The jobs conundrum

Labour crisis and technological unemployment

The social and economic changes have always animated modern era, and, since the half of Seventeenth century, they often were so radical we used the term “revolution” to evidence the need of a deep existential readaptation for people life.

The problematic relationship between jobs and technological innovation, that cyclically arises when a relevant crisis affects production and consumption models, is also an old story. The American economist John Maynard Keynes thought of it as inescapable phenomenon, coining the term technological unemployment (1930).

Obviously, issue feeds hot discussions normally ending with a dichotomous scheme between people that consider industrial and commercial competitive dynamics seeing technology as a gift for its capacity to create new realities/activities, and people that, on the contrary, think of it as a ruin for almost every sort of occupation.

Nowadays, in front of a persistent economic crisis associated with a general restructuration of many business helped by digital connected technologies embedded (almost) in every things, this issue assumes great centrality. Or, otherwise said, there are many suggestions to frame it as a relevant argument because humane society radically changes when new communication and energy paradigms are available.

American sociologist Jeremy Rifkin explains very well what’s happening. In his last book Zero marginal cost society, Rifkin does not have doubts to indicate the game-over for the classical market economy due to internal contradiction of a production system that reached so high efficiency in getting products with near zero incremental costs.

What would the human race do, and more importantly, how would it define its future on Earth, if mass and professional labor were to disappear from economic life over the course of the next two generations? That question is now being seriously raised for the first time in intellectual circles and public policy debates. (2014, p. 84)

On the other hand, we continue to put the issue in the same dichotomic schema, as this popular article explains.

While, until now, the pessimistic thesis was supported by few scholars as Robert Gordon, suddenly defined as “new luddites”, a survey conducted by US authoritative Pew Research Center among 2000 experts produced surprising results. The half of people is still convinced that jobs lost for automation will be recovered in a better numerically way by the growth of new sectors. For the rest of people (48%), this is not true in the digital economy; steam has produced railways absorbing millions of workers, electricity has lighted cities and powered factories, combustion engine gave jobs not only to automotive industries but also people to build roads, revolutionize urban cities and create oil production and distribution networks. Otherwise, internet produces digital highways that create few direct jobs. Indeed, new digital activities increase, but they always seem to substitute  a less efficient, “physical” service that, finally, ends to fire workers (Robot commercialisti o radiologi, 2014).

Global_flows_1Avoiding less problematic reactions and addressing analysis focused on changes related to digital and connective Global_flows_2revolution, we can start to gather some considerations economist and Nobel Price Michael Spence has lately elaborated.

Incidentally, the article of American scholar explicitly recalls a thorough report about nature and directions of global economic flows in their evolution during last documentabile decade – the purpose of McKinsey Global Institute is to link flows with the increasing digitization of/on products/processes. (For more details, see the report).

However, Spence describes how digital technologies are working  to redefine (again) global value chain. They already made possible to delocalize business activities through new supply and distribution chains, unhinging the linear models that separated nations between producers and consumers.

Activities as production, research, designing have been moved where there were availability of human capital and low cost conditions, helped by ability of digital systems to ease goods and information exchanges (digital systems virtually reaggregate scraps that new economic model really produces).

It is important to note that, in the same period, even demand for goods changed due the growth of middle class in some Global_flows_3emerging areas. Thus, not only the decline of transaction costs have permitted to weaken Global_flows_4geographic constraints in organizing enterprises and consumption, but, in this new commercial condition, the new digital systems have supported new kind of services focused, for example, on knowledge, expertise, information, and communication, whose limits depend more on cultural factors than physical distance.

Yet, nonetheless impacts in terms of income distribution and jobs is relevant, it seems secondary with reference to the new impulse that sophistication and ubiquity of digital technologies are producing with the last wave.

Nowadays, there are enormous incentives to invest in hw/sw systems to substitute jobs. Think of, for example, “ATMs, online banking, enterprise resource planning, Global_flows_5customer relationship management, mobile payment systems, and much more. This revolution isGlobal_flows_6 spreading to the production of goods, where robots and 3D printing are displacing labor” (Spence, 2014).

Briefly, apart high initial costs of designing and implementation, new technologies can guarantee scalability with low marginal cost and global and local applicability, namely, production that is addressable and customizable becouse effectively required and not based on  “anticipated or forecast demand”.

Indeed, intensive labour use becomes less important than what digital system can devise to improve/create/implement business processes, and every country will be obliged to revise their own development model.

