Automation’s Destruction of Jobs: You Ain’t Seen Nothing Yet

Automation–networked robotics, software and processes–has already had a major impact on jobs. As this chart from my colleague Gordon T. Long illustrates, the rise of Internet technologies is reflected in the steady, long-term decline of the labor force participation rate– the percentage of the populace that is actively in the labor market.

The oft-repeated fantasy is that every new wave of technological innovation creates more jobs than it destroys. Not this time: the total number of full-time jobs has stagnated for years, and most of the new jobs that have been created are in low-wage, moderate-skill positions that cannot move the productivity needle much: jobs such as those in the retail and restaurant sectors.

Real wealth isn’t created by printing currency or jacking up stock valuations–it’s created by increasing productivity. As this chart reveals, productivity has stagnated for years. This is a complex dynamic, but we can surmise that the low-hanging fruit of automation has already been harvested, and the addition of jobs that are inherently limited in the productivity gains that can be achieved are core components in stagnating/declining productivity.

I have often discussed productivity and economist Michael Spence’s framework of tradable and non-tradable labor. You want a beer-bottling machine? That’s a tradable good; it can be manufactured anywhere in the world. You want a beer at the local tavern? That is non-tradable–it is a service that can only be provided locally.

The problem is non-tradable labor is typically impervious to productivity gains: even the most experienced bartenders can only draw so many beers and mix so many drinks in an hour. A retail salesperson can only help so many customers in an hours, a gardener can only mow so much lawn in an hour, and so on.

As Gordon and I discuss in our new video program, Robotics & Chronic Unemployment, automation is now entering these non-tradable sectors with a vengeance. Sectors dominated by non-tradable labor include taxis, local trucking, long-haul trucking, delivery services, courier services, retail, restaurants, fast food, and so on.

Every one of these sectors is perched on the precipice of dramatic disruption by automation. Self-driving vehicles, drone deliveries, self-serve kiosks, robotic store clerks that have the entire store inventory available to answer customer questions–the list of automation advances in once-safe sectors is almost endless.

The driver is the need for productivity increases. Labor costs keep rising, especially for labor-overhead expenses such as healthcare insurance and pensions. The cost of living keeps rising, pushing wages higher.

If productivity can’t be increased, the only alternative is to raise prices. But consumers, even at the high end, are reaching their limits. When meals that cost $20 now cost $30, consumers start opting for cheaper alternatives.

Corporations and small businesses alike can only trim production costs and keep prices fixed for so long before profits vanish.

Enter automation. The new technologies are now giving enterprises the tools to increase productivity in these previously low-productivity non-tradable sectors.

While we can collectively fret over this need to increase productivity and the resulting decline in paid labor, the employers have no choice: it’s innovate/automate or die.

Even local, state and federal government agencies and contractors, heretofore impervious to soaring labor and overhead costs, are about to feel the urgent need to automate as a survival technique as budgets turn red in rising deficits and taxpayers revolt against ever-higher taxes.

There are no safe sectors any more because unrestrained cost increases are killing the economy. Healthcare is a runaway train, and all the buffers that enables prices to go to the moon are gone: we can’t even afford the limited Medicare we have now, much less Medicare for All.

It’s not just low-skill jobs that are being destroyed. Look at the automation of financial services and trading. In the near future, if you want human service, you’ll have to pay extra–if it’s available at all.

There is a self-reinforcing dynamic to job losses and stagnating wages. As households receive less income, they must tighten their belts, further pressuring government and private enterprise alike to do more with less costly labor.

Given a choice between a lower-cost automated service and a higher-cost human-labor service, the bottom 95% will have to choose the automated service.

If a fast-food meal at a kiosk is $5 and the one served by a human is $6, which will people choose? I have described the difference in my book Get a Job, Build a Real Career and Defy a Bewildering Economy: this setting is low-touch–the human interaction doesn’t create much value for the customer, so they aren’t willing to pay a premium for it.

the same is true of most non-tradable sectors.

