Tag Archives: employment

Happy Meals: now made with 20% less people!

Summary:  By now everybody sees that a new industrial revolution has begun, but few clearly see its dynamics. This post looks at one example: the debate about wages. Raise wages or lower them, it makes little difference compared to the new technology that does jobs both cheaper and better.  {1st of 2 posts today.}

Minimum Wage Meme: False

 

Funny but false, showing a deep misunderstanding of how automation works…

 

Mike Konczal demolishes fantasies about a post-work world in his rebuttal to Derek Thompson’s article in The Atlantic (discussed here yesterday): “The Hard Work of Taking Apart Post-Work Fantasy” at the Roosevelt Institute. However, he believes several false elements of consensus thinking, such as this: “If wages are stagnant or even falling, what incentive is there to build the robots to replace those workers?

Economist Gregory Clark gives an example showing why that’s false in A Farewell to Alms: A Brief Economic History of the World (2007)…

There was a type of employee at the beginning of the Industrial Revolution whose job and livelihood largely vanished in the early twentieth century. This was the horse. The population of working horses actually peaked in England long after the Industrial Revolution, in 1901, when 3.25 million were at work. Though they had been replaced by rail for long-distance haulage and by steam engines for driving machinery, they still plowed fields, hauled wagons and carriages short distances, pulled boats on the canals, toiled in the pits, and carried armies into battle.

But the arrival of the internal combustion engine in the late nineteenth century rapidly displaced these workers, so that by 1924 there were fewer than two million. There was always a wage at which all these horses could have remained employed. But that wage was so low that it did not pay for their feed.

Horses then, people now. New technology allows machines to do their jobs cheaper and better. McDonald’s shows how this works as they install kiosks allowing people to enter their own orders. They’re already used at “McDonalds in Switzerland“. In the US they’re being tested where “The McDonald’s of the future lets you customize your burgers“.

Are they doing these because automation is cheaper or better than people? It’s both, as explained by Gretchen Gavett in “How Self-Service Kiosks Are Changing Customer Behavior” at the Harvard Business Review, 11 March 2015…

McDonalds isn’t the first fast food chain to consider giving customers more control over their orders using technology … Many of its competitors have been experimenting with self-service apps and kiosks, finding that when customers use them, they tend to spend more money. Taco Bell recently announced that orders made via their new digital app are 20% pricier than those taken by human cashiers, largely because people select additional ingredients. Chili’s, after installing self-service tablets, reported a similar increase in dessert orders. Cinemark theater’s new self-service kiosks have “had concession spending per person climb for 32 straight quarters.”

… To start, four researchers at the Rotman School of Management, Duke’s Fuqua School of Business, and the National University of Singapore did a study where they found that, when a liquor store changed from face-to-face to self-service, the market share of difficult-to-pronounce items increased 8.4%. The researchers concluded that consumers might fear being misunderstood or appearing unsophisticated in front of the clerks. Changing to self-service removed the social friction.

… McDonald’s {has} been experimenting with kiosks for a while. At one store, 10 or so years ago, they found that the average check size was a dollar higher — a 30% increase at the time. And they found that 20% of customers who didn’t initially order a drink would buy one when it was offered. Kiosks, of course, never forget to upsell.

In addition to all of this, there is some research from 2011 showing that a seven second reduction in service times in fast food restaurants can increase the company’s market share by 1% to 3%.

Automation can deliver a better product more cheaply, hence its irresistible advance (in waves) during the past few centuries. A new wave of automation has begun — slowly — affecting both services and manufacturing, manual and cognitive workers. It will reshape our world, painfully if we do not manage the process.

To see what lies ahead read Three visions of our future after the robot revolution.

