Losing jobs to machines: is it different this time? Blog #7

29 May 2017 – Blog #7

Losing jobs to machines: is it different this time?

A number of recent studies have described the jobs that will be lost to automation in the next few years.  The World Economic Forum estimated that 5 million jobs will be lost to robots in the next five years, globally.  The Brookfield Institute for Innovation and Entrepreneurship at Ryerson University issued a report that found that nearly 42 percent of the Canadian labour force is at a high risk of being affected by automation in the next decade or two.  They found that the top five jobs at risk of automation were: retail salesperson, administrative assistant, food counter attendant, cashiers and transport truck drivers.

This report is consistent with other long-term trends in the economy.  For example, a report in the Economist looked at employment growth in routine vs. non-routine jobs, and found that non-routine tasks grew much faster in the last 30 years.

Blog 7 -think

The impact of automation and artificial intelligence seem so far-reaching that some people suggest it will permanently reduce the number of jobs needed in the economy.  A recent study by the National Bureau of Economic Research in the US found that each new robot added to the workforce meant the loss of between 3 and 5.6 jobs in the local commuting area.

Meanwhile, for each new robot added per 1,000 workers, wages in the surrounding area would fall between 0.25 and 0.5 percent.

Fear of changing technology is noting new.  A hundred years ago the Luddites destroyed weaving machinery they believed was threatening their jobs.

However, there are strong views saying that we shouldn’t worry about automation. In  a poll of Canadians Abacus Research found that 89% of Canadians agreed that technological change has been good for the world. And 76% felt it had been good for their own economic well being. They may be on to something. According to the Global Entrepreneurship Monitor study of  entrepreneurship, Canada is the most entrepreneurial country among the advanced countries.  Entrepreneurship is basically creating new jobs by following opportunities, whatever the rest of the economy is doing.

There is heavy weight evidence to back up this view.  Joel Mokyr, an economic historian, points out : “We can’t predict what jobs will be created in the future, but it’s always been like that.  Imagine trying to tell someone a century ago that her great-grandchildren would be video-game designers or cybersecurity specialists.  These are jobs that nobody in the past would have predicted.”

Carolyn Wilkins from the Bank of Canada points out that technological change has been part of the Canadian economy since Canada was founded 150 years ago.  100 years ago one third of jobs were in agriculture, today fewer than 2% are.

So there are optimists and pessimists. Who is right? And is it different this time?

While history supports the view that new jobs will be created to replace the jobs lost, we can’t be sure of that. So what should we do, given that uncertainty? It seems to me that we need to consider three actions:

  • Expand adult re-training. It is pretty clear that many people are going to loose their jobs, and will need to find new ones.
  • Update the education system to increase the focus on preparing people for the non-routine jobs that seem likely to dominate the economy in the next 50 years.
  • Experiment with novel social programs that may be needed if the pessimists are right. A good example of this is the basic income experiments being carried out in many places round the world, including California, Finland,Italy, the Netherlands and in Ontario.

Peter Josty

p.josty@thecis.ca
403-249-0191
www.thecis.ca


Do we have too much or too little innovation? Blog #6

4 May 2017 – Blog #6

Do we have too much or too little innovation?

We are surrounded by talk about innovation, in the media and in government pronouncements.  But do we really have too much, or too little of it?  Before we can answer this question, we need to establish a framework:

  1. What is our definition of innovation? There are hundreds if not thousands of definitions to choose from.  One widely used is from the OECD (Organization for Economic Cooperation and Development), which see four different types of innovation: product innovation (e.g. a new iPhone), process innovation (e.g. lean manufacturing), marketing innovation (e.g. Amazon) and organizational innovation (e.g. outsourcing).  This definition is helpful for commercial innovations but does not capture broader aspects of innovation such as social innovation and public sector innovation including regulatory innovation.
  2. What role does innovation play in the economy? The economist William J. Baumol sees innovation as the principal weapon of competition in the free market economy, and entrepreneurship as the vehicle for bring innovations into existence. So innovation is the lifeblood of our economy.  He sees three main roles for entrepreneurship: productive entrepreneurship (a useful new product or service); non-productive entrepreneurship (for example, exploiting a monopoly or a tariff wall) and destructive entrepreneurship (criminal behaviour).
  3. Risk and uncertainty. One aspect of innovation that is not apparent from the definitions above is the inherent risk of an innovation. The whole nature of innovation is to “suck it and see”.  When a new product or process is launched, it faces a whole range of risks some of which can be predicted in advance, but many of which cannot.  So trying new things is inherently risky and uncertain.
  4. Life cycle. Another aspect not apparent from the definitions above is that innovations have a life cycle.  New things get commercialized and are welcomed as innovations;  more and more of them get sold and new competitors entre the market and eventually the “new “ thing becomes communized and is replaced in turn by something else.

 

Having set up a framework, we can see that innovations are just solutions to problems.  Quite often, the problems have not been recognized before the innovation comes along.  Henry Ford is reputed to have said that if he had asked his customers what they wanted they would have said “faster horses”.

 

So we can re-frame the question to ask what are the big problems needing solutions today?  The answer is straightforward, and jumps out from the headlines of the newspapers and TV news:

  • Inequality
  • Global warming
  • Trade protectionism
  • Oil sands emissions and costs
  • Terrorism
  • The impact of automation on jobs

This list can obviously be extended.  However, it does give a clue to where we do not yet have enough innovation.

Where do we have plenty of innovation?  Again, we can look to the headlines:

  • Self driving cars
  • Artificial intelligence
  • Drones
  • Robotics
  • Blockchain
  • Quantum computing

This list can also be extended.  So there are clearly areas where innovation is alive and very well.  This list also include some public sector innovations.  For example, the experiment in Ontario with a Basic Income, to provide a level of income for selected households for a three-year period and evaluate the impact.  This experimental approach to government policy making is a new development that is staring to emerge around the world.

To return to our initial question: do we have too much or too little innovation?  It depends where you look.  We are woefully short of innovations is some areas, while other areas are doing just fine.

Peter Josty

p.josty@thecis.ca
403-249-0191
www.thecis.ca

#innovation  #entrepreneurship  #THECIS