President Trump likes to blame trade, immigration, and overregulation for job losses in the American heartland. But that’s generally not how economists see it. They say machines are a more important reason why companies don’t employ people like they used to. In several industries, like steel, industrial output is as high as it’s always been. It’s just that manufacturers need less labor to do the work. “Almost 88% of job losses in manufacturing in recent years can be attributable to productivity growth,” one recent study by economists at Ball State University said.
If it’s true that automation is more to blame than the other causes, we might be concerned about the even-greater automation that’s coming. The next wave of robotics, artificial intelligence, and machine learning could threaten new categories of workers, including office staff doing routine tasks, chemical technicians, web developers, and even higher management. In a new report, McKinsey says almost half (49%) of paid activities in the global economy “have the potential to be automated by adapting currently demonstrated technology.” And it’s not clear we have policies to deal with the fallout, especially if technology leads to uneven growth, raising the income of some highly skilled workers while impoverishing those with less future-proofed skills.
To be clear, that doesn’t mean half of jobs will be eliminated. McKinsey looks at automation potential of activities that make up jobs, not whole jobs: 60% of jobs could have 30% of their tasks automated, but not done away with completely. Still, the potential for disruption by technology is vast and probably dwarfs what we’ve seen in manufacturing. “Accommodation and food services” have a 73% automation rate, transportation and warehousing are above 50% automatable, as is mining and agriculture, McKinsey says.
The United States is not the country worst affected by the automation wave. McKinsey says Japan, India, and China have higher automation potential than we do. Owing to its size and the manufacturing-centric economy, China has more than six times the number of automatable activities than the U.S. does, according to the analysis. It also has a higher percentage of wages at stake.
McKinsey sees higher productivity from better machinery as a good thing for economies overall. But it admits that it will lead to upheaval and that, even if people find jobs to replace the old ones, those new jobs may not pay as well. It says governments need to do a better job of forecasting job losses and predicting where new opportunities may occur. Better today to train the next generation of data scientists–positions that companies will likely need–than warehouse operators (which they likely won’t). Also, more people are likely to be fending for themselves as “technology-enabled entrepreneurs” as opposed to being full-time workers, it says.
Automation may gradually erode the power of wages to provide broad-based prosperity, requiring other interventions. “If automation does result in greater pressure on many workers’ wages, some ideas such as earned income tax credits, universal basic income, conditional transfers, shorter workweeks, and adapted social safety nets could be considered and tested,” the report says. “As work evolves at higher rates of change among sectors, locations, activities, and skill requirements, many workers may need assistance in adjusting to the new age.”
That is, more assistance than they’ve been afforded up to now and more direct help than the rhetoric of trade, immigration, and overregulation might allow.