No friendly faces at the McDonalds of the future

McDonald's Kiosk

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See these books to better understand what’s coming…

 

 

Three visions of our future after the robot revolution

Summary: During the past 2 years the robot revolution has come into view, and all but Right-wingers living in fantasy-land have begun to realize it might (like the previous ones) produce large-scale social disruption and suffering. But to prepare for these changes we must first image what kind of world they’ll create. Here we look at three visions about what lies ahead for us.  {1st of 2 posts today.}

“We did not come to fear the future. We came here to shape it.”
— Barack Obama’s speech to Congress, 9 September  2009.

Dark futures

 

Contents

  1. The center-left sees the problem
    ……and offers mild solutions.
  2. Realistic analysis and prescriptions.
  3. Visions of dark futures.
  4. For More Information.

 

(1)  The center-left sees the problem and offers mild solutions

Slowly, people have come to see the coming robot revolution (aka, a new industrial revolution), even economists. The Left has adopted this issue, as they have climate change, as a means to enact long-sought changes in the US economy. Like climate change, their solutions are far too small for the problem described.

(a) A World Without Work” by Derek Thompson in The Atlantic, July/Aug 2015 — “For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?” Typical of The Atlantic. Long, meandering, confused mish-mash of issues. Never confronts the core issue of how people will earn money to live. Lots of nonsense about people living by selling crafts to each other.

(b) The Future of Work in the Age of the Machine” by Melissa S. Kearney, Brad Hershbein, and David Boddy at the Hamilton Project, February 2015. See the slides and transcript from the seminar they held for academics and businesspeople. Their prescription is aggressive application of conventional methods…

The Project’s economic strategy reflects a judgment that long-term prosperity is best achieved by fostering economic growth and broad participation in that growth, by enhancing individual economic security, and by embracing a role for effective government in making needed public investments.

(c) The future of work in the second machine age is up to us” by Marshall Steinbaum at the Washington Center for Equitable Growth, 23 February 2015 — They show that the robot revolution has not yet appeared in the macroeconomic statistics. But it’s coming. Their conclusions are the standard center-left recipe, like those of the Hamilton Project…

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The bottom line of the May employment numbers

Summary: The strong May employment number confirms what I’ve said in previous reports about the economy, casting doubt on the bears’ confident forecasts of an imminent recession. The economy was slow in Q1, but the data so far for Q2 paints a stronger if still mixed picture. {1st of 2 posts today.}

Economy

Contents

  1. Summary of this important report.
  2. Where were the jobs?
  3. Wages and hours.
  4. For More Information.

 

(1)  Summary of this most important economic number

The May employment data was clearly and broadly strong. See the BLS’ Highlights report for the pictures. BLS revised the gains in March and April by +32,000 and estimated that total nonfarm payroll employment rose by 280,000 in May. This compares with an average monthly gain of 207,000 over the past 3 months and 251,000 over the prior 12 months.

Keep a sense of proportion about these numbers. There are 140 million jobs in America, done by 147 million employed workers. The monthly changes are small and so difficult to measure accurately. Watch the patterns instead; ignore those who obsess over the tiny wiggles in May’s numbers. They are mostly statistical noise. For jobs the overall pattern was strong, but not a breakout.

Job gains through May 2015

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Look at immigration policy to see our government respond to its masters

Summary: Immigration has been one of the most fascinating issues in American politics, revealing the influence of our elites over not just the government but also the experts and media that guide public policy. A new report shows past trends — revealing hidden causes of our problems — and points to a new future for America.  {2nd of 2 posts today}

Immigrants as fraction of US population

Graph of US Census data, prepared by the Center for Immigration Studies, April 2015. See Census graphs here.

Using data from US Census reports, the Center for Immigration Studies reveals some powerful trends (see their report for sources and methodology) …

  • Total net immigration (the difference between the number coming and going) will increase steadily over the next 45 years, totaling 64 million.
  • Absent a change in current policy, the Census Bureau projects that in 2023 the nation’s immigrant population (legal and illegal) will reach 14.8% (51 million) of the total U.S. population — the highest share ever recorded in American history.
  • The bureau also projects that the immigrant population will grow nearly four times faster than the native-born population, reaching 15.8% (57 million) of the nation’s population in 2030, 17.1% (65 million) in 2040, and 18.8% (78 million) in 2060.
  • To place these numbers into historical context, as recently as 1990, immigrants were 7.9% (20 million) of the total U.S. population.
  • The nation’s total population will grow to 417 million by 2060 — 108 million more than in 2010. This increase is roughly equivalent to adding the combined populations of California, Texas, New York, Florida, and Massachusetts to the country.
  • The new projections indicate that, absent a change in immigration policy, immigrants who will arrive in the future plus their descendants will account for roughly three-fourths of future U.S. population increase.

