Tag Archives: automation

Look at the retail sector and see the power of the new industrial revolution

Summary: Economists and financial experts are baffled by events because their minds know only the past and so do not see the new industrial revolution at work, slowly in its early days. Look at the retail sector. What explains unusually high corporate profits, rapid growth in sales — along with slow growth in jobs and wages? Automation; better methods and new tech. These are just the first touches before we encounter the giant wave that lies ahead.

Retail Technology

In this eighth year of growth since the great recession (worst since the 1930s), many experts struggle to explain the US economy’s slow growth — its failure to take off and return to normal flight. The retail sector shows the slow growth, and a possible cause. For over two decades retail sales have been growing faster than retail jobs, and jobs faster than wages. These trends are accelerating. Here are the total changes for the retail sector from January 1992 (the earliest data) through March 2016.

  • Sales: up 167% ($4.7 trillion, 26% of GDP).
  • Jobs: up 24% (16 million, 7% of non-farm jobs).
  • Real wages: +0.9% (avg hourly wages of production & non-supervisory workers).

The obvious causes are better methods and new technology. The two are mutually re-enforcing, and still in the early stages. McDonald’s is automating order-taking, cutting costs and increasing customer satisfaction. Bossa Nova’s retail robots stock store’s shelves. And a thousand other innovations are made, large and small, every month.

Now for the worse news. These numbers are for the legacy retail stores. The stores of the future are online. Since January 1992 their sales have risen 550%, but they have added only 30% more workers. They are slowly destroying much of the legacy retail industry. Eventually retail employment will tip over and shrink.

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Why a guaranteed minimum income won’t protect us from the automation wave

Summary: My post A guaranteed minimum income: faux solution for the new industrial revolution sparked discussions in the comments and on Twitter, with some powerful insights and incisive questions. Here are answers to a few of the questions raised.

Money from Uncle Sam

A guaranteed minimum income (GMI) is a powerful tool for fighting poverty. As such it has been implemented in many nations (in different forms) and proven to work. My previous post said that it would not work if expanded to offset the job destruction coming from the new industrial revolution. That is, it could provide subsistence level income to the unemployed (preventing mass poverty) — but little more, with ill effects.

  • Automation might lead to a massive increase in the number of people collecting subsistence-level GMI. While preventing suffering, it would help create a two-tier society of rich and proles — as the productivity gains from the new industrial revolution went to the owners of the machines. We could end up living in the world of 1800, a high-tech Pride & Prejudice.
  • Above subsistence-level GMI would reduce people’s willingness to work at many of the boring, dangerous, or unpleasant jobs that pay low wages — either destroying them or boosting their wages (and so accelerate their automation) — either way boosting the program’s cost.
  • It would be politically difficult to implement an above subsistence level GMI. There is support for fighting poverty, although the decades-long rollback of welfare in America shows the limits are quickly reached. But there is today little cultural basis for large redistributive income transfers.

Objections were raised to this analysis. A brief note follows about each of these complex issues, just sketches of an opinion.

  1. Can we afford a high GMI?
  2. The GMI is a transitional step, followed by more radical redistributive measures.
  3. Is a high GMI is politically feasible?
  4. How would a large class of idle people affect society?

(1) Can we afford a high GMI?

Let’s run the math. The Federal government spends $2.2 trillion on social security, Medicare, and welfare benefits. State and local governments spend $0.688 trillion ($489B on Medicaid and $199B on welfare). Total: $2.9 trillion. That’s paid for by taxes which are on the low end of the post-WWII range (lower than those of most of our peers), with a small deficit (~3-5%) — which also fund a monstrous military/intel budget ($800 – $1T, depending on definition — almost half of total world spending).

Assume the GMI replaces the existing welfare and social security system (probably more cheaply). Assume a high GMI with an average cost per household of $40 thousand/year. That assumes a higher benefit since a GMI would supplement, not replace, the wages for many (most?) people on it. On the other hand, the program would probably have to provide some form of medical care coverage. For comparison, the 40th percentile of household income is $41 thousand; a $15/hour wage at 40 hours/week yields $31 thousand/year.

Under these complex assumptions each trillion dollars spent brings very roughly another 25 million people on the GMI “dole”, equivalent to 16% of the current working population (151 million), with a loss of their income taxes. We probably can afford to spend an added trillion dollars per year if military spending is reduced and taxes are increased (current GDP is $18 trillion). That would take the percent of Americans employed very approximately down to near the 1960 low (note: the graph double counts the part-time reservists with jobs, roughly 800 thousand).

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Matthew Yglesias tells us not to worry about the new industrial revolution

Summary: The new industrial revolution has begun, yet we have not yet begun to prepare. An article by Matthew Yglesias, neo-lib story-teller extraordinaire, shows why. He explains that faith-based economics assures us all will work out for the best.

