Tag Archives: automation

Looking at America’s future: economic stagnation, or will computers take our jobs?

Summary:  “Is the economy in technological stagnation? Or will computers take all our jobs?” An analysis from the Fed gives us an answer. Another in a series of posts about the future of America’s economy and the coming of the next industrial revolution.

Crystal Ball

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The Productivity Paradox: Is Technology Failing or Fueling Growth?
By Andrew Flowers (senior economic research analyst)
EconSouth, of the Federal Research Bank of Atlanta
Q4 2013
“Is the economy in technological stagnation? Or will computers take all our jobs?”

Opening:

The U.S. economy has grown slowly since the recession ended in 2009, more slowly than in past recovery periods. The depth of the recession, and the financial crisis that exacerbated it, surely explain this sluggishness  — right? Not according to some economists, who think we have a bigger problem on our hands: that the underlying dynamics of the economy are impaired and our ability to innovate new technologies is the root cause of the current stagnation. In other words, they argue, slow growth is the new normal.

But other economists take the opposite stance. These economists say that technology is improving so rapidly that machine intelligence and automation will replace much of human labor. And while overall growth will improve, technology is bound to radically reshape our economy, making it more unequal.

Which story is correct? Let’s look at some evidence found in long-run trends. …

That’s an important question, about which he provides an excellent summary. It is also discussed in several posts (links below). But it’s not our focus today.

Labor market implications

Considering these competing views on productivity and technology, we come to the most salient economic issue of our time: jobs. The rate of technological innovation obviously has major labor market effects. What is the relationship between new technological advances and the current skill distribution of the labor force?

Skill-biased technical change is the economic theory for how advances in technology can increase worker productivity, given compatible skills, but how they also displace certain workers. Think of the automation improvements in U.S. manufacturing. Total inflation-adjusted manufacturing production has never been higher than it is now, and manufacturing productivity, if anything, increased following World War II. But the total number of persons employed in manufacturing industries fell sharply, even more so as a percentage of the labor force.

… Cowen and the authors of Race Against the Machine foresee skill-biased technical change as accelerating in the future. They see the fruits of this third industrial revolution — information technology — as having just begun to disrupt the labor market.

This view is augmented by the recent research of David Autor, an MIT economist, who highlights a slightly different, and perhaps more disturbing, phenomenon: labor market polarization. Autor and his coauthors document the rise in demand for both high- and low-skill occupations alongside a decline in demand for middle-skill workers. They then tie technological automation to this erosion of middle-skill occupations. Manufacturing is one big area where these middle-skill jobs exist.

… If the techno-optimists are correct about the future, the combination of skill-biased technical change and greater labor market polarization will complicate the already serious state of the U.S. labor market.

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The promise and peril of automation

Summary:  Today we have a status report on society’s recognition of the coming industrial revolution. The next wave of automation (the next industrial revolution) was long forecast (even in the 1950s), but became clearly visible in 2010 with the writings of far-seeing people like Martin Ford (reported to readers of the FM website in August 2010). The news hit the mainstream in 2012 with the publication of Race Against The Machine by Erik Brynjolfsson and Andrew McAfee (reported here in April 2012). 2013 was the year of declaring it no big deal. 2014 might be the year we realize the scale of the challenge it faces — and the potential rewards.

The future of automation

The future of work

Contents

  1. The promise and peril of robots
  2. The robots are coming and will terminate your jobs“, Tim Harford, Financial Times
  3. The robots are coming. Will they bring wealth or a divided society?“, Gavin Kelly, The Guardian
  4. Remembering sabots (wooden shoes)
  5. For More Information

Red emphasis added.

(1)  The promise and peril of robots

Automation of service jobs will, like the first industrial revolutions (agriculture, then manufacturing), probably will increase humanities wealth and income. A successful transition requires again managing two challenges:

  • Most of the gains will go not to workers, but capital (i.e., owners of the machinery).
  • There will be massive unemployment.

That means

  • distributing these gains to maintain both social stability democracy,
  • creating new jobs for the unemployed — or otherwise supporting them,
  • creating new jobs for the next generation.

So far the typical responses have been to assume past success guarantees success today — without the need for special effort (the invisible hand will provide for us) — and education. The first is a Marxist-like faith in history. The second is illogical innumeracy: not everybody can benefit from advanced education (already we produce more undergraduate degrees than the market requires), and there is no evidence that the market for advanced degrees will expand sufficiently to absorb those unemployed by automation.

They still tend look to the past for signs of this new revolution, failing to see that it has barely started — with little recognition of its potential magnitude and the resulting human cost.

The two articles shown below show progress in recognition of these things, and improvement over the blindness that characterized articles to date in the news media.

(2) The robots are coming and will terminate your jobs“, Tim Harford, Financial Times, 27 September 2013 — “In future, there may be people who – despite being fit to work – have no economic value.” Excerpt:

Computing power is starting to solve everyday problems – which turn out to be the hardest ones. Computers were laughable drivers in 2004, when a computer-driving competition was “won” by a car that crashed after completing seven miles of a 150-mile course. Now computers drive cars safely.