The world we are entering is one in which the most powerful global flows will be ideas and digital capital, not goods, services, and traditional capital. Adapting to this will require shifts in mindsets, policies, investments (especially in human capital), and quite possibly models of employment and distribution. No one knows fully how all of this will play out. But attempting to understand where the technological forces and trends are leading us is a good place to start. (Spence, 2014).

Global_flows_7If, strategically, the issue needs deep and difficult changes of mind and actions for the range and nature of interventions – tackling consolidated economic and political power, redefining distribution mechanisms, facing ideological battle – tactically there are plans to move to labour areas less replaceable because highly qualified in term of knowledge and creativity. Frankly, even in these fields things seem to not go very well reasoning in term of final balance. Look at ICT, surely a great area of innovation, where layoff announcements are issued daily in high-tech companies as HP, Cisco, Juniper, Microsoft, Siemens, NetApp, IBM, Dell, Intel, Sprint, etc., alongside explanations about necessary business focus on new developments and costGlobal_flows_8 reduction. (The bloodiest tech industry layoffs, 2014). Moreover, newest companies put a scrupulous attention to size themselves – undoubtedly they can also benefit of more efficient tools and common experiences. Taking some very important worldwide software-houses we remain surprised to know the difference in term of full-time jobs – Microsoft (128.000), Google (47.000), Facebook (6.300). A recent post was published by Facebook in order to claim social benefits of its investments for  local community of Pineville (Oregon), where a big Data Center was built – buildings filled with computing and storage devices occupy an area equal to 3 football stadium to manage the over 1 billion of Facebook users. Instead of being a celebration, the post, ironically, seems to certify a kind of embarrassment (Connecting the World and Making an Impact, 2014). Despite the enormous investments (573$ millions) and oceanic infrastructures, finally we find out that Facebook’s Data Center runs with only 100 people inside, of which only 12 full-time and highly skilled (Facebook-commissioned study says, 2014). Indeed, even tactical approaches have their difficulties and need extensive government abilities. We can deduce this by people engaged to evaluate how advancements of learning machines and mobile robotics might Employmentimpact on labour activities, measuring probability to be replaced on the basis of some intrinsic characteristics as manuality, cognition, repeatability, creativity, and so on. Studying such dynamics, researcher of University of Oxford Carl Benedikt Frey indicates some interesting labour activities for new ages.

Labor markets may once again be entering a new era of technological turbulence and widening wage inequality. And this highlights a larger question: Where will new types of work be created? There are already signs of what the future holds. Technological progress is generating demand for big data architects and analysts, cloud services specialists, software developers, and digital marketing professionals – occupations that barely existed just five years ago (2014).

Yet, Frey prefers to insist on aspects that improve general ability to better face these changes, and he takes Finland as example. Due to inability to respond to challenges of new smartphone industries, the country lost its major high-tech company Nokia. However, from that experience many new companies were born, over 200, some of which very successful ones.

This transformation is no coincidence. Finland’s intensive investment in education has created a resilient labor force. By investing in transferable skills that are not limited to specific businesses or industries, or susceptible to computerization, Finland has provided a blueprint for how to adapt to technological upheaval. Despite the diffusion of big-data-driven technologies, research suggests that labor will continue to have a comparative advantage in social intelligence and creativity. Government development strategies should therefore focus on enhancing these skills, so that they complement, rather than compete with, computer technologies (Frey, 2014).

 

References

Connecting the World and Making an Impact“, Facebook.com, 21/5/2014.

Facebook-commissioned study says Oregon data center is good for the economy“, Gigaom.com, 21/5/2014.

Frey, C. B., 2013, The Future of employment: How Susceptible Are Jobs To Computerization?, University of Oxford.

Frey, C. B., 2014, “Creative Destruction at Work“, Project-Syndicate.org, 15/July.

McKinsey Global Institute, 2014, Global flows in the digital age: How Trade, Finance, People and Data Connect the World Economy.

Rifkin, J., 2014, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, New York, Palgrave Macmillan Trade.

Robot commercialisti o radiologi: così saranno i nostri concorrenti”, Corriere.it, 14/8/2014.

Spence, M., 2014, “Labor’s Digital Displacement“, Project-Syndicate.org, 22/5/2014.

The bloodiest tech industry layoffs of 2014 (so far)”, Inforworld.com, 30/07/2014.