The coming destruction of jobs will be monumental, unstoppable and long-term. Gordon Long and I discuss the effects of robotics and automation on jobs in this 27-minute program:

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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  • Nexusfast123

    His analysis is flawed from one perspective. Productivity is irrelevant if you do not have a ‘competitive’ national economy. No point having tradable goods if no one around the world wants to buy them. This subtlety is not understood by policy makers and so the US economy via current policies continues to declines as it becomes less and less ‘competitive’. Being ‘competitive’ is a fundamental prerequisite to the generation of economic wealth, evolving industrial capacity, creating jobs and balancing trade. Economists are really quite clueless.

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      • Zartan

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  • Zartan

    Government will be paying Basic Income and Healthcare ( to everyone) or Wall Street will be Murdered. Greed is going to cause the whole house of cards to come down. All the Corporate/Governmment idiots forget, if the people are abused, Wall Street Burns, and if that happens it all comes tumbling down.

    Anyone dumb enough to chase the wind for an education that pleases corporate America deserves what they get: $100,000 – dollars of Debt ( no Job Security) and your Industry/field gets Exported to Slave Labor Nations. Now these Corporate Idiots want Robots! Computer Programming and other Industries were entirely exported. Corporations need Regulated. Robots will be Regulated ( limited use) or the US government will go Bankrupt When Wall Street Burns.

    Corporations are comprised of some of the dumbest, most spoiled, and greedy psychopaths that society can produce. You regulate a Prison; and therefore, You regulate corporations. I hear those Corporate psychos do not even pay taxes?

    Americans better get thier acts together. I am really getting sick of the Spoiled American Rich.

  • Zartan

    Robots are SHIT.

    Anyone who has every worked on them knows, they are “very limited” and for specific types of automation, only. Robots cannot think. Robots are also very expensive and require maintenance.

    I am sick of reading idiotic articles like the “above” that fail to understand and internalize the consequences of such stupidity! If Corporate America, a bunch of spoiled children, succeed in such perversion, the American people will hunt them down and Wall Street and all of its exchanges will be burned to the ground. The US government will Go Bankrupt and Rates will Fly.

    Police are powerless when there are 100,000 or more on the streets! The Rich, obviously, cannot add or understand Physics. The Police will Join or Be Trampled!

    God DAMN the Spoiled RICH! If God only took all the RICH and made them WORK! I bet they would repent!

  • Dr Mindbender

    People have not allowed Airlines to Replace Pilots with Robots, which actually could be done, easily, because ROBOTS “cannot think” and nobody wants to be on a Ghost Plane, because the ROBOT did not know what to do. This will be the same in Trucking, and Other fields, because people are not going to allow for “NON-THINKING,” NON-HUMANS to Terrorize the ROAD.

    ROBOT lovers should put the ROBOTS in charge of US Nuclear Early Warning/ Detection Systems and in the Silos. You ( like Robots) are dumb enough to do it, SO “GO FOR IT, pinheads!” I am all for it, because it would be a fitting end for mankind. You are all already “one” MEGA virus away from the end … Let`s expedite the process!

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  • Silverado

    Anything mentioning the mass replacement of (cars, trucks, trains and plane) drivers by robots is pure unadulterated bullshit. I’m not saying the technology isn’t available. I am saying that nobody alive today will ever see driverless big rigs flying down the interstate at speed mixing it up in traffic with mom, dad and the kids in the VW station wagon. Why would WE the ones who have paid for these roadways via taxes etc etc ever allow anyone to put these dangerous and deadly rigs on OUR roadways? Of course if they wish to build a private roadway from say the port to one of their distribution hubs for instance, well fine and dandy. Go right ahead. But driverless big rigs on public roadways?? Never. Pilotless airplanes?? Hauling paying passengers?? Same deal…it’s not going to happen. How about driverless trains?? Oh the railroad companies all have the technology to do that NOW but why do you think they aren’t doing that? That’s because NOTHING beats a pair or even more HUMAN EYES connected to a human brain in the cab or cockpit especially when we’re talking about SAFETY. SAFETY, safety and safety which is lacking in the so-called driverless vehicles. It’s another great example of what I call the Sasquatch Effect. You know, it’s one of those things we keep hearing a lot about. But we’re never going to see one (or it) either.