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Quality Digest

Innovation

The Pros and Cons of Destructive Innovation

Automation and job loss

Published: Thursday, December 14, 2017 - 13:03

Each Friday, Mike Richman and Dirk Dusharme co-host Quality Digest Live, a 30-minute web TV show. On QDL they offer up news and commentary about the issues facing quality professionals and their organizations.

Often the topics covered on the show and in our editorial content are somewhat divisive among quality professionals. (Six Sigma, anyone?) Lately we’ve found some passionate disagreement on an issue with real meaning for the future not only of the quality profession, but of workers everywhere. That issue is the ongoing revolution of automation throughout the workplace.

Surprisingly, Mike and Dirk found that they’re rather disagreeable on this issue themselves. During the Dec. 8, 2017, episode of QDL, Dirk broached the subject during our “Off Script” segment. Dirk’s point was that automation will not lead to job losses in the long term. Mike felt that it most certainly will.

There are several parameters to this question that add complexity (and confusion). What kinds of jobs are we talking about, here? Who has benefited from innovation in the past, and what happened to those who lost out? What kind of retraining support is available to help displaced workers move onto even better, higher-value jobs?

A June 25, 2016, Economist article titled “Automation and Anxiety,” which appeared as part of a special report, “The Return of the Machinery Question,” tells the tale of automation and resulting disruption from the perspective of a pair of industries, one quite old, and one much newer:

“There are many historical examples of this in weaving, says James Bessen, an economist at the Boston University School of Law. During the Industrial Revolution more and more tasks in the weaving process were automated, prompting workers to focus on the things machines could not do, such as operating a machine, and then tending multiple machines to keep them running smoothly.”

Bessen adds that this caused a huge increase in output. In 19th-century United States, the amount of coarse cloth a single weaver could produce in an hour increased by 50 times, and the amount of labor required per yard of cloth fell by 98 percent.

“This made cloth cheaper and increased demand for it,” says Bessen. “Which in turn created more jobs for weavers: Their numbers quadrupled between 1830 and 1900. In other words, technology gradually changed the nature of the weaver’s job, and the skills required to do it, rather than replacing it altogether.”

He also points to the example of automated teller machines (ATMs) that, far from leading to a massive loss of bank tellers, actually led to an increase. Although the average number of bank tellers fell from 20 per branch in 1988 to 13 in 2004, ATMs reduced the cost of running a bank branch so much that banks were able open more branches in response to customer demand.

“The number of urban bank branches rose by 43 percent over the same period, so the total number of employees increased,” says Bessen. “Rather than destroying jobs, ATMs changed bank employees’ work mix, away from routine tasks and toward things like sales and customer service that machines could not do.”

In other words, in these two examples, automation destroyed and disrupted some jobs in the short term, but the leaps in productivity that they afforded ultimately created more job opportunities than were lost. This would seem to support Dirk’s stand that automation has no long-term effect on employment.

However, there is another side to the argument posited by David Rotman in a June 12, 2013, MIT Technology Review article, “How Technology Is Destroying Jobs.” Based on converations with Erik Brynjolfsson, a professor at the MIT Sloan School of Management, and his collaborator and co-author Andrew McAfee, who have argued that advances in computer technology are largely to blame for the sluggish employment growth of the last 10 to 15 years, the article argues that the so-called “hollowing out” of the middle class can be directly attributable to the destructive forces of automation.

Rotman writes: “That robots, automation, and software can replace people might seem obvious to anyone who’s worked in automotive manufacturing or as a travel agent. But Brynjolfsson and McAfee’s claim is more troubling and controversial. They believe that rapid technological change has been destroying jobs faster than it is creating them, contributing to the stagnation of median income and the growth of inequality in the United States. And, they suspect, something similar is happening in other technologically advanced countries.”

As proof, or at least as an indicator, of this, Brynjolfsson refers to a chart that shows two lines. One represents productivity, and the other total employment in the United States.


The great decoupling. Credit: MIT Technology review. See entire infographic here.

“For years after World War II, the two lines closely tracked each other, with increases in jobs corresponding to increases in productivity,” writes Rotman. “The pattern is clear: As businesses generated more value from their workers, the country as a whole became richer, which fueled more economic activity and created even more jobs. Then, beginning in 2000, the lines diverge; productivity continues to rise robustly, but employment suddenly wilts. By 2011, a significant gap appears between the two lines, showing economic growth with no parallel increase in job creation.”

Brynjolfsson and McAfee call it the “great decoupling.” And Brynjolfsson believes that technology is behind both the healthy growth in productivity and the weak growth in jobs.

“Far be it from me to argue with a nice chart,” says Dirk. “But there is a difference between weak growth (a “wilting”) in jobs vs. a major decline in jobs and the catastrophic plunge that has been predicted in almost all periods of technology growth. If the argument is that automation is hollowing out the middle or contributing in some way to job loss in the short term then, sure, I can agree with that... for now. But I think my initial point has been lost.”

