Saturday, October 3, 2020

Say Goodbye To Millions Of Jobs As Events Unfold

Society Needs Good Jobs 
Many jobs will not be coming back after the covid-19 crisis ends. We can say goodbye to millions of jobs as events unfold and markets evolve. Millions of small businesses being decimated by Fed policies that favor huge companies coupled with a surge in automation bodes poorly for those looking for work. Over the last three decades, robots have become far more common in factories. In many manufacturing facilities, robots do most of the work. A typical factory may contain hundreds of robots working on fully automated production lines, as it rolls by on a conveyor, a product can be welded, glued, painted, and finally assembled at a sequence of robot stations. 

Robots are rapidly replacing humans in performing repetitive and dangerous tasks that people prefer not to do or are unable to do due to size limitations. This includes working in places such as in outer space or at the bottom of the sea where humans cannot survive the extreme environments.  Industrial robots are also used extensively for placing products on pallets and packaging of manufactured goods, for example for rapidly taking drink cartons from the end of a conveyor belt and putting them into boxes, or for loading and unloading machines.

Factories Are Now Full Of Robot Workers
The rise in populism and Trump's trade war has brought front and center how globalization has often put America's self-interest behind that of corporate profits. In an article written in April of 2013, I claimed that if factories filled with mostly robot workers are the future then we should do all that we can to see that they are located in America. While they would not necessarily be a massive creator of jobs they would at least allow us to have control of our own manufacturing and reduce America's trade deficit. Fortunately, several events that have taken place since then have fed into an awareness of the vulnerabilities created in supply chains by allowing control of production to flow into foreign hands.

The changes made in how we tax American companies has been a gift to the rich and added to inequality, however, these changes and the pandemic also have paved the way for companies to build new facilities here in America rather than abroad. This was not the chief goal of the legislation but we should celebrate this small victory. In truth, the structural issues that haunt America's competitiveness far outweigh the benefits of lower taxes. The ugly reality is American companies have little reason to bring jobs home, the logic that lowering corporate income tax will create a massive flow of jobs to our shore is flawed. The tax bill did little to level the playing field when it comes to issues such as healthcare costs and over-regulation. This means these factors continue to act as barriers to doing business in America.

Capital Buys Machines To Reduce Labor
Many people blame the decline of manufacturing jobs in America and other rich countries on outsourcing and the movement of factories to countries where labor is cheaper. That has indeed been the case but with new less expensive robots entering the game even this "cheap labor" is being replaced by machines. By manufacturers replacing workers with machines they are now replacing labor with capital. This means the manufacturing workers who remain are many times more productive than their fore-bearers 50 years ago.

Robert Lawrence of Harvard and Lawrence Edwards of the University of Cape Town argued in "Rising Tide", that factories have gotten spectacularly more efficient.  They produce more goods with fewer people, their "productivity" is rising.  Manufacturing employment is shrinking not mainly because jobs are moving "offshore", but because fewer workers are needed.  In most advanced countries, even those with strong export sectors, manufacturing's share of jobs has plummeted. This is apparent in Canada where from 1973 to 2010, manufacturing's proportion of employment fell from 22 percent to 10 percent.

As software and robots improve they will be able to expand the number of functions that they can perform.  This suggests that sooner rather than later, the only people working in factories in rich countries will be those who had the time and money to get college degrees.  In the past, much of America's middle class consisted of people who started out working in factories with only a high school degree. This path forward is being eliminated with the increased use of robots. How easily human workers can be replaced by robots is a major reason concerns about the increasing use of robots and their role in society is growing.

What has happened in the manufacturing is part of a larger paradox at the heart of America's economy, while we are creating wealth faster than ever before in history, at the same time, millions of people are being left behind. The median worker in the US is poorer now than in the mid-1990s. Not everyone is suffering, skilled workers, for example, are earning more than ever.  So are the very rich, those who own the capital that can be put to work in the world's increasingly person-free farms, mines, and factories.  But those who used to make middle-class wages are increasingly slipping into lower-paying, service-sector jobs.

