Carl Wernicke: The Economy & Automation

Nov 10, 2016

Credit IHMC

Last weekend I visited the clean energy festival downtown. I met the owner of a Tesla, the innovative electric car. He giddily described a phone app that opens his garage, starts the car and backs it out into the driveway.

But just wait, he said. Soon the car will be able to drive him to work, then head out on its own to work for Uber all day before returning to ferry him home.

That points to the economic challenge facing our new president.

We are facing a rapid acceleration of a current trend: the replacement of human workers with machines.

Throughout our economic history, that trend has been positive. Machines have unlocked productivity and created new opportunities. For instance, in 1900, farming required 38 percent of our labor force; today it’s 2 percent.

Yet farms produce far more food today, and all those people now work elsewhere, perhaps building tractors.

And while we often hear that the U.S doesn’t build anything anymore, U.S. manufacturing output ranks second only to China, which has four times our population.

But the employment trend has become disturbing.

By 2012, U.S. output was 2.2 percent higher than before the 2008 crash, and corporate after-tax profits were up 30 percent. Yet employment was down 2.6 percent.

There have always been Cassandras warning that machines kill jobs. They have almost always been proven wrong, although often only after disruptive hardship for many workers.

But something new seems to be happening. Every major industry, from aircraft to automobiles to apparel, is using automation to steadily reduce the man-hours required to make things. Meanwhile, the world is awash in manufacturing capacity, which gets more efficient every day. And by efficient I mean needing fewer people.

One positive trend is the return of manufacturing to the U.S. from overseas. The New York Times wrote about a textile plant that came back to South Carolina. With modern machines, it employs 147 workers to produce what required 2,000 workers in 1980.

So the production is there; the workers are not.

This new world is especially worrisome for people at the margins. When I was young people without a college degree or advanced technical skills could still make a decent living: pumping gas, clerking, driving trucks, as bank tellers and secretaries and in basic manufacturing. Today those jobs are declining, or soon will be.

Earlier I mentioned Uber, a model for the new economy in which people use their own cars as taxis. But those jobs disappear when robot cars arrive, as do the jobs of regular taxi drivers. So do truck driving jobs. Computers have eliminated many secretaries, self-checkout is killing cashier jobs, and ATMs and online banking are reducing teller jobs. And once Amazon’s drone delivery fleet is perfected, what happens at UPS and FedEx? Even fast-food jobs could go; you’ll order and pay electronically and get fresh, hot food from machines. These restaurants already exist in Silicon Valley.

Meanwhile, according to the Pew Research Center, the value of the minimum wage, adjusted for inflation, peaked in 1968. So many jobs are worth less even to those who do have them.

So what comes next? The service sector is expanding, but how many dog walkers, massage therapists, yard workers and party planners can the economy absorb? And is it realistic to think we can retrain 55-year-old truck drivers to be software engineers?

The utopian vision has us all playing golf or learning to paint landscapes while robots do all the work. But the real question is what comes prior to that point.

Sorry, I’m not pretending I know the answers. But there might be some jobs open for anyone who does.