The Robot Era May Be Much Better Than We Feared

It is not a given that the future’s great challenge is scarcity of jobs. Perhaps it will rather be scarcity of labor.

We have all heard the warnings: Artificial intelligence, automation, and robots will revolutionize the labor market, rendering many of today’s jobs superficial. In the worst case, the result could be massive unemployment.

At the World Economic Forum in Davos, this topic has been high on the agenda for years. Many have expressed great concern that the jobs that are disappearing will not be replaced by new jobs during the coming “Fourth Industrial Revolution,” as the Alps-elite call it.

“This time it is not about making people more productive, but about doing away with them altogether,” pronounced historian Niall Ferguson to Aftenposten four years ago.

This year, the labor market of the future is again a central theme at Davos, and the message was largely the same during the many seminars: The revolution is happening now, and developments are accelerating faster than ever. It is time to buckle up – it could be a rough ride.

Lowest Unemployment since the 1970s

At the heart of this issue, however, lies a great paradox. The unemployment figures show few signs of these upheavals.

Since 1980, the first year the International Monetary Fund released statistics, there have in fact never been fewer unemployed in the world’s wealthy countries than in 2018. The IMF predicts that the number of unemployed will continue to drop in the coming years.

We are continually reaching new milestones. In the U.S., one has to look all the way back to 1969 to find unemployment numbers as low as now, while in Germany it has not been lower since reunification in 1990. The U.K. is also setting records, despite the uncertainty that Brexit has created. Not since 1975 has the country seen so few people unemployed.

Unemployment statistics do not show the whole picture, as those who have dropped out of the labor market altogether are not included in the figures. If one instead looks at the participation rate, the picture is a little more varied. The U.S. is below the levels preceding the financial crisis, while in aggregate, the Organization for Economic Co-operation and Development countries are considerably above.

Great Britain is among the countries that have seen the strongest growth. The U.K. has never had a higher proportion of the population employed since comparable measures began in 1971. The same holds for Japan, which is among the countries leading the way in the robot revolution.

’Unfounded Fear’

“Fears of robot-induced unemployment have dominated discussions about the future of work,” writes the World Bank in its 2019 World Development Report.

Many others have reached similar conclusions. A new study by Manpower shows that 87 percent of all companies that are planning automation in the coming years will either retain or increase their labor force, rather than cut it.

One explanation for why unemployment is so low is that the much discussed revolution is actually progressing rather slowly. So thinks Catherine Mann, former chief economist at the OECD. She is now the global chief economist at the multinational bank Citi.

“There is a great deal of ‘hype’ around this. Some companies are taking the lead and have begun using new technology on a large scale, but the majority are far behind and will be for a long time,” says Mann to Aftenposten.*

In other words, the gleaming robot Yumi, who served coffee to presidents and world leaders in Davos, is not representative of the technology most companies currently possess.

New Jobs up out of the Ashes

Mann thinks there are both positive and negative sides to the fact that it takes such a long time to implement innovations. On the one hand, businesses are not realizing value from technology that could increase their earnings and wages. On the other hand, this means that the great upheavals are not coming as abruptly as some have feared.

“Jobs are worse paid, but more stable,” says Mann.*

Does this mean that the era of massive unemployment will only be delayed by a few years? Not necessarily. Many believe that the robot revolution will create more jobs than it destroys. This was among the conclusions in a report from McKinsey in 2017, but the consulting company underscores that this depends on how governments and businesses handle the situation.

Paul Daugherty, chief technology and innovation officer at the consulting company Accenture and author of the book, “Human + Machine,” is of the same opinion.

“Artificial intelligence is not overhyped, it is the fastest disruption in technology ever. We estimate that 15 to 20 percent of today’s jobs will disappear, but new jobs are also coming. All in all it will provide a net benefit, but it will be tough for those who get squeezed out,” he says.*

Too Many Jobs, Too Few People

Estimates vary widely on how many jobs will be automated out of existence. No one has definite answers. Furthermore, the consequences may be quite different in different parts of the world. In some countries, labor scarcity may become a greater challenge than unemployment.

Indeed, Norway Prime Minister Erna Solberg is not the only one dreaming of people having more children. Germany is among the countries that have a low birthrate and a quickly aging population. Some sectors of German industry have already begun to use robots on a large scale, but also struggle with an acute need for more labor. The government has enacted a law that makes it far easier to recruit qualified labor from outside the EU.

Even the traditionally closed-off Japan has found itself pushed to open its borders to increased labor immigration in the last few years.

It Rhymes Poorly with Brexit

Even though unemployment in the West is low, it is not the case that everything in the labor market is just as it should be. Things are happening “under the surface,” which Guy Ryder, director-general of the International Labor Organization, emphasizes to Aftenposten.

“On the basis of the unemployment figures one would assume that the U.K. had a very healthy labor market and that people were satisfied, but that rhymes poorly with the economic discontent that is part of what explains Brexit,” he says.*

This is an important point. Many counties, especially the U.K. and the U.S. have had extremely poor wage growth in the past decades. Some positions are so badly paid that people must work several jobs to survive. Too many people have unstable or temporary jobs. This paints a picture of the consequences of economic upheaval.

The Jobs People Should Choose

So how should people maneuver in a world with so much uncertainty? In Davos, Ulrich Spiesshofer, the CEO of industrial giant ABB Group, shared the advice he has given his sons.

“Try to find a job where you do something creative and avoid a job where you repeat the same tasks again and again,” he said.

Then it becomes far more difficult to automate you out of existence.

*Editor’s note: The original quotation, accurately translated, could not be verified.