Humans vs Machines

Posted on April 10, 2015


Man vs Machine 1

Humans vs Machines: Early Days

A recent article posted to a Wall Street Journal blog got me thinking about a question that has long been on my mind: are we really facing a humans vs machine dilemma when it comes to U.S. jobs and competitiveness?

The following three important and persistent trends are leading business to replace labor with technology:

  1. Availability of low cost capital, which is driven by near deflationary environments almost everywhere in the developed world including the U.S., despite the Fed’s weak protestations to the contrary.
  2. Rapid increase in the capabilities of technology in virtually every sector through continuous innovation.
  3. Continued upward pressure on wages in sectors amenable to technology disruption.

The real question is not whether these trends are occurring but rather what they mean for those affected and U.S. competitiveness.

Routine Jobs 1

Source: WSJ Real Time Economics Blog 4-8-15

These factors when combined with ongoing enhancement of labor productivity via technology for jobs that are not in line for possible replacement, lead to the conclusion supported by the research cited in the article. Namely that routine jobs are likely to be replaced by non-routine jobs over time (see graphic to the left). One might even go a step further to say that because of the possibility of the “Uberization” of many sectors, some non-routine jobs thought stable may also be in line for becoming more routine. Lastly, it is also likely that some of what is thought of as non-routine today may become more routine as technology further advances.

The good news is that in the near future, because of these trends, the quality of available jobs in terms of required skills and pay should continue to increase. Uberization will create new ways for workers to provide their skills and time. Longer-term, the U.S. economy will be better off for making this transition to an ever more skilled and flexible labor force using ever more sophisticated technology. It is the only way to maintain leadership in world markets.

Yet, we have to face a continuing transition.

The quantity of such jobs in the short- and medium-term (the place in which we all live) will unlikely be sufficient in number to replace good, middle-income jobs in a cross-section of industries, that in previous generations swelled the ranks of the middle class even for those without a college degree.

The impact on the lives of those Americans caught up in the transition – and many will be affected over time – needs to continue to be addressed. These are well-trained, hard-working people who need to be reabsorbed for their benefit and that of the country. Much of this will happen, as it has during other periods of change, through re-training and absorption in other sectors that are short on workers, entrepreneurship on the part of many, and yes, through Uberization and finally through other new types of jobs and new sectors made possible by the advancement of technology.

From my perspective, in addition, “on-shoring” of jobs should be part of the equation. With real wage growth in “Rise of the Rest” countries, the costs and vagaries of transportation in a world of tight just-in-time production, now is the time for national policy and actions at the state-level to accelerate this trend to bringing production back to the U.S. through increased initiatives to bring jobs home.

Man vs Machine 2

Humans vs Machines: Good Science Fiction

It is not about humans vs machines in the end, although such stories make for good science fiction. It is really an old story about people forging a new future with the tools at hand.

 

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