What does the history of previous industrial revolutions teach us about the impact of technologies on jobs? - the destruction of machinery in Britain in the British Industrial Revolution. (18th). although manufacturing technologies made the skills of artisans obsolete, gains from technological progress were distributed in a manner that gradually benefited a growing share of the labour force. Specifically, inventors, consumers and unskilled factory workers largely benefited from mechanization, some property owners stood to benefit from the export of manufactured goods. - the general pattern observed in the nineteenth century, with physical capital providing a relative complement to unskilled labour, while substituting for relatively skilled artisans. Example, the first assembly-line was documented in 1804, it was not until the late nineteenth century that continuous flow processes started to be adopted on a larger scale, which enabled corporations such as the Ford Motor Company to manufacture the TFord at a sufficiently low price for it to become the people’s vehicle. - the idea that technological advances favour more skilled workers is a twentieth century phenomenon: Late 19th, reduced the demand for unskilled manual workers, increased the demand for relatively skilled blue-collar production workers to operate the machinery. With the transport revolution, establishments became larger and served geographically expended markets, managerial tasks increased in number and complexity, requiring more managerial and clerking employees. - Since electrification, the story of the twentieth century has been the race between education and technology. While the typewriter was invented in the 1860s, the early twentieth century, when it entered a wave of mechanisation, with dictaphones, calculators, mimeo machines, address machines, and the predecessor of the computer – the keypunch. Importantly, these office machines increased the demand for the complementary factor – i.e. educated office workers - The Computer Revolution complements more abstract and creative services. Note: Throughout history, technological progress has vastly shifted the composition of employment, from agriculture and the artisan shop, to manufacturing and clerking, to service and management occupations. Hence, in short, technological progress has two competing effects on employment (Aghion and Howitt, 1994). First, as technology substitutes for labour, there is a destruction effect, requiring workers to reallocate their labour supply; and second, there is the capitalisation effect, as more companies enter industries where productivity is relatively high, leading employment in those industries to expand. Like occupations that involve complex perception and manipulation tasks, creative intelligence tasks, and social intelligence tasks are unlikely to be substituted by computer capital over the next decade or two. Is the evidence of the past useful to understand the impact of artificial intelligence of jobs?” as computerisation enters more cognitive domains, this will become increasingly challenging. This raises questions about (a) the ability of human labour to win the race against technology by means of education; and (b) the potential extent of technological unemployment, as an increasing pace of technological progress will cause higher job turnover, resulting in a higher natural rate of unemployment. Effectiveness of robots: - the fact that computers lack human biases is of great value: algorithms are free of irrational bias, and their vigilance need not be interrupted by rest breaks or lapses of concentration. To many such tasks, the unbiased decision making of an algorithm represents a comparative advantage over human operators. AI algorithms are able to process a greater number of financial announcements, press releases, and other information than any human trader, and then act faster upon them Following the declining costs of digital sensing and actuation, ML approaches have successfully addressed condition monitoring applications ranging from batteries to aircraft engines, water quality, and intensive care units (ICUs) Sensors can equally be placed on trucks and pallets to improve companies’ supply chain management, and used to measure the moisture in a field of crops to track the flow of water through utility pipes. This allows for automatic meter reading, eliminating the need for personnel to gather such information Although the extent of these developments remains to be seen, estimates by MGI (2013) suggests that sophisticated algorithms could substitute for approximately 140 million full-time knowledge workers worldwide. Hence, while technological progress throughout economic history has largely been confined to the mechanisation of manual tasks, requiring physical labour, technological progress in the twenty-first century can be expected to contribute to a wide range of cognitive tasks, which, until now, have largely remained a human domain. Many occupations being affected by these developments are still far from fully computerisable, meaning that the computerisation of some tasks will simply free-up time for human labour to perform other