Opportunities and Responses Position Paper Topic: Opportunities and Responses Position PaperReading:Model UN Preparation. “Position Papers.” Online at this

Opportunities and Responses Position Paper Topic: Opportunities and Responses Position PaperReading:Model UN Preparation. “Position Papers.” Online at this link.West, Darrell M. “Chapter 4: Rethinking Work,” “Chapter 5: A New Social Contract,” and “Chapter 6: Lifetime Learning.” The Future of Work: Robots, AI, and Automation. Washington, D.C.: Brookings Institute Press, 2018. Pages 63-124. FOUR
RETHINKING WORK
IN EDWARD BELLAMY’S classic Looking Backward,
the protagonist, Julian West, wakes up from a 113-
year slumber and finds the United States in 2000 has
changed dramatically from 1887. People stop working
at age forty-five and devote their lives to mentoring
other people and engaging in volunteer work that
benefits the overall community. There are short
workweeks for most people, and everyone receives full
benefits, food, and housing.
The reason is that the new technologies of the peri-
od have enabled people to be very productive while
working just a few hours. Society does not need a
large number of employees, so individuals can devote
1 of 39
? r
most of their waking hours to education, personal in-
terests, volunteering, and community betterment. In
conjunction with periodic work stints, they have time
to pursue new skills and personal identities that are
independent of their jobs.
In the current era, industrialized societies may be
on the verge of a similar transition. Robotics and ma-
chine learning have improved productivity and en-
hanced the economies of developed nations. Artificial
intelligence (AI) has advanced into finance, trans-
portation, defense, and energy management. The In-
ternet of Things (IoT) is facilitated by high-speed net-
works and remote sensors to connect people and busi-
nesses. In all of this, the possibility of a new era that
could improve the lives of many people appears on the
horizon.
To take advantage of this moment, however, people
need to rethink the concept of work. In this chapter, I
look at the impact of emerging technologies on con-
ventional business models and the workforce. I dis-
cuss how technology affects employment and the ex-
tent to which it creates or takes jobs. Developments
such as the sharing economy already emphasize jobs
that lack traditional health or retirement benefits. In
the future, we need to figure out how to provide bene-
fits to those whose employment does not provide
them, broaden the notion of work to include volun-
teering, parenting, and mentoring, and expand
leisure-time activities.
2 of 39
IMPACT ON THE WORKFORCE
Many contemporary firms have achieved broad eco-
nomic scale without a large number of full-time em-
ployees. They outsource work tasks to contractors and
subcontractors (both domestic and foreign), and
maintain lean in-house operations. According to the
MIT economist Andrew McAfee, “We are facing a time
when machines will replace people for most of the
jobs in the current economy, and I believe it will come
not in the crazy distant future.”2 Companies have
found they do not need nearly the number of workers
as the biggest businesses fifty years ago did because
software platforms and the outsourcing of labor can
deliver effective services without requiring many full-
time workers.
As an illustration, table 4-1 compares the market
capitalizations and workforces of the largest firms in
1962 and 2017. In the earlier period, AT&T had
564,000 U.S.-based full-time employees and stock
market capitalization of $2.5 billion, which is equiva-
lent to $20 billion in 2017. Meanwhile, General Mo-
tors had 605,000 workers and $1.5 billion in stock
market capitalization, which is equivalent to $12 bil-
lion in current dollars.3
The comparison with the top business firms in
2017 is quite stark. If one looks at the market capital-
ization and number of employees of current firms,
most companies require relatively few full-time work-
3 of 39
ers to sustain very high valuations. As of mid-2017,
Apple was the leading business, and it had only
116,000 U.S.-based full-time workers and a market
value of $800 billion. That is forty times the valuation
of AT&T in 1962 but only one-fifth the number of full-
time workers. In regard to General Motors, Apple in
2017 had sixty-seven times the valuation and one-fifth
the U.S.-based full-time labor force.
Table 4-1 Market Capitalization and Total Employees
for Top Firms, 1962 and 2017
Total
Market cap
employ-
Largest
companies (in $ billions)
ees
1962
AT&T
20
564,000
General
12
605,000
Motors
2017
Apple
800
116,000
679
73,992
Google/Al
phabet
Microsoft
540
114,000
Facebook
441
18,770
Oracle
186
136,000
4 of 39
Cisco
157
73,390
Priceline
92
20,500
Qualcomm
85
30,500
Source: The 1962 number for total employees comes from
Compustat via Jerry Davis, “Capital Markets and Job Creation
in the 21st Century,” Center for Effective Public Management,
Brookings Institution, December 2015, p. 7. The 1962 market
capitalization values for General Motors and AT&T were com-
puted by the author. The 2017 market capitalizations and em-
ployee figures are quoted in Mary Meeker, “Internet Trends,”
Kleiner Perkins, 2017.