In 2008, robots still struggled with a problem known as “Slam” – simultaneous localisation and mapping, the process of mentally building up a map of a new location, including hazards, as you move through it. In 2011, Slam was convincingly addressed by computer scientists using Microsoft’s “Kinect” gaming hub, an array of sensors and processors that until recently would have been impossibly costly but is suddenly compact and cheap.

Problems such as language recognition and Slam have so far prevented robots working alongside humans; or on tasks that are not precisely defined, such as taping up parcels of different sizes or cleaning a kitchen. Perhaps the robots really are now on the rise.

… What is sobering is that we have already seen convincing evidence of the impact of technology on the job market. Alan Manning of the London School of Economics coined the term “job polarisation” a decade ago, when he discovered that employment in the UK had been rising for people at the top and the bottom of the income scale. There was more demand for lawyers and burger flippers. It was middle-skill jobs that were disappearing. The same trend is true in the US, and is having the predictable effect on wages: strong gains at the top, some gains at the bottom, stagnation in the middle.

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Applebees automates, and brings a new world of jobs one step closer

Summary:  The FM website serves to help readers more clearly see the future (it’s an unplanned emergent role). Today we look at one aspect of America’s future, bring both peril and promise: the next wave of automation. It’s already here, but seen by few. Today is not too soon to consider how this might affect your family.

Seeing the future

Ron Chapple/Getty Images

“Fortune favors the prepared mind.”
— Lecture by Louis Pasteur, 7 December 1854

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Our experts fret about decreasing fertility, slowing population growth (we need immigrants! otherwise wages will rise and consumption fall!) and aging populations of longer-living retirees (we must slash social security and medicare!).

These are daft recommendations for a nation with real wages stagnant for a generation — taxes on the rich near multi-generational lows — corporate profits at record highs — inequality rising — a health care system grossly less cost-effective than that of any other developed nation’s — and perhaps most important, the next wave of automation already hitting us.

From another perspective, these problems — centered on the Federal government’s debt and liability for retirement care — are operationally easy to fix. Embarrassingly so, like pouring water from a boot with the instructions on the heel. Especially when compared to the problems of our peer nations (e.g., unifying the nations of Europe, or Japan’s government avoiding financial collapse from its mind-blowingly large debt).

Experts label these issues “politically difficult” to avoid asking if we have become too incompetent to govern ourselves.

Meanwhile a far greater challenge has already begun, although still invisible to our experts: the next wave of automation. We can as yet only guess how many jobs this will extinguish, as it does to the service sector what previous waves of automation did to farming and manufacturing. Both skilled and unskilled jobs will go away in unguessably large numbers. Previous posts (see below) discussed some of the first effects. Here’s another…

Applebees Tables Get Tech Treatment

100,000 Applebee’s Tables Get Tech Treatment; DineEquity Announces Rollout of E la Carte Tablets“, Restaurant News, 3 December 2013 — Excerpt:

Today, Applebee’s steps into the future to redefine and enhance the guest experience through the installation of 100,000 E la Carte Presto tablets, powered by Intel, on every table and multiple bar positions at more than 1,800 Applebee’s® restaurants in the United States by the end of next year.

DineEquity, franchisor of Applebee’s and IHOP® restaurants, announced the relationship with an aggressive schedule for 2014 installation throughout the Applebee’s system. The tablets, which enable guests to add to their orders, pay and play games from their seats…

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Must our population always grow to ensure prosperity?

Summary: Economists are often criticized for excessive focus on monetary measures for a nation’s prosperity, and too narrow and backwards-looking vision of trends in society. Today we look at example of both: recommendations that Japan increase immigration. These matters affect not just Japan, but much of the world.

UN Fertility Graph

Now everything’s a little upside down, as a matter of fact the wheels have stopped
What’s good is bad, what’s bad is good, you’ll find out when you reach the top
You’re on the bottom

— From Bob Dylan’s “Idiot Wind” (1974)

Contents:

  1. Japan leads us to the future
  2. A crowded Japan faces the robot revolution
  3. Why recommend more immigration?
  4. For More Information

(1)  Japan leads us to the future

Fewer people is good news for Japan! (source)

Japan's population

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Many economists look at this data and conclude that Japan needs more immigration, otherwise their national income (GDP) will fall along with their population.

Economists prescriptions for Japan show the limits of economics as a guide to public policy. GDP is not the only measure of a nation’s well-being, or even the best. Worse, economists sometimes see only linear trends of the past, blind to future developments visible even today.

(2)  A crowded Japan faces the robot revolution

Japan has been crowded for over a century. Japan’s government has worried about its overpopulation since the Meiji Restoration (population ~3 million) in 1868 (their attempted solution was encouraging emigration to Korea). They had 50 million in 1910; 100 million in 1967, and 127 million today.

Excerpt during periods of great productivity improvement (e.g., during an industrial revolution), growth in total GDP requires a growing population. More housing, more public infrastructure, more consumption. A shrinking population not only requires less of these things, but also a rising dependency ratio (i.e., the labor force falls as a share of the population). All bad things. Hence economists’ advice to maintain or even grow Japan’s population.

