The Future of Work

Robots, AI, and Automation

Darrell M. West

• Publisher: Brookings Institution Press
• Year: 2018
• ISBN:
  9780815732945
• Topic: Politics & International Relations
• Subtopic: Social Policy
• Index: Politics & International Relations

Looking for ways to handle the transition to a digital economy

Robots, artificial intelligence, and driverless cars are no longer things of the distant future. They are with us today and will become increasingly common in coming years, along with virtual reality and digital personal assistants.

As these tools advance deeper into everyday use, they raise the question—how will they transform society, the economy, and politics? If companies need fewer workers due to automation and robotics, what happens to those who once held those jobs and don't have the skills for new jobs? And since many social benefits are delivered through jobs, how are people outside the workforce for a lengthy period of time going to earn a living and get health care and social benefits?

Looking past today's headlines, political scientist and cultural observer Darrell M. West argues that society needs to rethink the concept of jobs, reconfigure the social contract, move toward a system of lifetime learning, and develop a new kind of politics that can deal with economic dislocations. With the U.S. governance system in shambles because of political polarization and hyper-partisanship, dealing creatively with the transition to a fully digital economy will vex political leaders and complicate the adoption of remedies that could ease the transition pain. It is imperative that we make major adjustments in how we think about work and the social contract in order to prevent society from spiraling out of control.

This book presents a number of proposals to help people deal with the transition from an industrial to a digital economy. We must broaden the concept of employment to include volunteering and parenting and pay greater attention to the opportunities for leisure time. New forms of identity will be possible when the "job" no longer defines people's sense of personal meaning, and they engage in a broader range of activities. Workers will need help throughout their lifetimes to acquire new skills and develop new job capabilities. Political reforms will be necessary to reduce polarization and restore civility so there can be open and healthy debate about where responsibility lies for economic well-being.

This book is an important contribution to a discussion about tomorrow—one that needs to take place today.

PART I

ACCELERATING INNOVATION

ONE

ROBOTS

RESTAURANT EXECUTIVES ACROSS the United States are reacting to tight labor markets by introducing automated tablets that transmit food orders. Rather than use the services of wait staff, customers place orders through mobile screens. Andrew Puzder, former CEO of CKE Restaurants, the parent company of Hardee’s, praised digital devices over human workers. Referring to the former, he said, “They’re always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex or race discrimination case.”1 Noting labor requests for a higher minimum wage, writer Eric Boehm of Watchdog.org opined that “a computer kiosk doesn’t need to be paid $15 an hour to take orders.”2

McDonald’s, meanwhile, has announced plans to install “digital ordering kiosks” in place of cashiers at 2,500 of its American restaurants and mobile ordering at 14,000 of its stores. Based on these technologies, market analysts in 2017 raised their 2018 growth projections for the firm from 2 percent to 3 percent. McDonald’s believes that digital tools cut costs, improve productivity, and reduce the chain’s reliance on human employees. The corporation’s officers predicted that the new technologies would lift the company’s stock price by 17.5 percent in 2018.3

These restaurant firms are not alone in embracing digital automation. Amazon is replacing cashiers in its new storefront locations. Rather than employ humans to scan purchases and generate a bill, Amazon Go “allows customers [to] check in to the store using a smartphone app and walk out with what they need.” Sensors track items that people want to buy and charge their accounts.4 This innovation is significant for overall employment because retail clerks and cashiers constitute 6 percent of the U.S. workforce, or about 8 million workers in all.5

In addition, Amazon has expanded rapidly into robots in its distribution warehouses. It has deployed around 55,000 Kiva robots, up from 30,000 in 2016, with many more expected in the future.6 According to Marc Wulfraat of the consulting company MWPVL International, “Picking is the biggest labor cost in most e-commerce distribution centers, and among the least automated. Swapping in robots could cut the labor cost of fulfilling online orders by a fifth.”7 The virtue of robots is that they can move heavy racks, locate products for shipping, and place the relevant items in a box, all without human intervention. As robots learn how to handle new objects in the warehouse, each “shares what it learns with a hive mind in the cloud” and helps other automated machines locate items.8

Truck driving long has been a well-paying job for high school graduates. This occupation does not require a college degree and is an attractive entry-level position for those not seeking higher education. According to Brookings economist Alice Rivlin, in 2016, “There were 1.7 million heavy and tractor-trailer truck drivers, with a median annual wage of $43,590; 859,000 light-truck and delivery workers, who earned $34,700; and 426,000 driver/sales workers, who earned $28,449. So the rough estimate would be that driverless deliveries would put at least 2.5 million drivers out of work.”9

As illustrated by these examples, the list of emerging technologies grows every day. Robots, autonomous vehicles, virtual reality, artificial intelligence (AI), machine learning, drones, and the Internet of Things are moving ahead rapidly and transforming the way businesses operate and how people earn their livelihoods. For millions who work in occupations such as food service, retail sales, and truck driving, machines are replacing their jobs. There already is evidence of this happening with blue-collar jobs, but the impact is starting to be felt by the white-collar workforce as well.

In this book, I analyze several aspects of the technology revolution. First I review developments in robotics, AI, and sensors associated with the Internet of Things, and show how they are transforming business. I then look at how these digital technologies are redefining jobs and altering financial models. After that, I examine how the social contract should be reconfigured to cope with these transformations and the manner in which health care, income, and retirement benefits are provided. Finally, I discuss whether our political processes in a polarized society are up to the task of handling the transition to a digital economy and how we can cope with an automated society.

