Originally Posted by sebastian_dangerfield
"The next phase of automation has begun, and it will accelerate in the years ahead. Faced with a rising scarcity of labor, companies and investors are likely to draw increasingly on automation technologies, which, in turn, would boost productivity. But to grow, economies need demand to match rising output. Our analysis shows automation is likely to push output potential far ahead of demand potential. The rapid spread of automation may eliminate as many as 20% to 25% of current jobs—equivalent to 40 million displaced workers—and depress wage growth for many more workers.
The benefits of automation will likely flow to about 20% of workers—primarily highly compensated, highly skilled workers—as well as to the owners of capital. The growing scarcity of highly skilled workers may push their incomes even higher relative to lesser-skilled workers. As a result, automation has the potential to significantly increase income inequality and, by extension, wealth inequality.
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"Optimists argue that the clear pattern of history is that creating more value with fewer resources has led to rising material wealth and prosperity for centuries. We see no reason to believe that this time will be different—eventually. But the time horizon for our analysis stretches only into the early 2030s, about 15 to 20 years from now. Relieving the imbalances causing the stagnation in that time period means changing the pattern of income distribution somehow, shifting income toward those inclined to spend rather than save. Many options exist, and different countries will choose different paths. But historically, governments confronted with serious economic imbalances often have opted for a more active role in reshaping market-based outcomes.
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"Our analysis concludes that the coming phase of automation could eventually eliminate up to 50% of all current jobs.
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"By 2030, employers will need 20% to 25% fewer workers, equivalent to 30 million to 40 million jobs in the US (see Figure 22). Automation technologies will affect each industry and occupation differently. In some cases, lower costs resulting from automation combined with high demand for goods or services may add back jobs in a given industry. Many sectors will be able to lower operating costs by 10% or more, including some of the largest service sector employers such as retail trade and food service (see Figures 23, 24 and 25). At lower prices, we will see increased demand for some products, which will offset some displacement. Without it, the total reduction in employment would rise to nearly 30% of existing workers, or almost 50 million workers in the US. To put these numbers in context, during the Great Recession, US employment fell rapidly from its peak in January 2008 to its trough in February 2010 by nearly 9 million jobs, or 6.3% of total employment.
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"Finally, our analysis does not take into account additional third-order effects such as the introduction of new job categories. Social media marketing manager, for example, was hardly a job category 10 years ago; today it is among the fastest-growing fields. Automation will certainly create some new job categories—robot repair technician comes to mind—that will grow rapidly. However, given the magnitude of disruption in our base-case scenario, we do not believe new job categories will temper the degree of labor force disruption in the 2020s.
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"Alternatively, we may have underestimated the flexibility and fluidity of labor markets around the world to adjust to a stepped-up pace of transformation, enabling societies and economies to arrive quickly at a more prosperous balance of higher productivity and employment enabled by a smooth adaptation to incredible new labor-saving tools. This outcome echoes the more bullish technology-as-solution viewpoints with which we largely agree—but only over a much longer time horizon, past the end of the horizon discussed in this report. The balance of historical experience, including experience watching recent adjustments to far more modest market disruptions than contemplated here, such as the recent global financial crisis and recovery, suggests that labor market adaptations are sluggish and will be made even more sluggish by an aging demographic profile.
Potentially the most controversial element of our base-case scenario is the expectation that the government will assume a larger role in the marketplace. The opposite reaction might occur—namely, yet another retreat of government from the marketplace—but that scenario implies accepting the possibility that the demand constraint to growth due to income inequality becomes a near-permanent fixture and an irreconcilable problem. Unfortunately, there is no data set to rely on when analyzing the possible outcomes beyond the pattern of history. In our judgment, the weight of the data suggests that governments are likely to play a more active role addressing market imbalances.
Conclusion
The coming transformation will test leadership teams profoundly. Automation will reshape national economies, throw labor markets into turmoil and change the rules of the game in many industries. Aging populations will strain social systems as never before. But the 2020s will be a period of growth and innovation, too. Eventually, beyond the time horizon of this report, the global economy will recover from the temporary imbalances created by demographics, automation and inequality. As the labor force develops new skills, productivity gains will benefit a broader segment of the population, and new industries will flourish."
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