“If you don’t have a real stake in the new, then just surviving on the old… I don’t think is a long-term game.” – Satya Nadella
Is Automation Scarier Than COVID-19?
Does automation put people out of work?
Economists, politicians, and union leaders have been asking this question for as long as I can remember. And it’s a legitimate concern.
Consider driverless vehicles.
In the last 16 years, since the first DARPA Grand Challenge was held in the Mojave Desert, the race to develop a fully autonomous vehicle has been on. (See “Did You Know?” below.)
More than two dozen companies are working on it. The current leader is Alphabet Inc.’s Waymo, whose fleet of 600 vehicles have logged in more than 20 million miles. (Waymo stands for “a new way forward in mobility.”) And although we are not there yet, industry experts suggest that the first commercial autonomous vehicle will make its appearance in the next several years.
Considering the advantages (safer, cheaper to operate, etc.), it seems inevitable that driverless cars will replace conventional cars just as conventional cars replaced the horse and buggy.
How will that affect the workforce?
In Ride Sharing
I’m sure that Uber’s smartest executives are already doing the math on how much money they would save by replacing their 750,000 drivers with driverless vehicles. Add to those the drivers for Lyft, etc., and you’ve got about 1.5 million people out of work.
In Trucking
There are an estimated 1.2 million trucking companies in the US. When the trucking industry goes driverless, at least another 3.5 million Americans will be unemployed.
In the Bus Business
There are half a million school buses on the road, and another 600,000 commercial buses. Which means that 2 or 3 million bus drivers could lose their jobs.
And that’s not to mention the millions of UPS, FedEx, and other delivery service workers that will become obsolete when we have driverless vehicles and automated drop-off facilities.
What will all those people do?
Some Historical Perspective
The average American is not enthusiastic about the increased use of automation by just about every industry you can name. Many fear that it will lead to widespread unemployment and even greater economic inequality.
I have that fear myself. But the facts don’t support it.
When, for example, ATMs were introduced in the mid 1970s, it was thought that the jobs of tens of thousands of bank tellers were on the line.
That didn’t happen. Since then, in fact, the number of bank tellers in the US has doubled, from about 125,000 to 250,000.
The reason?
The hyper-efficiency of the ATMs gave banks more operating profits. And those profits were invested in opening new branches.
Thus, although the number of tellers at each bank did go down by a third, the number of branches increased by almost half.
It gets better.
Because the ATMs handle a majority of routine banking functions, tellers are freed up to to do more challenging – and higher-paying – work. (Such as customer service and loan processing.) And that means they make more money.
This is not to say that some jobs aren’t lost through automation.
From 1850 to 1970, the US agricultural sector shrank from 60% of the general workforce to 5%. Today, it’s 1%!
Manufacturing jobs, too, have been on the decline. Partly because some operations were moved overseas, but even more so through automation. In 1960, manufacturing workers represented 26% of the labor force. Today, that number is barely 9%.
But here’s the thing: Except for the Great Depression and the Great Recession, US employment opportunities, in general, did not shrink. On the contrary, they expanded.
One example: In 2012, after putting robots to work in its warehouses, Amazon was accused of being “determined to profit by creating a future where automation replaces good jobs.” But within a year, instead of having fewer employees, Amazon had added nearly 30,000.
Out With the Old…
When I was starting out in business in the late 1970s, every executive I knew had a secretary.
Being a secretary was a decent job for a smart person with a high school education and good typing skills. You could make $14,000 a year with benefits. But it was also mind-numbing. All you did was type, file, answer the phone, and book appointments.
Today, thanks in large part to computers and changes in the way businesses are run, secretarial jobs have pretty much disappeared. (My primary client has more than 1000 employees, and I don’t think there’s a single secretary among them.)
So what are all the people that once might have been secretaries doing? They are event planners, graphic artists, paralegals, personal assistants, and freelancers in dozens of fields – jobs that didn’t exist 50 years ago.
In much the same way, that’s what automation is all about.
Yes, automation replaces human labor. But countless studies, both in the US and in Europe, have found that innovations in technology, particularly in automation, have actually created more jobs.
What’s happening, I think, is this: By lowering the cost of the dullest and most tedious forms of human labor, automation generally increases profitability. A general increase in profitability stimulates economic growth. And when the economy grows, new jobs are created in every industry. Jobs that are more demanding, more interesting, and more financially rewarding than the ones that were lost.
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