The rise of technology and new (un)employment

How long do you think it will take before a machine is able to do your job?

What are you going to do next?

Technological process is a disruptive force that is going to radically transform our social and economic system, not in 1000 years, not in 100, this is going to happen in a matter of decades.

Technological progress and the creation of new jobs

Since the beginning and especially after the industrial revolution our economic system is based on a production-consumption cycle. In other words, people “must work” in order to have the income to buy the products that they contribute to produce with their work.

Until now this structure has been an essential requirement for our society and it actually led to noteworthy achievements.

Specialization and division of labour, along with new inventions, reshaped the world and enabled a dramatic improvement of life standards over the course of last centuries.

Automation and mechanization have dramatically increased productivity and bolstered the creation of new jobs, allowing us to be more creative and more productive in every sector.

Historically, the replacement of old jobs by machines allowed the creation of new and better jobs.

Today, we are living during a digital revolution, a period of change that is going to completely transform the world as we know it. Change inevitably causes pressures on society, as looms where a symbol on unemployment for textile workers in the industrial England of the XVIII century, today’s digital innovations are in a similar position: they are “stealing human labour”!

The thesis of many economists is that when old jobs are replaced by machines, new jobs are created and the market always finds a solution. And if we look back to the past centuries, it actually happened. If that’s the case, why worry? Is it really that simple?

A different perspective on unemployment

Unless you’ve been hidden under a rock for the past 20 years, you’ll have surely noticed the incredibly powerful wave of technological progress and innovation that brought a massive digitalization of the entire world.

By taking a look at the unemployment rate in US and Europe one may conclude that, all in all, it is low and we are living during economic good times. This is only one part of the story: among those who are actually employed, there are numerous people working part-time because they can’t find full-time jobs and many others that stopped looking for a job, calling themselves out of the workforce. Not exactly a good situation.

Moreover, a comparison between the active workforce and the total number of the population reveals that overall fewer and fewer people have a job, despite the decreasing unemployment rate.

What are the causes of this trend? Is it the outcome of a cyclical movement of the economy or the result of ineffective policies?

As we focus our attention on the news about the unemployment rate and the number of created and lost jobs, we miss the bigger picture and we don’t have a real idea of what is actually happening.

How many new types of jobs have been created thanks to technological progress in the last 20 years? While it is true that new professions are needed, the majority of those jobs require a high level of specialized education, flexibility, intelligence and entrepreneurial attitude: a background that most people simply don’t have.

Our educational system, created after the industrial revolution with the aim to form industrial workers able to perform manual and repetitive tasks, has not changed sufficiently and underwent only marginal updates from the original conception.

Standardized tests, standardized courses and standardized exams can’t produce anything but standardized minds.

There are millions of workers over 40 that perform manual and potentially easy to automate jobs. Given the extent of today’s innovation, the best hypothesis is that every new job created will employ only a fraction of those people and will require a flexible mind and profound knowledge of STEM subjects.

It’s likely that in the next decades we will see a massive shift of work from people to machines and artificial intelligence. Those changes will probably be too fast and radical for the market to provide an alternative job to everyone. In this scenario, high unemployment won’t be a temporary deviation from a healthy economy, it will be a structural and irreversible element of the system, meaning the end of labour as we know it today.

It is really possible that this new kind of automation will lead to structural unemployment. The idea that our society will be able to keep the amount of jobs given the pace and the reach of exponential technological change is unrealistic. Right now, it doesn’t even produce a sufficient number of new jobs to keep pace with the population growth.

Algorithms and Artificial Intelligence: a new kind of machine

Technological progress and automation have been around for decades. In the past automation was simpler, it helped to make human work easier and allowed to produce more output with the same amount of work. This increased productivity eliminated lots of poor and repetitive tasks, creating new jobs that were better and living standards overall improved. The industrial revolution caused the shift from agriculture to production jobs and further progression allowed to shift to service jobs.

Although in the past automation effectively created many new jobs, the current situation is a bit different.

