Mike Shedlock

Moments ago, I responded to a reader James from the UK regarding automation on farms. James commented that he only need one laborer where decades ago it took 25 men to do the same job.

James asked "If we displace 90% of the workforce in the next 100 years - and we could well exceed this, given rapidly increasing levels of automation (with humanoid robots becoming commonplace in this time-frame) - how will the aggregate consumer afford to consume the average product? The level of work loss seems likely to exceed the level of new product development."

My Reply to James

History suggests innovation will at some point create more jobs.

We have lost jobs on farms but we gained them on the assembly line. We lost jobs on the assembly line and gained them on the internet. We lost jobs on the internet and ....

And I don't know what's next. I suspect something with energy but I do not know.

If nothing comes, I expect war.

Dark Vision For Jobs

Just as soon as I replied to James, I noticed another email on the same subject. Reader Andrew asked me to comment on the ComputerWorld article Gartner's Dark Vision for Tech, Jobs.

Science fiction writers have long told of great upheaval as machines replace people. Now, so is research firm Gartner. The difference is that Gartner, which provides technology advice to many of the world's largest companies, is putting in dates and recommending immediate courses of action.

The job impacts from innovation are arriving rapidly, according to Gartner. Unemployment, now at about 8%, will get worse. Occupy Wall Street-type protests will arrive as early as next year as machines increasingly replace middle-class workers in high cost, specialized jobs. In businesses, CIOs in particular, will face quandaries as they confront the social impact of their actions.

Machines have been replacing people since the agricultural revolution, so what's new here?

In previous technological leaps, workers could train for a better job and achieve an improvement in their standard of living. But the "Digital Industrial Revolution," as the analyst firm terms it, is attacking jobs at all levels, not just the lower rung. Smart machines, for example, can automate tasks to the point where they become self-learning systems.

Smart machines "are diagnosing cancer, they are prescribing cancer treatments," said Kenneth Brandt, a Gartner analyst. These machines "can even deliver [treatment] to the room of the patient."

Gartner sees all kinds of jobs being affected: Transportation systems, construction work, mining warehousing, health care, to name a few. With IT costs at 4% of sales for all industries, there's very little left to cut in IT, but there is a great opportunity to cut labor.

The companies on the leading edge of this trend include Amazon, which spent $775 million last year to acquire Kiva Systems, a company that makes robots used in warehouses. Google is also on the forefront, with its effort to develop driverless cars. Gartner applies a broader template, and says that the jobs most susceptible to machine replacement involve a range of back-office functions, including transactions, specialization, objectivity, high control, high scale, compliance and science.

This shift will affect employment, said Brandt, at Gartner's Symposium ITxpo. "We believe there will be persistent and higher unemployment."

Is It Different This Time?

Is it different this time? Is Gartner right? Or is innovation-history right?

I have commented numerous times, as early as 2009, if not before, to expect "structurally high unemployment for a decade".

Nonetheless, I have been generally optimistic over longer periods of time. History suggests some innovation will create jobs.

Is innovation-history right? Even if so, will jobs arrive in time? If not, war-history suggests a far darker view.

Are the optimists or the pessimists correct?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2013/10/dark-vision-for-jobs-jobess-future-is.html#vAjrmaUI5x9g1ppy.99


Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.
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