In 2017, Google needed only 73,992 workers, for a
valuation of $679 billion; Microsoft had 114,000 em-
ployees and a valuation of $540 billion; and Facebook
had 18,770 employees and a market capitalization of
$441 billion. The technology company with the largest
number of employees is Oracle, with 136,000 people,
yet it has a much higher stock valuation and smaller
workforce than the 1962 levels of AT&T and General
Motors. 4
The combination of large firms with small U.S.-
based full-time workforces is typical of the twenty-
first-century economy. Companies no longer need half
a million employees to perform essential tasks. They
can achieve high valuations and function perfectly
well with a small workforce, an external supply chain,
and a reliance on independent contractors or the out-
5 of 39
sourcing of work to other countries. When this sce-
nario is repeated many times across numerous com-
panies, we have entered a situation in which the num-
ber of U.S.-based full-time employees required by in-
dividual firms is quite small, and this is especially true
of firms working in the digital economy.
The new jobs that are created today tend to be in
online ventures, not brick-and-mortar establish-
ments. E-commerce positions now constitute 8.4 per-
cent of U.S. retail sales positions, and much of the
current retail employment growth is occurring in that
area. For example, in 2017, e-commerce gained
178,000 new jobs, while traditional department stores
lost 448,000 jobs.5 Similar trends have unfolded
every year since 2010 in the United States. This shows
how dramatic the transformation of the U.S. work-
force has been, and how the number of jobs lost in the
retail sector exceeds the number of new jobs being
created.
The changing employment situation is illustrated
dramatically by the case of prime-age male workers,
traditionally the majority of the U.S.-based full-time
workforce. Figure 4-1 shows the participation in the
civilian labor force by males aged twenty-five to fifty-
four years from 1948 to 2017. Following a peak of 98
percent in 1954, the rate fell steadily to 88 percent in
mid-2017. The situation with women aged twenty-
five to fifty-four years is different as their participa-
tion has increased in recent decades. In 1948 it was
6 of 39
around 35 percent, but by mid-2017 it had risen to 73
percent as more women joined the workforce.7
Much of the falloff in male participation rates in
the workforce has occurred among those with a high
school education and among African American men, a
finding that underscores the shrinking economic for-
tunes of these demographic groups. A report issued by
the Obama White House in June 2016 identified a
lessening in labor demand brought on by technology
as an important source of this decline. It noted, “This
reduction in demand, as reflected in lower wages,
could reflect the broader evolution of technology, au-
tomation, and globalization in the U.S. economy.
The technology factor has also been highlighted by the
Brookings Institution scholars Eleanor Krause and Is-
abel Sawhill, who argue that “the portion of prime-age
men (ages 25 to 54) in the labor force has been in de-
cline…. Men’s rates have fallen about 8 percentage
points over the past 60 years.”9 According to them,
the combination of increased technology and trade
has reduced demand for young and middle-aged male
employees.
»8
Figure 4-1 Prime-Age Male Participation in the Civil-
ian Labor Force, 1948–2017
7 of 39
Percent
98
96
94
92
90
88
86
1948
1968
1988
2000
2004
2008
2012
2016
Source: Bureau of Labor Statistics, Current Population Survey,
1948-2017
Others worry about the impact of emerging tech-
nologies on worker prosperity. An International Mon-
etary Fund study found that “half the decline in work-
ers’ share of income in the developed world can be at-
tributed to advancing technology.”10 The report docu-
mented how worker incomes have suffered over the
past several decades and that the decline in union
power weakened workers’ bargaining power in signifi-
cant ways.
In a number of fields, technology is substituting for
labor, and this has dramatic consequences for work-
force participation and middle-class jobs. As the Cor-
nell University engineer Hod Lipson points out, “For a
long time the common understanding was that tech-
nology was destroying jobs but also creating new and
better ones. Now the evidence is that technology is de-
stroying jobs and indeed creating new and better ones
but also fewer ones.
The technologist Martin Ford has a stern warning
regarding the impact of technology on the workforce.
