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Automation and Employment in the 21st Century

Monday, March 27, 2017
Irving Wladawsky-Berger

Ever since the advent of industrialization over 200 years ago, there’ve been periodic fears about the impact of technology-based automation on jobs.  In the 1810s, for example, the so-called Luddites smashed the new machines that were threatening their textile jobs.  But each time those fears arose in the past, technology advances ended up creating more jobs than they destroyed.

Automation anxieties have understandably accelerated in recent years, as AI-related innovations, including robots and smart machines of all kinds, are now being applied to activities requiring intelligence and cognitive capabilities that not long ago were viewed as the exclusive domain of humans.  The concerns surrounding AI’s long term impact on jobs may well be in a class by themselves.

There’s a broad consensus that AI will have a major impact on jobs and the very nature of work, but it’s much less clear what that impact will be.  Will AI play out like past technology innovations - highly disruptive in the near term, but ultimately leading to the creation of new jobs, whole new industries, and a rising standard of living?  Or will this time be different, as AI-based innovations end up replacing a large portion of the workforce, leading to mass unemployment, economic dislocations and social unrest?

In January, the McKinsey Global Institute published A Future that Works: Automation, Employment and Productivity, the results of a two year study of automation technologies and their potential impact on jobs over the next several decades.  McKinsey’s comprehensive report,  is the most detailed analysis I’ve seen on the subject.  The report examines in great detail how things might likely play out over a broad spectrum of possibilities, -  from the pessimistic expectations of mass unemployment at one end, to the more optimistic expectations that AI will follow the path of past technology revolutions and be ultimately beneficial.  Its overriding conclusion is succinctly captured in this paragraph:

Many workers will have to change, and we expect business processes to be transformed.  However, the scale of shifts in the labor force over many decades that automation technologies can unleash is not without precedent.  It is of a similar order of magnitude to the long-term technology-enabled shifts away from agriculture in developed countries’ workforces in the 20th century.  Those shifts did not result in long-term mass unemployment, because they were accompanied by the creation of new types of work.  We cannot definitively say whether things will be different this time. But our analysis shows that humans will still be needed in the workforce: the total productivity gains we estimate will only come about if people work alongside machines.  That in turn will fundamentally alter the workplace, requiring a new degree of cooperation between workers and technology.”

The report explains in great detail the key findings that led to this overall conclusion.  I’d like to discuss a few of these findings.

Only a small percentage of occupations can be fully automated by adapting current technologies, but some work activities of almost all occupations could be automated

Most jobs involve a number of different tasks or activities.  Some of these activities are more amenable to automation than others.  But just because activities have been automated, does not imply that the whole job has disappeared.  To the contrary, automating parts of a job will often increase the productivity and quality of workers by complementing their skills with machines and computers, as well as by enabling them to focus on those aspect of the job that most need their attention.

Given that few jobs will be entirely automated, the report focused instead on the kinds of activities within jobs that are more likely to be automated, as well as how those jobs will then be transformed.

“Almost half the activities people are paid almost $16 trillion in wages to do in the global economy have the potential to be automated by adapting currently demonstrated technology, according to our analysis of more than 2,000 work activities across 800 occupations.  While less than 5 percent of all occupations can be automated entirely using demonstrated technologies, about 60 percent of all occupations have at least 30 percent of constituent activities that could be automated.  More occupations will change than will be automated away…

 

Continue reading the full blog from  March 8, here.