When Jobs Disappear

As technology changes the future of employment, radical solutions may be necessary, said panelists at a recent Richman Center event.

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The Richman Center for Business, Law, and Public Policy at Columbia Business School recently hosted a panel discussion, “The Future of Job Displacement in the US and Worker Protection,” which posed an increasingly disturbing thesis: Despite campaign rhetoric, no amount of onshoring or dismantling of trade pacts can reverse the replacement of humans by innovations such as driverless cars, automated payroll, robotic manufacturing, and self-checkout aids.

Here’s what we think we know:

  • Technology could already replace nearly half of current American jobs, according to separate research from McKinsey & Co. and Oxford Martin School. The World Bank says that emerging market displacement could be even more catastrophic, with automation substituting for two-thirds of current jobs in India and China in the next decades.
  • Just as unsettling, the vast global middle-class stands to bleed income as the workforce transitions from full-time jobs with benefits to part-time and contract employment. Think the income-inequality gap is bad now? It’s set to soar.

Opposite-end-of-the-spectrum scenarios call for either halcyon days of leisure spent exploring the arts and enjoying family time or “street protests like we haven’t seen since the 1960s,” in the words of one panelist.

In reality, “no one knows what the numbers of displacement could be,” said Andrew Stern, a senior fellow at the Richman Center. But “we need to prepare just like the military and business sectors do for a variety of scenarios. The social compact today needs to account for a massive tsunami of disruption of the labor market.”

A question – perhaps the question – of the 21st century is, how can government, business, education, and workers insure enough jobs remain to shelter, feed, and clothe the masses? A related dilemma: whose responsibility is it to reshape the future? “Until this election, nobody has been held responsible for the future of jobs,” said Gad Levanon, chief economist of North America for The Conference Board.

Here are five takeaways from the panel discussion:

1. A Universal Basic Income (UBI) plan could add stability and replace some lost middle-class wages. As championed by Stern in his new book How a Universal Basic Income Can Renew Our Economy and Rebuild the American Dream (2016, PublicAffairs), the UBI, a government-sponsored program similar to Social Security, would give each citizen between ages 18 and 64 a monthly stipend of $1,000, with no strings attached. This basic safety net would provide security for entrepreneurs to start businesses, students to return to school, and allow workers to go on strike. “We know it could work because millions of people already experiment with parental basic income,” said Stern. “Because I pay for my children’s housing and basic needs, they have the appropriate stability to go to school and take risks.”

Although the audience questioned the political expediency of Stern’s $1.7 trillion solution, he is convinced that the government can find the means if it has enough motivation, possibly sparked by social unrest. “We found a way to bail out the banks,” he said. “Plenty of money is available through transaction taxes,” for example.

And the approach may not be as far-fetched as it at first appears, Stern continued. He cited Alaska, which is already experimenting with a form of UBI as a way of distributing the state’s oil income. “Each citizen gets $1,500 to $2,500 at the end of the year as their share,” he said.

2. Globalization may give way to localization in an automated future. “Technology is poised to create more distributed economies. We have the technology to produce more local goods and grow local food,” said Steven Berkenfeld, managing director of Barclays.

Although localization efforts will rely more on automation than labor, the effort could still create good jobs. Added Stern: “When the cost of labor is not so much of an issue, companies will weigh those jobs against transportation and security costs.”

Even Levanon, who said the majority of economists scoff at the worst-case job erasures that technologists and futurists seem to predict, agreed that certain industries and geographic pockets stand to be skewered by technological changes, such as the high-unemployment states of West Virginia and Mississippi.

“We have to learn how to bring more jobs to areas most upended by technology,” said Levanon. With widespread use of technologies such as Skype, “we can do much more with remote jobs. We also have to find ways to increase mobility,” or to encourage people to move from areas of low employment to places where more jobs exist.

3. Training, virtually useless against the technological tide, has to be rethought. Stern pointed out that teaching an individual to be a computer programmer, for example, is much more time consuming and expensive than retraining a worker to take a new space on a more sophisticated assembly line. Further, companies are less likely to hire a 50-year-old novice programmer than to pay a lesser wage to a 20-year-old college graduate.

Stern indicated that worker education is more effective when employers take the initiative for teaching workers to do a specific job rather when government runs amorphous education initiatives with no guarantees of employment at the end of the program. Incentives such as tax breaks could encourage companies to retrain and hire workers. So could penalties such as a tax on profitable companies that choose to lay off workers.

4. The rest of the world will catch up with the United States in terms of lost jobs and displaced workers. And that’s not a good thing. Today, profitable American companies are more likely to lay off employees than competitors in countries where jobs are better protected. “You can’t pump your own gas in Brazil because laying off gas station workers would cost 25,000 jobs,” said Berkenfeld.

But companies in more protected economies are also reluctant to make new hires. Panel members pointed out that youth unemployment in many areas of Europe is staggering, generating long-term problems.

5. Family and community dynamics could change in a world that needs fewer workers. Noting that “companies don’t pay for five days of work when you only work two,” Berkenfeld suggested cash-strapped individuals may learn to pool resources again, with multiple generations once more living in a common house.

“Unemployment is not a poor-people problem anymore,” said Stern. “In the past when people worried about jobs, they told their children to go to college. That advice doesn’t work now.”

The panelists saw some positive signs in, of all places, politics. Stern talked about “a confluence of libertarian and progressive views,” that could lead to change, pointing to US Speaker of the House Paul Ryan’s push to provide block grants to states to distribute as they see fit, and the simultaneous popularity of former presidential candidate Bernie Sanders.

Most political solutions to date have taken the form of economic stimulus to encourage companies to expand. That approach, while temporary, could do both workers and society a boatload of good—if it is enacted on a broad enough scale. “If we transition from infrastructure that is old, dirty, dumb, and vulnerable to new, clean, smart, and resilient carbon-neutral infrastructure, we could put hundreds of millions of people to work worldwide,” said Berkenfeld.

“Wealthy people are smart,” he said, addressing the issue of why society would agree to pay for mass employment projects. “They would rather pay for their car windows to be washed than broken.” Faced with street protests over income inequality, he predicted, the 1 percent will turn pragmatic, looking for ways to provide a better standard of living across the board. “When their stability is threatened they will act.”

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