Challenging The ‘Official’ Automation Narrative

Academics and economists have repeatedly underestimated the impact that immigration and automation would have on the labor market. As data on productivity gains and labor-force participation clearly show, the notion that innovation ultimately creates jobs by allowing workers to focus on higher-level problems is an illusion. If it were true, then why aren’t we already seeing more of the 20 million prime-age men who have inexplicably dropped out of the labor force welcomed back in?

As we’ve noted time and time again, after decimating American manufacturing jobs in the 1990s, automation is now coming for service-industry workers like those in the retail and food-service industries. Earlier this week, we shared an analysis from Cowen that showed new kiosks being adopted by McDonald’s will result in the destruction of 2,500 jobs at its US eateries. And now, Bloomberg has published a “quick take” questioning this “official” narrative and pointing out the very real carnage that service sector workers are already facing. In it, the reporters noted how economists have repeatedly misjudged how our capacity to innovate would impact the labor market. For example, 13 years ago, two leading economists published a paper arguing that artificial intelligence would never allow a driverless car to safely execute a left turn because there are too many variables at work. Six years after that, Google proved it could make cars fully autonomous, threatening the livelihood of millions of taxi and truck drivers. And now Google, Uber, Tesla and the big car manufacturers are all exploring and testing this technology. Ford has said it plans to introduce a fully autonomous car by 2021.

“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.

Overall, services accounted for three-fourths of the job losses among more than 350 sectors of the private economy in the last year. That’s a big shift from previous decades, when goods-producing categories tended to suffer the most losses.”

Bloomberg used the retail industry as an example, noting that as customers increasingly purchased goods via the internet, department stores, which employ 25 times more workers than coal mining companies, are shedding workers at an accelerating rate. In the retail industry more broadly, average employment in the first four months of 2017 was down 26,800 from the same period a year earlier, against just 2,800 job losses in coal.

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