Sun, Jun 11, 2017 - Page 7 News List

Mismanaged automation may be catastrophic

Skill-biased technological change is fueling the polarization of both employment and wages while fostering a winner-takes-all effect, which brings massive benefits to the superstars of the new economy, who are able to leverage digital capital amid imperfect competition

By Laura Tyson

Illustration: June Hsu

Advances in artificial intelligence and robotics are powering a new wave of automation, with machines matching or outperforming humans in a fast-growing range of tasks, including some that require complex cognitive capabilities and advanced degrees. This process has outpaced the expectations of experts; not surprisingly, its possible adverse effects on both the quantity and quality of employment have raised serious concerns.

To listen to US President Donald Trump’s administration, one might think that trade remains the primary reason for the loss of manufacturing jobs in the US.

The possible technological displacement of workers is “not even on [the administration’s] radar screen,” US Secretary of the Treasury Steven Mnuchin has said.

However, among economists, the consensus is that about 80 percent of the loss in US manufacturing jobs over the past three decades was a result of labor-saving and productivity-enhancing technological change, with trade coming a distant second.

The question, then, is whether we are headed toward a jobless future, in which technology leaves many unemployed, or a “good-jobless future,” in which a growing number of people can no longer earn a middle-class income, regardless of their education and skills.

The answer might be some of both. A major study on the topic found that, from 1990 to 2007, the penetration of industrial robots — defined as autonomous, automatically controlled, reprogrammable, and multipurpose machines — undermined both employment and wages.

Based on the study’s simulations, robots probably cost about 400,000 US jobs per year, many of them middle-income manufacturing jobs, especially in industries such as automobiles, plastics, and pharmaceuticals. Of course, as a recent Economic Policy Institute report points out, these are not large numbers, relative to the overall size of the US labor market.

However, local job losses have had an impact: Many of the most affected communities were in the midwestern and southern states that voted for Trump, largely because of his protectionist, anti-trade promises.

As automation substitutes for labor in a growing number of occupations, the impact on the quantity and quality of jobs will intensify. As a McKinsey Global Institute study shows, there is plenty more room for such substitution.

The study, which encompassed 46 countries and 80 percent of the global labor force, found that relatively few occupations — less than 5 percent — could be fully automated.

However, about 60 percent of all occupations could have at least 30 percent of their constitutive tasks or activities automated, based on current demonstrated technologies.

The activities most susceptible to automation in the near term are routine cognitive tasks such as data collection and data processing, as well as routine manual and physical activities in structured, predictable environments.

Such activities now account for 51 percent of US wages and are most prevalent in sectors that employ large numbers of workers, including hotel and food services, manufacturing, and retail trade.

The McKinsey report also found a negative correlation between tasks’ wages and required skill levels on the one hand, and the potential for their automation on the other. On balance, automation reduces demand for low and middle-skilled labor in lower-paying routine tasks, while increasing demand for high-skilled, high-earning labor performing abstract tasks that require technical and problem-solving skills.

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