanced industrial economies might lead to some re-shoring over the 2018–2022 period, many emerging economies are increasingly shifting toward a domestic consumption driven growth model, with rising local middle classes generating increased demand for goods and services traditionally intended for export.” That is good news for countries in Africa that have younger populations.

The WEF report projects gains in healthcare, education and business services in developing economies. Demand for assembly and factory workers is projected for North Africa and Sub-Saharan Africa. Software developers and data analysts are cited as emerging job categories in those areas also, a finding consistent with a previous blog post on current tech businesses in Central Africa.

Projections for the future of automation present challenges and opportunities, capable of complementing current demographic trends, or exacerbating them. The WEF report advocates proactively managing that transition: “As technological breakthroughs rapidly shift the frontier between the work tasks performed by humans and those performed by machines and algorithms, global labour markets are undergoing major transformations. These transformations, if managed wisely, could lead to a new age of good work, good jobs and improved quality of life for all, but if managed poorly, pose the risk of widening skills gaps, greater inequality and broader polarization.”

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