Automation Is Replacing Off-shoring!
China's largest private employer, Foxconn, which manufactures the iPhone and many other consumer electronics have installed over a million manufacturing robots. This new wave of technology is leading to more and more automation and is rapidly replacing off-shoring as the least expensive way to produce products.  China has been losing jobs to countries with even lower wages. Eventually, "you run out of places to chase the (cheap) labor," says Rodney Brooks, an Australian roboticist. This is where automation and robots enter the picture. 
Years ago, thanks to some very clever engineering, a robot named Baxter cost about $22,000. Today the price is falling and Baxter is getting better. In the US, a person working full-time at what is considered a low wage would still cost an employer around $25,000 a year. The biggest difference is that robots like Baxter will work 24/7 where its human counterpart does not. Brooks indicates that, in many cases, these robots are not yet capable enough to replace a human worker. “The robot is not a one-to-one replacement,” says Brooks. “We see it as a tool for ordinary workers to do better.” His vision includes bringing manufacturing back to the US by replacing with automation some of the repetitive tasks that are currently shipped to China and other emerging markets. 
Not only are we looking at robots taking jobs from people but as robots become more advanced and sophisticated, experts and academics have increasingly explored the questions of what ethics might govern robots' behavior, and whether robots might be able to claim any kind of social, cultural, ethical or legal rights. It is possible that a robot brain will soon exist, others predict robot intelligence breakthroughs by 2050. We must also question the use of robots for military combat, especially when such robots are given some degree of autonomous functions. There are also concerns about technology which might allow some armed robots to be controlled mainly by other robots. The use of robots in military combat raises ethical concerns, the US Navy has funded a report looking into this.

The possibility of robot autonomy and potential repercussions has been addressed in fiction and is likely to become a growing issue. Even as you read this, huge companies such as Amazon are focused on moving to create robots with the goal of reducing its human workforce. Self-driving cars and delivery trucks as well as drones all have the potential to eliminate work that in the past only people could do. One thing is certain, robots are taking our jobs and learning new tricks far faster than us humans. Automation and improvements in robots is a job killer. When you consider how fast the cost of replacing often unreliable human workers is dropping one must take a dim view of the employment picture going forward.


  1. As you note, this is a phenomenon that has been going on for years. The orthodox economic theory about "creative destruction" says that with the destruction of old jobs, new jobs are created. While that may be true it seems each iteration in the last 40 yrs has seen the destruction of better jobs replaced generally by worse jobs. How else does one explain that 70% of jobs created over at least the last ten years pay less than $50k/year and most of those are $15/hr or worse? It would seem that at some point no decent jobs will be created and the whole thing will collapse. It's apparent, at least to me, that some sort of restructuring or reconfiguring of our current economic system will be necessary rather it's the dreaded universal income or some other sort of redistribution. As is usually the case, it won't be until we actually do collapse or it is apparent we will that anything will be done. Thankfully I'll be gone (I hope!)

    Another excellent post.

  2. I’m 57 and currently drawing disability benefits. I would work... if I could, or if I could find work that would match my diminished capabilities.

    For me, ‘Advancing Time’ raises several questions. First, given the work environment described in the article, who is going to hire a 57 year-old man such as myself?

    Second, assuming that I could somehow go back to work, what field of work could I possibly retrain for, given my age? People who are 30 to 35 years younger than me are having great difficulty finding decent work, and they’re better educated and prepared for the modern work world than I am. Whatever marketable skills I might have are wildly out of date and probably not transferable.

  3. The other side of the coin is that in theory the robots make things cheaper, so a dollar goes further. This doesn't always seem to be the case but it sure would be nice if the robots could manufacture an iPhone for $100 in the US and export them to the world.

  4. A robot manufacturing economy is not sustainable for the long term. Short term there are good cost savings. That's what these large companies lose sight of. They lose sight of the forest because of the trees. If you don't have people making money, who will buy your products?