“11
8 of 39
In his 2009 book, The Lights in the Tunnel: Au-
tomation, Accelerating Technology, and the Econo-
my of the Future, he writes, “As technology acceler-
ates, machine automation may ultimately penetrate
the economy to the extent that wages no longer pro-
vide the bulk of consumers with adequate discre-
tionary income and confidence in the future. If this
issue is not addressed, the result will be a downward
economic spiral.”12
A survey of AI experts by researchers at Yale Uni-
versity and Oxford University found that technical
specialists believe a dramatic workforce transforma-
tion will take place over the next few decades. As not-
ed in their report, “Researchers predict AI will outper-
form writing high-school essays (by 2026), driving a
truck (by 2027), working in retail (by 2031), writing a
bestselling book (by 2049), and working as a surgeon
(by 2053). These experts believe there is a 50% chance
of AI outperforming humans in all tasks in 45 years
and of automating all human jobs in 120 years.”
As an indication of coming changes, commercial
firms have discovered that robots can improve the ac-
curacy, productivity, and efficiency of operations com-
pared to the human performance. During the global
recession of 2008-09, many businesses downsized
their workforce for budgetary reasons. They had to
find ways to maintain operations through leaner
workforces. Business leader John Hazen White of
Taco Comfort Solutions in Rhode Island had 500
“13
9 of 39
workers for his $30 million business before the reces-
sion and now has 1,000 employees for a firm that has
grown to $300 million in revenues. He did this by au-
tomating certain functions and boosting productivity
in his factories. 14
The U.S. Bureau of Labor Statistics (BLS) compiles
future employment projections. In its 2015 analysis,
the agency predicted that 9.8 million new positions
would be created by 2024. This amounts to a labor
force growth of about 0.5 percent per year. Figure 4-2
shows the distribution by sector for the period 2014 to
2024. The health care and social assistance sector is
expected to grow the most, at a projected annual rate
of 1.9 percent, or around 3.8 million total new jobs
over the decade. That is about one-third of all the po-
sitions expected to be created.15 Other areas that are
likely to experience growth include professional ser-
vices (1.9 million), leisure and hospitality (941,000),
construction (790,000), trade (765,000), state and
local government (756,000), and finance (507,000).
Interestingly, in light of technological advances, the
information sector is one of the areas expected to lose
jobs. The BLS projects that about 27,000 jobs will be
lost in the information sector over the coming decade.
Even though technology is revolutionizing many busi-
nesses, it is doing so by transforming operations, not
by increasing the number of jobs. Technology can
boost productivity and improve efficiency, but it does
so by reducing the number of employees needed to
10 of 39
generate the same or higher level of production.
Figure 4-2 Future Employment Projections by Sec-
tor, 2014-24
Health Care
Professional
Construction
Leisure
State Government
Finance
Education
Trade
Transportation
Mining
Information
Agriculture
Federal Government
Manufacturing
I
-1,000
0
1,000
2,000
3,000
4,000
Millions
Source: Bureau of Labor Statistics, “Employment Projections,”
December 8, 2015.
Manufacturing is another area thought likely to
lose jobs. Manufacturing historically has been a big
employer of prime-working-age men, and the BLS ex-
pects American manufacturing to lose 814,000 jobs in
coming years. Other sectors losing jobs include the
federal government, which is expected to shed
383,000 positions, and the agriculture, forestry, fish-
ing, and hunting sector, which is projected to drop
111,000 jobs.16
THE ESTIMATES OF JOB IMPACT
11 of 39
Since BLS numbers are projections, they likely under-
estimate the disruptive impact of digital develop-
ments. It is hard to quantify the effect that introduc-
ing robots, AI, and sensors will have on the workforce
because the technology revolution is still in an early
stage. It is difficult to be definitive about emerging
trends since it is not clear how they will affect various
job sectors.
Nevertheless, there are computations of the likely
impact of computerization on many occupations. The
Oxford University researchers Carl Frey and Michael
Osborne claim that technology will transform many
sectors of life. They studied 702 occupational group-
ings and found that “47 percent of U.S. workers have a
high probability of seeing their jobs automated over
the next 20 years.”17
According to their analysis, telemarketers, title ex-
aminers, hand sewers, mathematical technicians, in-
surance underwriters, watch repairers, cargo agents,
tax preparers, photographic process workers, new ac-
counts clerks, library technicians, and data entry key-
ers have a 99 percent of having their jobs computer-
ized. At the other end of the spectrum, recreational
therapists, mechanic supervisors, emergency manage-
ment directors, mental health social workers, audiolo-
gists, occupational therapists, health care social work-
ers, oral surgeons, supervisors of firefighters, and di-
etitians have a less than 1 percent chance of seeing
their tasks computerized. Frey and Osborne base their
12 of 39
analysis on the different levels of computerization,
wage levels, and education required in different
fields.18
A Bruegel analysis found that “54% of EU jobs [are]
at risk of computerization.” Using European data to
extend the Frey and Osborne analysis, they argue that
job losses are likely to be significant and people
should prepare for large-scale disruption.19 Mean-
while, a McKinsey analysis of 750 jobs concluded that
“45% of paid activities could be automated using ‘cur-
rently demonstrated technologies’ and … 60% of occu-
pations could have 30% or more of their processes au-
tomated.”20 The occupations the report considered
most susceptible to automation included machine op-
erations, medical appliance technicians, and sewing
machine operators.
