Robots. They can be cute like Wall-E, huge like Arnold, deadly like his Skynet brothers, or stupid like the droid soldiers in Star Wars (May the 4th be with you, by the way). Yet one thing is for certain: the robots are coming. We’ve seen in the US economy just how disruptive and monumental technological advances can be.
The poster child of this structural shift in the economy is manufacturing. It is true that millions of American have lost their jobs in manufacturing – from 2000 to 2010, about 5.6 million jobs were lost in the US alone. Yet what is so surprising is that despite this decrease in jobs, manufacturing’s real output compared to 1980 levels have increased by approximately by 150% (whereas employment has declined by 50%). Mireya Solis, a fellow from the Brookings Institute, commented on this trend by simply saying, “…we are producing more with fewer people”. Humans and their wages unfortunately cannot compete against machines that can do the same job at drastically lower costs. Although President Trump does have a point that globalization and outsourcing may have played a role in the loss of manufacturing jobs, the real culprits are technology and a firm’s own desire to make a buck – a study conducted by Ball State University pegs technology as accounting for up to 85% of those job losses.
That’s usually the end of the argument…but there is a danger lurking. What if technology gets to such a point where many other low-skill service jobs are now at risk? Throughout many of the blog posts on this site, there has been much discussion on the topic of e-commerce and its threat to traditional retail business. Yet what if Amazon is only the first salvo in a new wave of automation that threatens services?
The fast-food industry is a sector of the economy that will certainly feel some sort of impact from automation. I’m sure many of us can remember a time where we were at McDonald’s and the line was excruciatingly long. It’s not too hard to imagine a reality where all ordering and drinks are taken care of by self-ordering kiosks; one can already see many cashiers have lost their jobs to self-checkout lines at other major retailers. In a Yahoo Finance article I read, it stated that the market for self-checkout kiosks alone is estimated to grow to $18 Billion by 2020, and that cash-less payment solution company OTI has been contacted by major fast food chains about cashless payment systems.
Yet it’s not only low-skill work that is at risk from technology’s unyielding march. Finance is a sector of the economy that is often thought of as highly-competitive and high-skill. Over the past few decades, it has benefited greatly from technology: analytical tools, new financial products, etc. Yet there is something that at the very least threatens wealth management and financial advising: the rise of “robo advisers”. If consumers can get comfortable with working with a web platform or a computer instead of a person, and if the technology and algorithms of the program are strong enough, then the switch over to robo-advisers could save firms millions or more in salary costs. Scott Smith, director of research at Cerulli Associates commented in a MarketWatch article that “there will be increasing pressure on traditional advice providers to broaden their advice services to maximize their value to clients”. Although Smith does not believe financial advisers will be replaced outright, I believe that no outcome can be completely disregarded – especially when technology is involved.
Technology has done much for us as a nation, society and indeed as a global community. It has helped streamline our lives, given us access to the Internet (which is pretty awesome because you can read my blog posts) and it has also spurred great innovation. Just think about how important your smartphone is to you.
Yet technology’s disruptive impact in the economy cannot be ignored – we saw this in manufacturing, and now we are beginning to see it in retail. I anticipate that this will only continue as we progress further into the future.
In the movie iRobot, we see Will Smith walk down the streets of Chicago with many robots bustling about him: they were mailmen, guards, cooks and caretakers. We still have just under twenty years to go to reach 2035 (when iRobot takes place) – who knows what might happen?
Just please don’t let Skynet be a thing.