The coming of cars (what was an innovative new industry) created huge industries, transforming our way of life, our infrastructures and our cities, creating millions of new jobs directly or indirectly.

What about the internet? It created completely new industries and made our life incredibly easier, but it hasn’t created enough jobs to compensate the industries is killing and a new number of jobs to cope with the growing population. Today, leading technology firms employ only a fraction of the workers employed by old innovative industries (like cars) and make revenues that are significantly higher.

That’s one part of the problem. Another fact is that new industries create fewer and fewer jobs, meanwhile, our jobs are taken over by machines much faster than they were in the past.

While old machines were able to replace predictable and repetitive tasks (like manufacturing processes), today machines are becoming so excellent in breaking down very complex tasks into many predictable ones that for lots of people there won’t be further room to specialize.

Machine learning allows a system to acquire information and skills by analysing data. You can think of algorithms as new machines that can teach themselves with training.

Without even thinking about it, in our day-by-day activities we generate data about everything: travel data, internet researches, behaviours, preferences, medical records, communication and information about how we do our work.

This creates an enormous database from which machines can basically learn “how human do things”, and ultimately learn how to do them better.

How fast is this happening? There are already case studies and real applications, like computer management solutions to eliminate middle management positions. Those project management algorithms are able to decide what tasks can be automated and what tasks require human intervention, outsourcing those tasks to a team of freelancers. Meanwhile, as freelancers complete their tasks, algorithms gather data about their jobs learning what they do and how they do it (basically people are teaching machines how to replace them. How does it feel to you?).

Solutions like this one can be applied in many fields, there are already software solutions that equal humans or are better than us in many different tasks. Those resources allow to significantly automate many activities that a few years ago were thought impossible to automate, like journalism and medical diagnosis.

So what?

Jobs won’t disappear overnight, but gradually fewer and fewer humans will be doing them.

Historically, the system has always worked: automation allowed to increase productivity and we managed to adapt ourselves to new tasks. If you think about it, in the past many procedures were too complex to be performed by machines or the costs were too high to justify the creation of a specially made machine.

The point that I want to highlight is that we managed to adapt because there was enough time to learn how to perform new jobs.

The nature of innovation in the information age is completely different from everything we encountered before. We don’t have a clue of what is going to come in the next decades (not centuries, decades!)

Automation and digitalization are taking over in every field. In every area of our life, we are gradually giving up control to algorithms and digital systems. Why? Because they are able to make our life easier, it is advantageous.

Algorithms can process huge amounts of data (that we generated without even thinking about), can access any knowledge on the planet in real time and ultimately, in many cases, are able to make better decisions than we do. (don’t think so? try not to use Google Maps!)

Gradually, with our initial and unconscious collaboration, the labour as we know it today will be revolutionized. An increasingly number of jobs will be automated, because it will be more efficient or because this process will be gotten out of hand.
Changes in the workforce affect the nature of society. Surely new jobs will be created, but the idea of work itself will be completely transformed.

If fewer and fewer people will have a job, who will be doing all the consumption required for the economy to run?
Are we going to end up with only few people that can buy and afford everything?
 Are we going to see a tiny minority that owns the machines and dominate over the other classes?

Conclusions

Future doesn’t have to be that grim! We are living in times of change and transformation means uncertainty. There are thousands of challenges in the world, this time digitalization and technological progress are giving us the means and resources to effectively tackle these problems. The information age and modern automation could be a huge opportunity to change for the better the human society, reducing poverty and inequality and significantly improve life standards, creating a better world for everyone.

We need to think big and fast. Maybe artificial intelligence won’t cause mass unemployment, but it will surely disrupt labour markets just as technological change has done before.

My suggestion is to develop curiosity, learn continuously and develop some technological knowledge to understand what’s going on, becoming able to leverage on the world of opportunities brought by the digital revolution.


This article is for informational purposes only, it should not be considered financial advice.
You can read the full disclaimer here.

Ready to get serious about your investments?

Leave a Reply

Close Menu