Amid the shrill and irritating noise of politics these days, there have been a few news stories reporting on the progress of robotics; especially robotic cars. Robots are just one of the engineering outgrowths that are part of Artificial Intelligence and high tech automation systems. Besides cars, their applications run the gamut from the military, to manufacturing, to health care, to agriculture, to running the vacuum and cooking the meals. And engineers are hard at work finding and developing more AI applications.
For private sector businesses, AI and its emergent technology provide a path to higher profits. Robots replace workers without the need to provide benefits like health and life insurance, retirement plans, vacation time, or sick leave. Of course, they still need someone like Dorothy to come along from time to time with her oil can to lubricate their joints. But with workers often being the single greatest expense of most enterprises, anything to help reduce labor costs is a means to higher profits.
Back in the 1950’s, at age 13 or 14, I worked in what we used to call a “filling station.” My job was to clean windshields, check the oil and the tire pressure, and, of course, operate the gas pump. About that same time, “self-serve” stations came into being. The old full-service stations like the one I worked in couldn’t compete; consumers preferred the convenience over the quality of service. Had I had kept the job (I didn’t because I was a teenager at the time), it would have eventually been replaced with a self-serve gas pump – essentially a robot.
Of course, many other jobs were created as self-service stations started popping up all over the place. This meant that the number of construction workers increased as did the number of factory jobs needed to manufacture the pumps. All of this activity lead to more jobs being created than those displaced like the one yours truly had.
So, in the past, as new technologies were developed and made part of the workplace, displaced workers were retrained and absorbed into new industries. As a result, there was a net gain in employment that, for the most part, kept pace with automation.
But today there is a concern that the ever-expanding AI technology will cause a net loss in employment and, if fact, may have already done so. Workers who are not absorbed into the jobs created by the new AI systems are added to the line at the unemployment office. And unemployment means that wages and salaries fall, which means demand for goods and services will drop as well. And without demand, business profits go down, economic expansion goes down, and tax revenues fall. And that results in a paradox.
To underscore this concern, the Center for Business and Economic Research at Ball State University, has reported that, of the 5.7 million manufacturing jobs lost between 2000 and 2010, a full 85 percent – 4.8 million – were due to automation. They estimated that only 13 percent, or about 741,000 job losses were due to foreign trade.
But this goes beyond manufacturing. A 2015 report by McKinsey & Co., estimates that expanding AI technology could destroy 45 percent of all jobs in the United States resulting in a loss of two trillion dollars in annual wages. That’s trillion with a “T.”
What we have here, then, is a paradox. Using AI, including robots, to increase productivity and profits saves labor costs for industry, but replacing jobs with automation faster than displaced workers can be reabsorbed back into the labor force causes an increase in unemployment and a downward economic spiral.
This presents a conundrum for president Trump and his laudable efforts to “bring jobs back to America.” As the Ball State report indicates, it’s not trade agreements that are causing job losses here, it’s AI, automation, robotics.
And this is a world-wide concern. A report issued by Citi GPS in January 2016, “Technology at work: V2.0“, concludes that 35 percent of jobs in the UK are at risk of being replaced by automation, In Japan, it’s 49 percent. In India, it’s 69 percent. In China, it’s as high as 77 percent. And across the 35 industrialized nations that make up the Organization for Economic Co-operation and Development” an average of 57 percent of jobs are at risk.
The following graphics are from the Citi GPS report and show the potential impact on selected countries and then on cities in the U.S.:
So, it seems clear that the potential macroeconomic dilemma presented by AI and its related automation systems present a great challenge to the nation and the world. The old trope that innovation is a job creator may well become more of an illusion than a reality.
Given the extent of globalization these days, a remedy or remedies, if there are any, will be difficult to find. I suppose the level in education, especially in the areas of technology, would help future workers to be better prepared to enter the work force where automation is expanding. A similar education for workers displaced by robotics so they can stay employed.
Of course, such education and retraining will require some level of subsidy; mostly from government. And that means taxes.
On that point, Microsoft Corp. founder Bill Gates made a splash in a recent interview, when he suggested that robots should be taxed in order to help humans keep their jobs:
“Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”
Gates’ suggestion does make a little sense. The problem though is the private sector. At the moment, they somewhat myopic – robots replace the cost of labor and that savings, in turn, goes to the stockholders. They are not going to give that up easily. That’s hardly fair to honest, hardworking laborers. But, businesses also make the claim that taxing the robots will inhibit innovation because the savings would be more or less income natural.
In an interview on the Larry King show back in June 2016, the celebrated physicist Stephen Hawking expressed concern about the future of automation.
“I don’t think advances in artificial intelligence will necessarily be benign. Once machines reach a critical stage of being able to evolve themselves we cannot predict whether their goals will be the same as ours. Artificial intelligence has the potential to evolve faster than the human race.”
But who knows. As Yogi Berra once said, “Predictions are heard. Especially about the future.”
This is a revised and expanded version of an Op-Ed by the Author that appeared in the Joplin Globe on February 26, 2017.