What effect will this have on America?

“{this body of excess workers} forms a disposable industrial reserve army …  a mass of human material always ready for exploitation.”
— Marx’s Das Kapital, expanding upon Friedrich Engels’ insight. They got a few things right.

A four-fold increase in immigrants as a fraction of the total population creates a severe shock to America, even when occurring over 90 years. That would take us beyond the point at which massive popular opposition forced “closing the door” in the early 20th century: the Immigration Act of 1917, the Emergency Quota Act (1921), and the Immigration Act of 1924. FDR reduced immigration to trickle during the Great Depression.

With the supply of cheap labor restricted, the foundation for a large middle class was laid. Unions were able to gain traction and wages began the long rise. Of course corporations immediately began to undermine these accomplishments. By 1970 their efforts began to bear fruit: unions were weakening, immigrants began to grow as a fraction of the population, and wages stagnated. By 1990 unions were crushed, immigrants flooded in with few limitations, and real wages for the unskilled plummeted.  Supply rising faster than demand.

We can expect more of all three trends as the 1% continues to gain power.

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The vital things to know about the latest employment report

Summary: The March employment report is important, confirming the slowing of the US economy. This post skips our usual numbers blizzard, focusing instead on the vital numbers, and debunking both the hype and hysteria about this most important of the economic statistics. {1st of 2 posts today.}

Economy

Contents

  1. Summary of this important report.
  2. Has Obama’s recovery helped the middle class?
  3. The bottom line.
  4. Does this signal a recession coming soon?
  5. For More Information.

 

(1)  Summary of this, the most important economic number

The March employment report was one of the worst in the past 3 years. See the Highlights for the pictures. Nonfarm payroll employment increased by 126,000 in March and 197,000 per month over the past 3 months — compared to 269,000 over the prior 12 months. This slowing is consistent with that of the other economics indicators in the past month.

Keep a sense of proportion about these numbers. There are 140 million jobs in America, done by 147 million employed workers. The monthly changes are small and so difficult to measure accurately. Watch the patterns instead.

Employment trend as of March 2015

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How Robots & Algorithms Are Taking Over

Summary: Today we have another essay about the 3rd industrial revolution now under way (aka the robot revolution), reviewing another new book preparing us for what is to come. We’ve had 50 years of warnings, all ignored. We’ll have to move soon to avoid severe social turmoil. Let’s not repeat our ugly 19th C history. {1st of 2 posts today.}

“We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come — namely, technological
unemployment. This means unemployment due to our discovery of means of economising the useof labour outrunning the pace at which we can find new uses for labour. ”

— John Maynard Keynes, “Economic Possibilities for our Grandchildren“, The Nation and Athenœum, 11 and 18 October 1930.

Cover of <i>Galaxie</i>, 1959

Cover of Galaxie, 1959. CCI/Art Archive.

Excerpt from
How Robots & Algorithms
Are Taking Over

By Sue Halpern.
London Review of Books, 5 March 2015

Halpern reviews: Nicholas Carr’s The Glass Cage: Automation and Us.

Here is what that future — which is to say now — looks like: banking, logistics, surgery, and medical recordkeeping are just a few of the occupations that have already been given over to machines. Manufacturing, which has long been hospitable to mechanization and automation, is becoming more so as the cost of industrial robots drops, especially in relation to the cost of human labor.