His point being that in the long term, lost jobs are replaced, and most likely, median income levels are restored. The ATM and textile examples above are just a couple of examples of technology breeding jobs, and there doesn’t seem to be any evidence that the jobs that were created were lower paying jobs. It’s also true that this isn’t happening across all industries. Obviously, there is a decline in manufacturing employment, but interestingly, not that much of a decline in overall employment, which tells us that displaced workers are not all going on unemployment.

So where are those displaced workers going? As Brynjolfsson and others point out, some are going to lower-paying jobs. What they don’t point out is that some are also moving to higher-paying or equal-paying jobs, where their skills are transferable—renewable energy, for instance. Some even are retrained for newer, higher-paying jobs. Is it possible the hollowing out of the middle income is just as much a shift to higher-paying jobs as it is a shift to lower-paying jobs? That’s a question we haven’t seen addressed, and it’s an important one because it points to at least some shift in employment that doesn’t mean a loss in pay.

Another problem with the automation doom-sayers is that they seem to see this as a static system, says Dirk. That all of this automation is happening in a vacuum neither influencing nor being influenced by outside forces. This isn’t true.

Kallum Pickering, a senior UK economist at Berenberg Bank in London, put it nicely in a recent article in The Guardian:

“Producers will only automate if doing so is profitable. For profit to occur, producers need a market to sell to in the first place. Keeping this in mind helps to highlight the critical flaw of the argument: If robots replaced all workers, thereby creating mass unemployment, to whom would the producers sell? Because demand is infinite whereas supply is scarce, the displaced workers always have the opportunity to find fresh employment to produce something that satisfies demand elsewhere.”

For Dirk, this is sound reasoning and not just optimism. “Automation may (or may not) cause a loss of jobs in some sectors, but it will also create jobs, and consistently those jobs have paid at least as much, and often more, than the jobs that were lost,” he says. “As demand for the products produced by automation grows, then so will the demand for people who work in those industries. Will it take a bit for that shift to occur? Yes it will. Will some people be forced out of work and into lower-paying jobs? Yes. But in the long term, either those people or fresh young faces will fill the newer, higher-paying jobs and fill in the hollow. And this will occur because the market will drive it.”

As an illustration of what market forces cause, we got an interesting comment from one of our readers, Bob Delgado, quality manager at Krueger Bearings in Milwaukee.

“Currently in Wisconsin, there are approximately 98,000 jobs available, but only 45,000 people are unemployed...,” wrote Delgado. “With Foxconn coming to Wisconsin in a couple of years, those shortfall numbers will increase if not addressed now. Automation will not be the cause for loss of jobs as there are currently not enough people now to fill current vacancies within the manufacturing and service industries. New technologies, yes, have over time replaced job positions, but they have also created new job positions, expanding job opportunities, education, wage increases, and quality of life.”

So training is what will address both the jobs and the hollowing-out issue. And as we have discussed on QDL many times, many companies are starting their own training and apprenticeship programs to bring new employees into these higher-paying jobs.

“At the end of the day,” says Dirk, “what we see is a constantly shifting landscape where automation displaces jobs, but creates new ones, driven by market forces, and these same market forces also drive the training needed to fill those jobs.”

We want to know: What has been your experience? Did automation take your job, and if so, did you end up in a better, worse, or same type of position?

Discuss

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For 35 years Quality Digest has been the go-to source for all things quality. With more than 30,000 opted-in subscribers, our newsletter, Quality Digest, shares expert commentary and relevant industry resources to assist our readers in their quest for continuous improvement. Our website includes every column and article from the newsletter since May 2009 as well as back issues of Quality Digest magazine to August 1995. We are committed to promoting a view wherein quality is not a niche, but an integral part of every phase of manufacturing and services.

Comments

not so black and white

Innovation has always changed the employment landscape and will continue to do so in the future. From early hominids discovering they could plant the food stocks to feed themselves without daily gathering in the wild, to realizing others could finance ventures for a share of the crop, to monitoring several automated machines from a central location the evolution has progressed.

The more important factor to consider is all of these actions have one purpose in mind. The purpose is survival. I may have the most technologically advanced facility with the most robots and fewest humans, but at the end of the day who is going to buy what I make? The demand side of the supply and demand curve depends upon disposable income. A scant few with lots of money simply will not support a wide spread automation of all work.

The lower middle and middle income brackets are those that create the demand for the product being offered by corporations. When that is forgotten, the corporation forgetting is dooming itself to a short lived life.

 

There are those that will make this mistake but luckily it is a self-fulfilling phenomena. Lower costs, with lower prices, with now clientele leads to the same bankruptcy that high costs do.

Automation and Jobs

If automation does not increase profit, it will not occur (?) 

At what point does technology eliminate the need for a job (the way money does)?

Why not?  What then?  Over population?

Is technolgy "bad?"  Is it preventable?  Should we ask an Amish community?

Technology not bad

My personal thought is that tech in itself is not bad. It is a tool. Also, it isn't preventable. People will always invent and if there is a market for that invention people will use it (hopefully for good).

I don't think even Brynjolfson is saying tech is bad. His fear is that it is being adopted too quickly to be easily integrated into the economy. Which is where I disagree with him.

Dirk