Industrial revolution


Last week I posted Well-meant minimum wage increases will accelerate automation. On the same day Matthew Yglesias posted “Will minimum wage hikes lead to a huge boost in automation? Only if we’re lucky.” at VOX. He provides an unusually clear example of liberals’ love of just-so stories to explain the world in a pleasing fashion — much like the follies of conservatives that liberals (correctly) condemn (e.g., Megan McArdle).

Yglesias explains the new industrial revolution in simple and non-threatening terms. No need to worry, let alone act, since the experts are in control (it’s the neoliberals’ mantra). The opening states his thesis.

“…one major line of criticism from outlets like the Wall Street Journal editorial page and Forbes’s Tim Worstall is that big increases in pay floors only lead to job loss via automation. Both critics point to initiatives at McDonald’s and Wendy’s to automate more of the service process, and warn that robots, rather than workers, will be the real winners if liberals succeed in boosting minimum pay.

“This is doubly wrong. On the one hand, there’s little guarantee that increased minimum wages really will increase the pace at which labor-saving technology is developed. On the other hand, there’s no reason to think this would be a bad scenario.”

To draw these confident conclusions he closes his eyes and makes stuff up. This is a common response to the new industrial revolution, one large reason we are so poorly prepared for its obvious effects. Yglesias supports his first assertion by saying…

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The coming Great Extinction – of jobs

Summary: News of the coming great extinction has the chattering classes agog with fear. But they’re (as usual) looking the wrong way. The rapid evolution of algorithms, software, and robots will make many kinds of jobs as extinct as the Great Auk. This will reshape the world into a wonderland — or unleash disastrous social turmoil. It’s up to us.

The Great Auk, last seen 1852. Lots of jobs will go extinct, just as they did.

Great Auk

Great auks by John James Audubon, from “The Birds of America”(1827).

Yet another of these coordinated-looking propaganda barrages warn us of the danger. These are all from June 2015…

These headlines are correct, but about the wrong subject. They are exaggerated speculation based on false claims about damage to the biosphere (e.g., 30 thousand species going extinct each year). The coming great extinction is of jobs. The drumbeat of automated has become background in the news, the unnoticed washing away of the foundation to American society. When it is seen, the job losses are often attributed to corporate oligarchies, free trade, or massive immigration.

It has just begun. To more clearly see this trend I recommend following the few experts charting the path to this new world. Such as Martin Ford.

Martin Ford interviewed by Knowledge@Wharton

Traditionally, robots have been in factories, but I think that over the next 10 to 20 years, automation in the form of robots, smart software and machine learning is really going to invade pretty much across the board. It’s going to start impacting jobs at all skill levels. It’s not just going to be about low-wage people who don’t have lots of education. It’s really starting to impact also professional jobs.

… we’re in the midst of a transition where in the past, machines have always been tools that have been used by people and made those people more productive, but increasingly, the technology is really becoming a replacement or a substitute for more and more workers. That’s going to be a huge issue over the coming decade.

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50 years of warnings about the new industrial revolution. It’s here. Ignore the naysayers.

Summary:  The new Industrial Revolution is now upon us. We have sufficient warning and, with the experience from the earlier ones, should be able to navigate through it to a prosperous future without massive suffering during the transition. This is the latest in a long series about what might be the major economic event of the 21st century. {1st of 2 posts today.}

Danger, Construction Ahead

There is a safe path to the future.
“Danger, Construction Ahead” by Kay Sage (1940)



  1. Preparing by closing our eyes
  2. James Blish warned us
  3. Jeremy Rifkin’s bleak forecast
  4. Politics of new industrial revolution
  5. Conclusions
  6. For More Information


(1) Prepare for the future: close our eyes

On September 23 {William the Conqueror’s} fleet hove in sight, and all came safely to anchor in Pevensey Bay. There was no opposition to the landing. The local fyrd had been called out this year 4 times already to watch the coast, and having, in true English style, come to the conclusion that the danger was past because it had not yet arrived had gone back to their homes.

— From A History of the English-Speaking Peoples by Winston Churchill.

The development of semi-intelligent machines, with simple sensory systems and IQ equivalents of 60+ (in a small domain), will destroy a large fraction of today’s jobs.  Perhaps we’ll find new forms of employment.  Perhaps we will develop new economic systems which require fewer people to work.  If delayed into the second half of the 21st century, the almost inevitable population crash (esp. following the invention of a contraceptive pill for men) will make automation a cure — not a curse.  All of these solutions will require innovation, wisdom, luck — and time.

But the need to adapt is not obvious to everybody. In her deep 1989 book In The Age Of The Smart Machine: The Future Of Work And Power Shoshana Zuboff does not even use the word “unemployment” — or mention the potential for massive job losses.