tasks. Nonetheless, the trend is clear: computers increasingly challenge human labour in a wide range of cognitive tasks (Brynjolfsson and McAfee, 2011) With improved sensors, robots are capable of producing goods with higher quality and reliability than human labour. For example, El Dulze, a Spanish food processor, now uses robotics to pick up heads of lettuce from a conveyor belt, rejecting heads that do not comply with company standards. Can robots replace humans: - No: occupations that involve complex perception and manipulation tasks, creative intelligence tasks, and social intelligence tasks are unlikely to be substituted by computer capital over the next decade or two. + A human support the robot: worker simply guides the robot arms through the motions that will be needed for the task. Baxter then memorises these patterns and can communicate that it has understood its new instructions. + tasks that relate to an unstructured work environment can make jobs less susceptible to computerisation. For example, most homes are unstructured, requiring the identification of a plurality of irregular objects and containing many cluttered spaces which inhibit the mobility of wheeled objects. + it seems unlikely that occupations requiring a high degree of creative intelligence will be automated in the next decades. + whole brain emulation is unlikely to become operational within the next decade or two. - Yes: + Non-routine manual tasks: As robot costs decline and technological capabilities expand, robots can thus be expected to gradually substitute for labour in a wide range of low-wage service occupations + supermarkets, factories, warehouses, airports and hospitals have been designed for large wheeled objects, making it easier for robots to navigate in performing non-routine manual tasks. Technological advances are contributing to declining costs in robotics. Over the past decades, robot prices have fallen about 10% annually and are expected to decline at an even faster pace in the near future Which poses bigger concerns over the future loss of jobs: artificial intelligence or lack of skills? Intro: as digitization, automation, and AI reshape whole industries and every enterprise,. “Destruction effect” Manual jobs will be replaced; require cognitive skills of humans. the creation of new types of occupations that may not have existed before, as many as 375 million workers globally (14 percent of the global workforce) will likely need to transition to new occupational categories and learn new skills, in the event of rapid automation adoption. (report). Lack of skills Body: Impact of AI and technology over future job occupation Technology adoption can and often does cause significant short-term labor displacement, but history shows that, in the longer run, it creates a multitude of new jobs and unleashes demand for existing ones, more than offsetting the number of jobs it destroys even as it raises labor productivity (report) Jobs can be replaced by robots:…. New technologies have spurred the creation of many more jobs than they destroyed, and some of the new jobs are in occupations that cannot be envisioned at the outset; one study found that 0.56 percent of new jobs in the United States each year are in new occupations.3 Most jobs created by technology are outside the technology-producing sector itself. We estimate that the introduction of the personal computer, for instance, has enabled the creation of 15.8 million net new jobs in the United States since 1980, even after accounting for jobs displaced. About 90 percent of these are in occupations that use the PC in other industries, such as call center representatives, financial analysts, and inventory managers. Impact of Lack of skills: If their transition to new jobs is slow, unemployment could rise and dampen wage growth. Advanced economies may also see employment declines in occupations that are most susceptible to automation. These include office support occupations, such as record clerks, office assistants, and finance and accounting; some customer interaction jobs, such as hotel and travel workers, cashiers, and food service workers; and a wide range of jobs carried out in predictable settings, such as assembly line workers, dishwashers, food preparation workers, drivers, and agricultural and other equipment operators. Helping individuals transition from the declining occupations to growing ones will be a largescale challenge. (report) We estimate that between 400 million and 800 million individuals could be displaced by automation and need to find new jobs by 2030 around the world, based on our midpoint and earliest (that is, the most rapid) automation adoption scenarios. We think demand for jobs will be there, based on our scenarios of future labor demand and the net impact of automation, as described in the next section. with sufficient economic growth, innovation, and investment, there can be enough new job creation to offset the impact of automation, although in some advanced economies additional investments will be needed as per our step-up scenario to reduce the risk of job shortages. But a larger challenge will be ensuring that workers have the skills and support