… Meanwhile, algorithms are writing most corporate reports, analyzing intelligence data for the NSA and CIA, reading mammograms, grading tests, and sniffing out plagiarism. Computers fly planes — Nicholas Carr points out that the average airline pilot is now at the helm of an airplane for about 3 minutes per flight — and they compose music and pick which pop songs should be recorded based on which chord progressions and riffs were hits in the past. Computers pursue drug development — a robot in the UK named Eve may have just found a new compound to treat malaria — and fill pharmacy vials.

Xerox uses computers — not people — to select which applicants to hire for its call centers. The retail giant Amazon “employs” 15,000 warehouse robots to pull items off the shelf and pack boxes. The self-driving car is being road-tested. A number of hotels are staffed by robotic desk clerks and cleaned by robotic chambermaids. Airports are instituting robotic valet parking. Cynthia Breazeal, the director of MIT’s personal robots group … $25 million in venture capital funding, to bring Jibo, “the world’s first social robot,” to market.

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A warning about the robot revolution from a great economist.

Summary:  Our series about experts has discussed our reliance on bad or biased experts. Today we see the opposite: how we ignore insightful exports, people who could help us see and prepare for the future. An economist and Nobel Laureate warned us of what’s happening today. We didn’t listen then but can still learn from him. Also, let’s learn to listen better to our top experts; it might be an essential skill for our survival in the 21st century.  {1st of 2 posts today.}

Automation robot

Introduction

Sixty years ago science fiction author James Blish described a future in which semi-intelligent machines caused massive unemployment. Of course we did nothing to prepare. Thirty years ago a great economist wrote a paper clearly describing the 3rd industrial revolution that’s now begun (even today it’s one of the clearer statements of the situation). It was part of a major report by the National Academy of Engineering, much of which also accurately described these trends. We have done nothing to prepare, not even to study the problem on a large scale, because the majority of economists had a religious-like faith that future industrial revolutions must run like the first two — so we could go blindly into the future.

“National perspective: the definition of problems”

By Wassily Leontief, Nobel Laureate in Economics.
A chapter in Long-Term Impact of Technology on Employment and Unemployment.
National Academy of Engineering (1983). Red emphasis & headings added.

The great Industrial Revolution triggered by the invention of the steam engine has by now run its course; the age that we are about to enter will be dominated by the sign of the electronic chip. The new wave of tech­nological innovation will carry us forward at least as fast and as far as the last. However, to make full use of these opportunities, our eco­nomic, social, and even cultural institutions will probably have to undergo a change as radical as that experienced during the tran­sition from the preindustrial society to the industrial society in which we live today.

The introduction of successive generations of more and more complex machinery made possible by the discovery of new sources and forms of mechanical energy over the last 200 years not only led to an unprecedented rise in the output of various goods and services, but at the same time freed working men and women from the toil and trouble associated with physical exertion. The role of labor as the dominant factor of production was not reduced but enhanced. The control and guidance of increasingly powerful and intri­cate machinery required that each worker exercise mental capabilities of progressively higher and higher order. The competitive market mechanism translated this steadily increasing demand for labor into higher and higher real wage rates.

As the earning power of an average work­ing family increased, it naturally chose to allocate some part of those earnings to acquiring more leisure time. One might speak of this progress as an increase in voluntary technological unemployment. One hundred years ago, the number of hours worked in the average week in the United States was over 70; by the beginning of World War II, hours per week sank to 42.

Computers and robots replace humans in the exercise of mental functions in the same way as mechanical power replaced them in performance of physical tasks. As time goes on, more and more complex mental func­tions will be performed by machines. Not unlike large bulldozers assigned to earth-moving jobs that could not possibly have been carried out even by the strongest laborers or draft animals, powerful computers are now performing mental operations that could not possibly be accomplished by human minds.

Any worker who now performs his task by following specific instructions can, in princi­ple, be replaced by a machine. That means that the role of humans as the most important fac­tor of production is bound to diminish — in the same way that the role of horses in agricul­tural production was first diminished and then eliminated by the introduction of tractors.

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