Experts see that the 3rd Industrial Revolution is upon us. How many jobs will be lost?

Summary:  It’s been almost 4 years since the first article appeared on the FM website warning about the next wave of job losses from automation. Now experts slowly begin to grapple with this problem, estimating its magnitude, extent, and possible solutions. Here we look at three of these. Properly managed, the 3rd industrial revolution will be an unmixed blessing to all. But only if we manage it better than we’re doing with simpler problems 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 use of labour outrunning the pace at which we can find new uses for labour.

But this is only a temporary phase of maladjustment. All this means in the long run that mankind is solving its economic problem. I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is to-day. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of afar greater progress still.

Economic possibilities for our grandchildren” by John Maynard Keynes, The Nation, 11 October 1930. He had confidence in our ability to solve both economic and political problems of modernization.

Jobs of the Future



  1. Retail: an example of the coming wave of losses
  2. Number crunching to estimate the jobs at risk
  3. A more realistic analysis
  4. For More Information


(1)  Retail: an example of the coming wave of losses

The next industrial revolution will improve productivity in many ways, not just the simple machine-replace people exchange seen so often in the past.

Fifteen million people work in retail, plus millions more in jobs supporting them. A large fraction of those jobs will go away in the next decade as e-commerce gains market share. Salespeople, the people that run and maintain the companies and the stores, the people that maintain the buildings — a widening circles of impact.

Here’s one of the many articles appearing as the inevitable approaches: “The Tipping Point (E-Commerce Version)“, Jeff Jordan (Partner, Andreessen Horowitz), 14 January 2014 — Excerpt:

We’re in the midst of a profound structural shift from physical to digital retail. The drivers of this shift are simple:

  • Online retail has strong cost advantages over its offline counterparts and is rapidly taking share in many retail categories through better pricing, selection and, increasingly, service.
  • These offline players have high operational leverage and many cannot withstand declining top-line revenue growth for long.
  • The resulting bankruptcies of physical retailers remove competition for online players, further boosting their share gains.

So, how has this shift been playing out? Recent data suggests that it’s happening faster than I could have imagined.

Online Share of Retail
From Recode, 14 January 2014

The data suggests that there are two very different patterns going on with respect to e-commerce penetration. The two largest categories — “Food and Beverage” and “Health and Personal Care” — show e-commerce penetration well below the overall average. These categories essentially are the domains of grocery stores and drug stores, and e-commerce (at least to date) has achieved only modest penetration of these massive categories (but Amazon Fresh has designs on changing that).

… One additional observation is that the pace of online share gain in the specialty retail categories shows absolutely no signs of slowing down.

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50 years of warnings about the next industrial revolution. Are we ready?

Summary:  Today we look at three early predictions about the 3rd Industrial Revolution, now upon us. We have sufficient warning (and the experience from the first two industrial revolutions), and should be able to navigate through it without massive suffering — to a prosperous future. This is the latest in a long series about what might be the major economic event of the 21st century (links to earlier posts at the end).

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

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: science fiction warning
  3. Jeremy Rifkin’s bleak forecast
  4. David Noble looks at the politics of the 3rd industrial revolution
  5. For More Information

(1) Prepare by closing our eyes

As our world has grown richer and our technology more powerful, our ability to anticipate troubles increases. Yet that’s so only if we make the effort to do so.  Too often we fail to even try. Extreme weather (i.e., hundred-year events), climate change, peak oil, and the next Industrial Revolution all show this sloth at work.

All of these are visible problems, long forecast. Yet rather than make use of this warning time, which allows gradual, careful preparation, we interpret failure of the event to arrive as evidence that it will not come.

In the past we could not well anticipate, mitigate, or avoid large-scale changes in the world. Plagues, droughts, floods were the natural course of life, often devastating regions — even destroying civilizations. Social and economic changes, like the first two Industrial Revolutions, brought greater wealth — but its poor distribution created massive suffering from pollution and poverty.

That was then, but need not be so today. We can do better. Too often in America we’re not.

Coastal cities such as New York should have defenses against typical storms like Sandy (details here), as do many of the great cities of Europe. Sea levels have been rising for thousands of years, and the world has been warming for two centuries (until roughly 1950 largely from natural causes), with obvious effects that should shape public policy.  Building cities in the desert without assured water supplies courts disaster. Developing new energy sources prepares us for Peak Oil and It’s a long list.

Too often we squander the time provided by advance warnings for the most feckless of reasons: the problems are coming but not yet arrived.

Which brings us to our issue for today: the 3rd Industrial Revolution is upon us. Below are some of the earlier forecasts of its effects during the past half-century. We have no excuse for being caught unaware, destabilizing our society and causing widespread suffering. With modest planning we should enjoy it fantastic benefits without pain. As with driving, reacting without planning might mean more pain than gain.

A Life for  the Stars

(2)  Sci Fi then; fact for the future

The effects of automation have been visible to some people many years. Such as science fiction authors An early example is in this from James Blish’s A Life for the Stars (1962, second of his Cities in Flight series):

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.

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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

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?”


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


  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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A book about one of the trends shaping the 21st century: the next industrial revolution (robots)

Summary:  It’s not too soon to prepare your 2014 reading list. Today we have an excerpt from what might be one of the most important books of the year, about a trend which will drive events in the 21st century — the next wave of automation. AKA the rise of smart machines, the next industrial revolution. Distributing its fruits might be the defining political challenge for each society, with almost unimaginable rewards for nations that do so peacefully.

Robot Revolution
RobotRevolution by PackRatGraphics



  1. The Book
  2. Excerpt: about the next Age
  3. Reviews
  4. About the authors
  5. For More Information

(1)  The Book

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson and Andrew McAfee (2014) — “Work, Progress, and Prosperity in a Time of Brilliant Technologies”

A revolution is under way.

In recent years, Google’s autonomous cars have logged thousands of miles on American highways and IBM’s Watson trounced the best human Jeopardy! players. Digital technologies — with hardware, software, and networks at their core — will in the near future diagnose diseases more accurately than doctors can, apply enormous data sets to transform retailing, and accomplish many tasks once considered uniquely human.

In The Second Machine Age MIT’s Erik Brynjolfsson and Andrew McAfee—two thinkers at the forefront of their field — make the case that we should be optimistic about the future because technological progress, ‘the only free lunch that economists believe in,’ is accelerating quickly past our intuitions and expectations. But we should also be mindful of our values and our choices: as technology races ahead, it may leave a lot of people, organizations and institutions behind.

This is the book that explains the new age we’re quickly heading into and shows why we should be optimistic about it, yet also discusses the challenges it will bring.

(2)  Excerpt from Chapter One

This work led us to three broad conclusions.

The first is that we’re living in a time of astonishing progress with digital technologies — those that have computer hardware, software, and networks at their core. These technologies are not brand-new; businesses have been buying computers for more than half a century, and Time magazine declared the personal computer its “Machine of the Year” in 1982.

But just as it took generations to improve the steam engine to the point that it could power the Industrial Revolution, it’s also taken time to refine our digital engines. We’ll show why and how the full force of these technologies has recently been achieved and give examples of its power. “Full,” though, doesn’t mean “mature.” Computers are going to continue to improve and to do new and unprecedented things. By “full force,” we mean simply that the key building blocks are already in place for digital technologies to be as important and transformational to society and the economy as the steam engine.

In short, we’re at an inflection point — a point where the curve starts to bend a lot — because of computers. We are entering a second machine age.

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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


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 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.

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)

Stand by for a boom!


  1. Japan leads us to the future
  2. 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

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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