needed to transition to new jobs. Countries that fail to manage this transition could see rising unemployment and depressed wages. https://www.news.com.au/finance/business/retail/woolworths-1300-jobs-cut-due-toautomated-distribution-facilities/news-story/338cf6360a9401515c90822364d506fa Retraining and reskilling workers in the age of automation Pablo Illanes, Susan Lund, Mona Mourshed, Scott Rutherford, and Magnus Tyreman McKinsey Global Institute, 22 January 2018 The world of work faces an epochal transition. By 2030, according to the a recent McKinsey Global Institute report, Jobs lost, jobs gained: Workforce transitions in a time of automation, as many as 375 million workers—or roughly 14 percent of the global workforce—may need to switch occupational categories as digitization, automation, and advances in artificial intelligence disrupt the world of work. The kinds of skills companies require will shift, with profound implications for the career paths individuals will need to pursue. How big is that challenge? In terms of magnitude, it’s akin to coping with the large-scale shift from agricultural work to manufacturing that occurred in the early 20th century in North America and Europe, and more recently in China. But in terms of who must find new jobs, we are moving into uncharted territory. Those earlier workforce transformations took place over many decades, allowing older workers to retire and new entrants to the workforce to transition to the growing industries. But the speed of change today is potentially faster. The task confronting every economy, particularly advanced economies, will likely be to retrain and redeploy tens of millions of midcareer, middle-age workers. As the MGI report notes, “there are few precedents in which societies have successfully retrained such large numbers of people.” So far, growing awareness of the scale of the task ahead has yet to translate into action. Indeed, public spending on labor-force training and support has fallen steadily for years in most member countries of the Organisation for Economic Co-Operation and Development (OECD). Nor do corporate-training budgets appear to be on any kind of upswing. But that may be about to change. Among companies on the front lines, according to a recent McKinsey survey, executives increasingly see investing in retraining and “upskilling” existing workers as an urgent business priority—and they also believe that this is an issue where corporations, not governments, must take the lead. Our survey, which was in the field in late 2017, polled more than 1,500 respondents from business, the public sector, and not for profits across regions, industries, and sectors. The analysis that follows focuses on answers from roughly 300 executives at companies with more than $100 million in annual revenues. Among this group, 66 percent see “addressing potential skills gaps related to automation/digitization” within their workforces as at least a “top-ten priority.” Nearly 30 percent put it in the top five. The driver behind this sense of urgency is the accelerating pace of enterprise-wide transformation. Looking back over the past five years, only about a third of executives in our survey said technological change had caused them to retrain or replace more than a quarter of their employees. But when they look out over the next five years, that narrative changes. Sixty-two percent of executives believe they will need to retrain or replace more than a quarter of their workforce between now and 2023 due to advancing automation and digitization. The threat looms larger in the United States and Europe (64 percent and 70 percent respectively) than in the rest of the world (only 55 percent)—and it is felt especially acutely among the biggest companies. Seventy percent of executives at companies with more than $500 million in annual revenues see technological disruption over the next five years affecting more than a quarter of their workers. Appropriately, this keen sense of the challenge ahead comes with a strong feeling of ownership. While they clearly do not expect to solve this alone—forging creative partnerships with a wide range of relevant players, for example, will be critical—by a nearly a 5:1 margin, the executives in our latest survey believe that corporations, not governments, educators, or individual workers, should take the lead in trying to close the looming skills gap. That’s the view of 64 percent of the private-sector executives in the United States who see this as a top-ten priority issue, and 59 percent in Europe. As for solutions, 82 percent of executives at companies with more than $100 million in annual revenues believe retraining and reskilling must be at least half of the answer to addressing their skills gap. Within that consensus, though, were clear regional differences. Fully 94 percent of those surveyed in Europe insisted the answer would either be an equal mix of hiring and retraining or mainly retraining versus a strong but less resounding 62 percent in this camp in the United States. By contrast, 35 percent of Americans thought the challenge would have to be met mainly or exclusively by hiring new talent, compared to just 