There was one type of employee that was essential to the Industrial Revolution—until it wasn’t. Everyone interacted and depended on this hard worker, whose number peaked at 3.25 million in England alone by 1901. Yet by the 1920s, their number had been cut in half thanks to one invention that cut their value to less than a living wage. Their decline soon cascaded throughout the range of vocations that depended on their existence.
The “employee” was the horse, done in by the internal combustion engine. This story is far from old history, for we are on the verge today of another great technological revolution whose change may be just as wrenching. The question is not whether or how these changes will occur, but how we choose to adapt to them.
Technological advancements regularly make some jobs obsolete. But every once in a while, a host of changes descend on an economy rapidly and completely. Small advances slowly become big ones until suddenly they are massive, as gains double and then double again. The proceeds of the information age—data, connectivity, automation—are believed to be growing exponentially. They result not merely in job losses, but eventually in vocational extinctions.
[pq]However we adjust to the information age, we must avoid becoming like the horses of the industrial age.[/pq]
Today’s technologies are quite unlike those of the industrial age, which replaced or complimented mankind’s physical labor and, over the really long term, prioritized brains over brawn. What we are seeing today are innovations that are taking on mankind’s comparative advantages in gray matter. These machines have mastered repetitive mind tasks, such as accounting, and are now becoming highly complex thinkers that can rapidly adjust to a complex human world—autonomous vehicles, for example.
Carl Frey and Michael Osborne recently looked at the likelihood that over 700 different occupations would be automated over the next decade or so. What they found was shocking. Over 47 percent of jobs in America are at high risk of being automated, rendering an unknown portion of their workforce obsolete. But their findings are merely the tip of the iceberg.
The analogy with the horse is that some of today’s unskilled or medium-skilled workers are at risk of quickly becoming worth less to the economy than the value of even the most basic salary. Such an outcome would occur through the spread of a game-changing advancement—one that researchers like Frey and Osborne have yet to anticipate—or the novel application of an existing technology.
But even those scenarios don’t quite result in rapid vocational extinction. That would likely come through a technological advancement being applied to a highly inefficient, walled-off industry. Consider those sectors with large government roles and stagnant productivity gains, where new tools could offer the means to bypass existing barriers to entry. Any new competitor that could successfully take on old regulations and cartel-like structures would stand to capture near-monopolistic gains, meaning that it’s only a matter of time before an Uber-like entrant emerges. Except this time it would be taking on a sector that’s far bigger than the taxi industry, with far more inefficient jobs at stake.
To be clear, we should celebrate these advancements. They are beckoning toward a more productive future beyond our wildest imaginations. Sometimes we risk losing the good and the true in the midst of change. I just don’t think that means being forced to take a taxi. In the end, there are few ways that a country benefits from fighting these technological changes. If it chooses that path, it will simply be holding on to an ever shrinking share of the global economy.
The really important matter is whether Millennials in particular sit on their hands and accept whatever fate is in store or realize ways to sit up and get ahead of this change.
Right now, the highly educated are getting a disproportionate share of the earnings from their vast productivity gains. Those at the lower to middle end of the skills continuum are seeing their earnings flat line or fall. Capital owners—those who have the robots and computers—are absorbing much of the rest of what’s left over (which is a lot). Meanwhile, the entire economy is experiencing drag from the growing ranks of workforce castaways. This is a key difference from what we saw during the Industrial Revolution, in which wages and opportunity rose for most workers, and on more or less similar terms as to what capital owners enjoyed.
For these reasons and more, education is critical to future success. Rather than re-hash what others have done a far better job of discussing, the general thoughts of Tyler Cowen seem about right: those who can work well with computers and retain a supremely human touch will be better off in the future. Some of these skills can be taught, while others must be cultivated by a society that accepts the growing ranks (and value) of a service-driven economy built on serving the needs of others.
What really intrigues me is the question of who will do all of this educating, and how to transition those who are already in the workforce and yet aren’t prepared. The answer to that question will likely revolve around whether servicing those needs reveals a market failure, in which few can afford the time off to retrain, and whether individual universities struggle to adjust to the needs of preparing new students for the information economy.
It doesn’t take much imagination to envision state and local institutions reacting more nimbly to these changes than those at the national level and, in something like desperation, choosing to experiment with unconventional programs with a strong apprenticeship element. One can also see for-profit educators trying to absorb a share of the many in need of retraining.
But I can’t help but think that adjusting to these coming changes will be a demand-driven process, meaning that employers will be the ones pushing for a new kind of employee who’s been educated in new ways. Employers are already struggling to sort through a sea of candidates, since degrees don’t offer much signaling value anymore (in major cities, most job applicants have at least a four-year degree). Massive Online Open Courses, but only with generally accepted accreditation and recognition, could easily and cheaply create large pools of skilled workers, particularly if they are being backed by large companies on behalf of their current or future workforce.
We will adjust to this new age, and in time we will fill the ranks of the employed with the sufficiently educated and prepared. But the past is sticky and the future unclear; we will not be racing against the machines but feeling our way forward.
However we adjust to the onrushing information age, we must avoid becoming like the horses of the industrial age, where the value of our work is less than the cost of our feed.