To show the economic impact of workplace au-
tomation, researchers have examined the financial
ramifications for wages and productivity. The activi-
ties most likely to be automated are “physical activi-
ties in highly structured and predictable environ-
ments.” Overall, these kinds of jobs “make up 51 per-
cent of activities in the economy accounting for al-
most $2.7 trillion in wages.’
921 On the plus side, au-
tomation could increase productivity by 0.8 to 1.4 per-
cent each year, and therefore contribute to economic
growth.
A more recent McKinsey Global Institute report,
“Jobs Lost, Jobs Gained,” found that 30 percent of
13 of 39
“work activities” could be automated by 2030. Among
the jobs most at risk were positions in fast-food ser-
vice, finance, machinery operation, transportation,
mortgage processing, accounting, and paralegal work.
Overall, the report writers estimated that up to 375
million workers worldwide could be affected by
emerging technologies. 22
Other specialists are worried about job displace-
ment. A Pew Research Center study asked 1,896 ex-
perts about the impact of emerging technologies. It
found that “half of these experts (48%) envision a fu-
ture in which robots and digital agents [will] have dis-
placed significant numbers of both blue- and white-
collar workers—with many expressing concern that
this will lead to vast increases in income inequality,
masses of people who are effectively unemployable,
and breakdowns in the social order. “23
Researchers at the Organization for Economic Co-
operation and Development (OECD) focused on
“tasks” as opposed to “jobs” and found fewer job loss-
es. Using task-related data from twenty-one OECD
countries, they estimated that “9% of jobs are au-
tomatable.” The range was 6 percent in Korea to 12
percent in Austria. Although their job loss estimates
are well below those of other experts, they concluded
that “low qualified workers are likely to bear the brunt
of the adjustment costs as the automatibility of their
jobs is higher compared to highly qualified
workers.”24
14 of 39
Despite all the analysis, there remain disagree-
ments over the impact of emerging technologies. For
example, in their highly acclaimed book, The Second
Machine Age: Work, Progress, and Prosperity in a
Time of Brilliant Technologies, the economists Erik
Brynjolfsson and Andrew McAfee argue that technolo-
gy is producing major changes in the workforce. Ac-
cording to them, “Technological progress is going to
leave behind some people, perhaps even a lot of peo-
ple, as it races ahead. As we’ll demonstrate, there’s
never been a better time to be a worker with special
skills or the right education because these people can
use technology to create and capture value. However,
there’s never been a worse time to be a worker with
only “ordinary skills and abilities to offer, because
computers, robots, and other digital technologies are
acquiring these skills and abilities at an extraordinary
rate.”25
Economists Daron Acemoglu and Pascual Restrepo
echo these fears with a detailed empirical assessment
of job and wage impact. They examined the impact of
industrial robots on local American job markets be-
tween 1990 and 2007 as robot use was increasing.
They found “large and robust negative effects of
robots on employment and wages across commuting
zones…. According to [our] estimates, one more robot
per thousand workers reduces the employment to
population ratio by about 0.18-0.34 percentage
points and wages by 0.25-0.5 percent.”
“26
15 of 39
Former U.S. treasury secretary Lawrence Summers
is equally pessimistic about the employment impact.
In July 2014 he wrote, “If current trends continue, it
could well be that a generation from now a quarter of
middle-aged men will be out of work at any given mo-
ment.” From his standpoint, “providing enough work”
will be the major economic challenge facing the
world.27 Later he updated his prediction, saying, “We
may have a third of men between the ages of 25 and
54 not working by the end of this half century
[2050].”28 These numbers are double to triple the 12
percent of prime-age men who currently are not
working
However, other economists dispute these claims.
They recognize that many jobs will be lost through
technological improvements but believe new ones will
be created. There may be fewer people sorting items
in a warehouse because machines can do that task
better than humans. But jobs analyzing and mining
big d…
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