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Will 21st Century USA have a surprise boom, as did the 19th Century UK?

Summary:  Today we have an essay by Andrew Odlyzko, one of the top polymaths and futurists writing today. He reminds us of the difficulty in accurately predicting the future, and the peril of relying on past successes to solve our problems. The industrial revolution relieved the UK’s crushing debt in the 19th century. As the post-WW2 boom relieved the US’s large war debt.  The future might not be so kind to us.

Industrial revolution

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Excerpt from
Crushing national debts, economic revolutions,
and extraordinary popular delusions

By Andrew Odlyzko
Professor of Mathematics. University of Minnesota)

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Introduction

A superpower with crippling debt, exorbitant taxes, glaring inequality, wages far exceeding those of competitors, high and persistent unemployment, lack of basic workplace skills, malnutrition, a rapidly growing rival across the ocean to the West, heated debates about the role of government in the economy, and widespread pessimism about the future. Could that be any country but the U.S. today, with China as the looming threat?

Toss in costly military misadventures in the Middle East, Greece unable to pay its debts, a sclerotic domestic legal system clogging up the economy, and the rising competitor flouting copyright and other property rights and relying on slave labor, and the case seems clinched. Yet this is also an accurate description of Britain around 1850, with the United States as the transatlantic rival. Surprisingly, what followed was an explosive acceleration of the Industrial Revolution that saw the UK sprint ahead of others during the “Great Victorian Boom” of the third quarter of the 19th century.

Britain in the 1840s

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Two proposals for dealing with the robot revolution (the next wave of automation)

Summary: Slowly people see the robot revolution coming, when automation does to jobs in services what it did to farming and manufacturing. We’re in the first phase, delusional confidence about the effects — so we see not need to prepare. So we idly dream away the time available to prepare. Here we review two new reports with proposals — what we can do manage these inevitable changes.

Welcome to the Future

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(1) Some rare good sense about automation

The Rise of the Machines“, Gavin Mueller, Jacobin, #10 — “Automation isn’t freeing us from work; it’s keeping us under capitalist control.”  Excerpt:

I applied to America’s employer of last resort: McDonald’s. I was hired within the week. I’d worked kitchens before, so I figured this would be pretty easy stuff. It was and it wasn’t, and it wasn’t because it was.

… McDonald’s was different from other restaurants, where I had had to learn at least a few cooking basics. At McDonald’s, each station was highly mechanized to minimize the need for employees to know anything. That included counting: the cash register automatically spat out the correct change for me with every transaction. The food prep areas had huge specialized machines to standardize the cooking process. I didn’t even have to pay attention when filling up soft drinks — just hit the button for the appropriate size. Practically every machine was connected to some kind of timer. During busy times, the kitchen became a buzzing, beeping confusion, adding a layer of sonic chaos to an already hectic job.

This is the automated kitchen. At McDonald’s, food preparation is designed to require absolutely no thought or technique at all, deskilled as completely as possible by half a century of industrial management. This standardizes the food, so your McNuggets are the same no matter which McDonald’s fries them. More importantly, it entails minimal training for employees, a good idea since turnover is high (I did a bit over two months before quitting). A deskilled workforce is a precarious workforce.

As it was a generation ago, automation has become a political issue; one Peter Frase, my colleague at Jacobin, has been discussing for some time. Frase has developed a “post-work” argument for understanding the politics of automation. In the short term, the new machines benefit capitalists, who can lay off their expensive, unnecessary workers to fend for themselves in the labor market. But, in the longer view, automation also raises the specter of a world without work, or one with a lot less of it, where there isn’t much for human workers to do. If we didn’t have capitalists sucking up surplus value as profit, we could use that surplus on social welfare to meet people’s needs. Meanwhile, whatever work remains could be split up, so we’d have shorter working days and more time for the things that really matter to us.

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How do we respond to the Robot Revolution?

Summary: The productivity of the next industrial revolution — based on semi-intelligent machines, with sensors and manipulators — will create fantastic abundance. Perhaps on a scale and nature we cannot imagine. The question is choice: how we divide the results. Here are two extreme outcomes, with a thousand points between them.

20121210-Marx-poster

(1)  Feudal dystopia

The rich might prefer a form of feudalism: a very hierarchical society, people in the upper layers linked by personal relationships (networked), with massive inequality and limited social mobility, divided into classes.  Marx described a version of this.

  • the inner party (the haute bourgeoisie) of  upper echelon leaders and the wealthy,
  • the outer party of middle managers, small business owners, and professionals (the petite bourgeoisie), and
  • the remainder of the working class (the proletariat, proles)
  • the underclass (the lumpenproletariat) — criminals, poor workers (many in the grey economy), those subsisting on meager fixed incomes (pension, disability, welfare, and social security  — plus social services).

Maintaining this will require sophisticated internal intelligence and security services to prevent and suppress insurgencies, and keep social order (low levels of crime at the top, minimal levels at the bottom).  The security services and military would recruit strong intelligent people from the lower class — their only path to advancement — which also deprives the lower classes of their natural leaders.

We’re on our way to this future:

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