This is not the first time people have encountered megachange, whether of a social, economic, political, or technological variety.10 One hundred years ago the United States (and other countries) made the transition from an agrarian to an industrial economy. It took several decades to work through the resulting transformations in business models, employment, and social policy, but leaders rose to the challenge of dealing with those disruptions.

Today, as the United States moves from an industrial to a digital economy, poor governance poses a serious barrier to expanding the definition of jobs, revising the social contract, and extending models of lifetime learning. With the current political dysfunction in the United States, the high levels of economic inequality, polarized media coverage, and societal divisions, it is not clear that economic and political leaders can resolve the anxieties and dislocations associated with technology-induced disruption. Unless there is more effective governance, the process of conflict resolution will prove quite contentious over the next few decades and could undermine democratic systems of government. As I note in the concluding chapter, we need fundamental economic and political reforms to deal with these challenges and make sure we have a smooth adjustment to the emerging economy.

THE GROWING USE OF ROBOTS

The use of robots is expanding around the world. About 5.4 million were sold in 2015, and that number doubled in 2016 to more than 10 million units.11 The top applications were in manufacturing, construction, rescue operations, and personal security.

The use of industrial robots deployed in factories has also expanded. Figure 1-1 shows the number of these devices in operation globally; as is evident from the figure there has been a substantial increase in the past few years. In 2013, for example, an estimated 1.2 million industrial robots were in use. This figure rose to around 1.5 million in 2014 and increased to 1.9 million in 2017.12 Japan has the most, at 306,700, followed by North America (237,400), China (182,300), South Korea (175,600), and Germany (175,200). Overall, robotics is expected to grow from a $15 billion to a $67 billion sector by 2025.13

According to an RBC Global Asset Management study, the reason for this expanded usage is that the costs of robots have fallen substantially. It used to be that the “high costs of industrial robots restricted their use to few high-wage industries like the auto industry. However, in recent years, the average costs of robots have fallen, and in a number of key industries in Asia, the cost of robots and the unit costs of low-wage labor are converging.… Robots now represent a viable alternative to labor.”14 To illustrate this point, a warehouse in California that introduced robots at a cost of $30,000 to $40,000 per unit found that robots could “handle 30% to 50% of the items the facility ships each day, in about half the time it takes a human worker.”15

A CEO of a top technology firm explained the new financial model facilitating robotics and its effects on the employment prospects of lower-skilled workers: “We will soon launch a robot that can perform tasks currently done by people with a high school education or less. The robot will only cost $20,000. We’re not the only ones; our competitors across the world are working on similar projects. When these cheap, efficient and reliable robots become commonplace, I have no idea what jobs will be given to people who don’t have skills above a high school level.”16

Figure 1-1 Number of Industrial Robots around the World

Source: Alison Sander and Meldon Wolfgang, “The Rise of Robotics,” Boston Consulting Group, August 27, 2014. The 2017 numbers are projected figures.

Other executives also emphasize the declining cost of robots as a key feature in their adoption decisions. Factory owner Joe McGillivray runs a company called Dynamic that manufactures plastic molds and metal parts. In his factory, where it once took four people to operate a press making the molds, he purchased a robot for $35,000 that was effective at doing their jobs. It worked well and was easy to reprogram for work tasks.17

The Hudson’s Bay Company, meanwhile, has deployed robots in its distribution center and found positive results. According to Erik Caldwell, senior vice president of supply chain and digital operations, “This thing could run 24 hours a day. They don’t get sick; they don’t smoke.”18 Combined with low cost, those qualities give robots important advantages over human workers.

With recent efforts in the United States and elsewhere to increase the minimum wage and provide benefits for human workers, the compensation differential between a robot and a human has dropped even further. A paper by the economists Grace Lordan and David Neumark, for example, found that “increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become unemployed.”19 This view was echoed by Wendy’s COO Bob Wright, who noted, “We’ve hit the point where labor-wage rates are now making automation of those tasks make a lot more sense.”20

These are just a few of the ways in which robotic devices are altering businesses. As a sign of their growing sophistication, the Defense Advanced Research Projects Agency held a competition for robots that could perform effectively in hazardous environments. Robots were given eight tasks, including “driving a vehicle, opening a door, operating a portable drill, turning a valve and climbing stairs.”21 The goal was to have equipment that could operate in damaged nuclear reactors or at disaster scenes considered too dangerous for humans.

In this competition, a team from the Korea Advanced Institute of Science and Technology won the $2 million first-place prize by building a robot called Hubo that completed each of these tasks without falling down. The device was five feet, seven inches tall and weighed 200 pounds. With two arms, two legs, and a head featuring a LiDAR camera, it could scan its surroundings as it maneuvered around obstacles in a search-and-rescue mission.22

Robotization is very popular in China. Farmers there are deploying “nanny robots” to monitor the health of their chickens. Using mechanized machines equipped with the latest sensors, these devices identify and isolate “feverish or immobile birds from their cages to protect the rest of the brood and keep sick birds and their eggs from reaching kitchen tables.” Firms such as the Charoen Pokphand Group use eighteen “automatons” to make sure that bird flu does not break out. With the poultry sector generating $100.7 billion in revenue, companies see technology as a wa...