7 percent in this camp in Europe. Now the bad news: only 16 percent of private-sector business leaders in this group feel “very prepared” to address potential skills gaps, with roughly twice as many feeling either “somewhat unprepared” or “very unprepared.” The majority felt “somewhat prepared”—hardly a clarion call of confidence. What are the main barriers? About one-third of executives feel an urgent need to rethink and upgrade their current HR infrastructure. Many companies are also struggling to figure out how job roles will change and what kind of talent they will require over the next five to ten years. Some executives who saw this as a top priority—42 percent in the United States, 24 percent in Europe, and 31 percent in the rest of the world—admit they currently lack a “good understanding of how automation and/or digitization will affect our future skills needs.” Such a high degree of anxiety is understandable. In our experience, too much traditional training and retraining goes off the rails because it delivers no clear pathway to new work, relies too heavily on theory versus practice, and fails to show a return on investment. Generation, a global youth employment not for profit founded in 2015 by McKinsey, deliberately set out to address those shortcomings. Operating in five countries across over 20 professions, Generation operates programs that focus on targeting training to where strong demand for jobs exists and gathers the data needed to prove the return on investment (ROI) to learners and employers. As a result, Generation’s more than 16,000 graduates have over 82 percent job placement, 72 percent job retention at one year, and two to six times higher income than prior to the program. Generation will soon pilot a new initiative, Re-Generation, to apply this same formula—which includes robust partnerships with employers, governments and not for profits—to helping mid-career employees learn new skills for new jobs. For many companies, cracking the code on reskilling is partly about retaining their “license to operate” by empowering employees to be more productive. Thirty-eight percent of executives in our survey, across all regions, cited the desire to “align with our organization’s mission and values” as a key reason for taking action. In a similar vein, at last winter’s World Economic Forum in Davos, 80 percent of CEOs who were investing heavily in artificial intelligence also publicly pledged to retain and retrain existing employees. But the biggest driver is this: as digitization, automation, and AI reshape whole industries and every enterprise, the only way to realize the potential productivity dividends from that investment will be to have the people and processes in place to capture it. Managing this transition well, in short, is not just a social good; it’s a competitive imperative. That’s why a resounding majority of respondents—64 percent across Europe, the United States, and the rest of the world—said the main reason they were willing to invest in retraining was “to increase employee productivity.” We hear that thought echoed in a growing number of C-suite conversations we are having these days. At the moment, most top executives have far more questions than answers about what it will take to meet the reskilling challenge at the kind of scale the next decade will likely demand. They ask: How can I map the future against my current talent pool and processes? What part of future employment demand can I meet by retraining existing workers, and what is the ROI of doing so, versus simply hiring new ones? How best can I tap into what are, for me, nontraditional talent pools? What partners, either in the private, public, or nongovernmental-organization (NGO) sectors, might help me succeed—and what are our respective roles? Good questions all. Over the coming months we intend to share more of our own thinking and analytical work—and some of the best ideas we are finding elsewhere—about the solutions that are emerging. Success will require first developing a granular map of how technology will change the skill requirements within your company. Once this is understood, the next step will be deciding whether to tap into new models of online and offline learning and training or partner with traditional educational providers. (Over time, a more fundamental rethinking of 100-year-old educational models will also be needed.) Policy makers will need to consider new forms of unemployment income and worker transition support, and foster more intensive and innovative collaboration between the public and private sectors. Individuals will need to step up too, as will governments. Depending on the speed and scale of the coming workforce transition, as MGI noted in its recent report, many countries may conclude they will need to undertake “initiatives on the scale of the Marshall plan.” But for now, we simply take comfort from the clear message of our latest survey: among large companies, senior executives see an urgent need to rethink and retool their role in helping workers develop the right skills for a rapidly changing economy—and their will to meet this challenge is strong. That’s not a bad place to start.
