Are We All Going to Lose Our Jobs in This Technological Revolution?

Looming over all industries, the severe tension between rapid technological evolution and relatively slow adaptation of the workforce creates universal potential unemployment challenges. There is no perfect remedy readily available, but better education and career training remain the best solution for diversified workforce.

Capital and labor intensive industries that used to account for the bulk of many economies are undergoing lackluster growth and even retrenchment in today’s digital economy. Over the last decade, the percentage of the world’s gross domestic product (GDP) contributed by industries that include manufacturing, mining, retail & wholesale, etc., have been persistently declining. The transition of the global economy to a digitalized and automated economy has profound and unresolved implications on labor across the world. The severe tension between rapid technological evolution and relatively slow adaptation of the labor has manifested into economic challenges like unemployment as well as political upheavals in Europe and the United States. Can the world still catch up with technological development to avoid an unemployment crisis?

Employees in extraction, construction, retail and wholesale suffer the most from technological development. In the 2016 U.S. presidential election, votes of those from the “rust belt”, the deindustrialized area stretching across several swing states, secured Donald Trump’s victory. For many working class voters, voting for Trump, whose economic policies were widely criticised before the election for being unrealistic, was an expression of discontentment rather than support. The unemployment rate in industries has been significantly higher than unemployment of white collar professions, at times even twice higher. Industrial workers also bore the brunt of the economy’s volatility in financial crises (Fig. 1). Workers limited by their professional skillsets could hardly switch to industries with higher job security.

 

Fig.1 Unemployment Rate of the U.S. by Sector in the Last Decade. (FRED, 4.6.2017)

Meanwhile, jobs with higher entry barriers are not immune to the impact of new technologies, despite being more resistant to the blow of technological revolution. Artificial intelligence that specializes in mining legal documents for evidence could replace entry-level lawyers in the future. NHS GP nursing doctor jobs are replaced by robots. Apart from lawyers, tens of thousands of doctors and nurses in the U.K. are also predicted to lose their jobs to robots by 2030. Robots and artificial intelligence are less prone than human beings to distractions and negligence when performing repetitive and tedious cognitive work. The wider use of these technologies in basic information and data analysis poses a considerable potential threat to white-collar employees today. Having said that, unlike manufacturing, mining, and sales, higher value-added industries have more potential of creating new employment opportunities with new technologies. The cost of professional services such as business, legal and medical consultation could be significantly flattened by new technologies to open up new markets. Professional industries could potentially have a higher demand for more productive employees in the long term.

It would be wrong to perceive a dichotomy where the less skilled are left out in technological development and only the more skilled could stand a chance to surf on the wave of new technology. Technology development presents other learning opportunities for the temporarily less skilled, too. Research by Professor Ann Bartel and Professor Nachum Sicherman from the National Bureau of Economic Research shows that, at higher rates of technological change, employers are significantly more willing to invest in training less skilled non-production workers than more skilled workers. The proportion of workers receiving training also increases. Due to the rapid evolution of technologies, technical skills learned through formal education are more likely to become obsolete at work. This indirectly levels the playing field for those with lower education qualification who used to be significantly disadvantaged.

Fig.2 Unemployment Rate of the U.S. by Education Qualification in the Last Decade. (FRED, 4.6.2017)

Besides on-the-job training, sprouting online courses and bootcamps present alternative education and training opportunities to the unemployed. According to Course Report, a site that tracks the outcomes of computing bootcamps, 1143 graduates from 52 bootcamps who respond to Course Report’s survey earn 64% (or $26,021) more on average than before attending the bootcamps. With a female attendance rate that is almost three times higher than undergraduate computer science programs, bootcamps have an edge in empowering female employees who want to catch up with the digital economy.

Although statistics of alternative venues for upgrading professional skills seem dazzling, the alternative education industry is still in its developing stage, troubled by unqualified educators and the lack of transparency and regulation. Many for-profit bootcamps do not train the students as effectively as they promise to. Maggie Johnson, Google’s director of education and university relations, has made it clear in a statement that the top company in the software industry does not consider training provided by bootcamps adequate. Robyn Blum, a spokeswoman for Cisco, also stated that “We generally don’t hire from coding schools.” Inferior for-profit bootcamps and private profession courses are still rampantly growing.  Their poor track record undermines the reputation of the entire nascent training industry and confidence of employers. It would be a pity if the potential of alternative career training could not be fully materialized due to malpractice of early participants in the industry. Currently, the federal government of the United States, where online courses and bootcamps are most popular, is stepping up to tighten the regulation and providing financial aids to students of MOOCs (massive open online course) and bootcamps. It still remains unclear whether the federal financial incentives would provoke more unqualified educators to enter the market or encourage employees to upgrade professional skills through alternative training. The success of government incentive still depends on adequate regulation that purifies the ecosystem of the alternative education industry.

While those seeking a job with government help are trying hard to bridge the gap between job requirements and their obsolete skills, there are other urgent unaddressed concerns over unemployment. Developed countries face aging populations and workforces. Last year, the Singapore government raised the re-employment age to 67, one of the highest in the world. However, merely raising retirement and re-reemployment age does not resolve the dire employment challenges faced by older workers. The preference for younger employees is reinforced by the constantly changing technologies in informative and programming industries. Miki Malul from Ben-Gurion University points out that rapid technology development discourages older workers from investing in learning new skills and catching up with new technologies. Malul argues that technology changes could surprisingly impede production increase as a sizeable portion of the workforce is excluded by new technologies. He proposes subsidizing old technologies to keep older workers working. The proposal could maximize economic efficiency in the short term, but compromises technological evolution and productivity development in the long term.

While the gap between constantly changing technologies and the skillsets of employees is widely recognized, others argue that the mismatch is not the main cause for persistent unemployment. Rand Ghayad and William Dickens from Northeastern University discover that the long-term unemployed are searching for jobs less intensively. This is not because of skillset mismatches, but more likely due to “unprecedented amounts and durations of unemployment benefits.” Excessive social welfare support acts as disincentives for upgrading one’s employability and seeking employment, perpetuating unemployment. While social safety nets are necessary to support those transitioning between jobs and those permanently disabled, limited government funds can be better utilized by investing in supporting and regulating education programs than further increasing unemployment benefits.

It is not the first time that human beings have witnessed rapid technological development. Ever since the first Industrial Revolution, workers are compelled to adapt to new means of production. The world has managed to adjust to previous technological revolutions.

The latest technology development is the most drastic in history, promising the most opportunities and even higher productivity. On the other hand, it presents the greatest unemployment challenge. While there is no need to panic for the rapidly changing technologies, both the workers and the government have to react strategically to prevent potential economic and social issues.