This “robot revolution” is long-predicted and now arriving, but some interpret that it took long to arrive as evidence that it will not come. For example, past week Elizabeth Garbee at Slate wrote “This Is Not the Fourth Industrial Revolution” — “The meaningless phrase got tossed around a lot at this year’s World Economic Forum.”

Here are three forecasts of the coming robot revolution. Let’s learn from their insights, and get ready.

(2)  Science fiction then; now our future

The effects of automation were visible to some people long ago. One of the first was James Blish, as in this his A Life for the Stars (1962), the second of his Cities in Flight series. This passage describes what New York might look like in the late 21st century.

The cab came floating down out of the sky at the intersection and maneuvered itself to rest at the curb next to them with a finicky precision.  There was, of course, nobody in it; like everything else in the world requiring an I.Q. of less than 150, it was computer-controlled.

The world-wide dominance of such machines, Chris’s father had often said, had been one of the chief contributors to the present and apparently permanent depression:  the coming of semi-intelligent machines into business and technology had created a second Industrial Revolution, in which only the most highly creative human beings, and those most fitted at administration, found themselves with any skills to sell which were worth the world’s money to buy.

(3) Jeremy Rifkin’s bleak forecast warns us to prepare

Jeremy Rifkin is a Jeremiah of our time. But as a stopped clock is right twice a day, he scores occasionally — as in The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era (1995):

The Information Age has arrived. In the years ahead, new, more sophisticated software technologies are going to bring civilization ever closer to a near-workerless world. In the agricultural, manufacturing, and service sectors, machines are quickly replacing human labor and promise an economy of near automated production by the middecades of the twenty-first century.

The wholesale substitution of machines for workers is going to force every nation to rethink the role of human beings in the social process. Redefining opportunities and responsibilities for millions of people in a society absent of mass formal employment is likely to be the single most pressing social issue of the coming century.

… We are entering a new phase in world history-one in which fewer and fewer workers will be needed to produce the goods and services for the global population. The End of Work examines the technological innovations and market-directed forces that are moving us to the edge of a near workerless world. We will explore the promises and perils of the Third Industrial Revolution and begin to address the complex problems that will accompany the transition into a post-market era.

… In the past, when new technologies have replaced workers in a given sector, new sectors have always emerged to absorb the displaced laborers. Today, all three of the traditional sectors of the economy agriculture, manufacturing, and service — are experiencing technological displacement, forcing millions onto the unemployment rolls.

The only new sector emerging is the knowledge sector, made up of a small elite of entrepreneurs, scientists, technicians, computer programmers, professionals, educators, and consultants. While this sector is growing, it is not expected to absorb more than a fraction of the hundreds of millions who will be eliminated in the next several decades in the wake of revolutionary advances in the information and communication sciences.

… The restructuring of production practices and the permanent replacement of machines for human laborers has begun to take a tragic toll on the lives of millions of workers.

(4) Politics of a new industrial revolution

For a grim look at our future see Progress Without People: New Technology, Unemployment, and the Message of Resistance by David F. Noble (1995). See his Wikipedia bio. The opening chapters are from his 1983 series of articles in Democracy about “Present Tense Technology”. The series opens with this stark warning from “Technology’s Politics“:

There is a war on, but only one side is armed: this is the essence of the technology question today. On the one side is private capital, scientized and subsidized, mobile and global, and now heavily armed with military spawned command, control, and communication technologies. Empowered by the second industrial revolution, capital is moving decisively now to enlarge and consolidate the social domination it secured in the first.

… Thus, with the new technology as a weapon, they steadily advance upon all remaining vestiges of worker autonomy, skill, organization, and power in the quest for more potent vehicles of investment and exploitation. And, with the new technology as their symbol, they launch a multi-media cultural offensive designed to rekindle confidence in “progress.”

On the other side, those under assault hastily abandon the field for lack of an agenda, an arsenal or an army. Their own comprehension and critical abilities confounded by the cultural barrage, they take refuge in alternating strategies of appeasement and accommodation, denial and delusion, and reel in desperate disarray before this seemingly inexorable onslaught —- which is known in polite circles as “technological change.

What is it that accounts for this apparent helplessness on the part of those whose very survival, it would seem, depends upon resisting this systematic degradation of humanity into mere disposable factors of production and accumulation?


“We’re all sorry for the other guy when he loses his job to a machine. When it comes to your job, that’s different. And it always will be different.”
— Dr. McCoy, star date 4729.4, in the Star Trek episode “The Ultimate Computer.“

We have no excuse for being caught unaware and letting this new technology destabilize our society and cause widespread suffering. With modest planning we can enjoy its fantastic benefits without pain. Failure to plan for these obvious developments might mean some tough times ahead for America.

Our world in their hands.

(5)  For More Information

If you liked this post, like us on Facebook and follow us on Twitter. See all posts describing how the 3rd industrial revolution has begun. Also see the posts about the evidence that we’ve entered a period of secular stagnation. And especially see these…

For deeper analysis see these books…