Is quality of life / general happiness considered when we talk about how many jobs there are in the service industry? I know a few people who have been steadily employed in such industries but are unhappy and don't see any way out.
Imagine a society with two classes - an upper class creating & sustaining 'services' like horse-walking or tinder coaching, a lower class forced to choose between unemployment and being the other class's glorified servants.
We need to be looking at ways to level the playing field - provide opportunity and education to those who were not fortunate enough to be born into it. Celebrating the stability of jobs which make people feel like second class citizens feels like shrinking away from the problem.
I think they're the opposite of glorified. A servant is someone you personally know, that your children may grow attached to, that, ideally, you feel some mutual obligation towards. Workers in the gig economy are faceless, replaceable cogs.
And the gig economy marketplaces expands that 'some' to 'all', since it's near-impossible to find out what's happening with any one gig worker once your brief interaction with them is over. Thanks to all that smart tech that automatically matches buyers to sellers, they probably don't even have a manager to notice they got sick.
The more you reduce human contact and any chance of forming a relationship, the more cog-like workers will be treated. And reducing human contact in the name of efficiency is exactly what all those gig economy services do.
Just because some servants are already abused, doesn't mean gig economy won't make it worse.
I agree. And to add to your point, we are bombarded with the demographic problem message every day. So what's the solution from these experts? Are we supposed to continuously grow the population forever? I've read our social welfare programs to private industry are being threatened by demographics change and the solution is more people. Okay, then what? What happens in a generation? We are back to the same demographic problem. Is it really a solution if you are just pushing the problem one generation into the future?
Seems like the problem isn't with demographics but the economic system if the problem is perpetual and impossible to correct.
Yes, it seems stunningly obvious that we aren't creating new jobs that pay a reasonable living wage fast enough, for a long time. AI (and plain old automation) accelerates that even more. So where are those new jobs coming from? There's no easy new job for the truck driver that pays as well, but even for the young person who is potentially easier to train for a new field, we keep producing more with less human effort, the general outlook is poor, we won't have as many jobs.
It seems to be qualitatively different than when people left farms to go to factories, or factory jobs to office jobs.
None of that would have been an issue if we had put the money away it costs to take care of those people when they get old, aka SS done right.
But we won't be back to the same demographic issue, because the issue that they people who retire now in the west are the last generations that were bigger than their parents generations (it has a formal name, but you can roughly think of it as many kids born, many kids die transitioning into many kids born, few kids die into what we have now which is few kids born, few kids die).
I feel like there's strawmanning going on too. I don't know of any 'AI alarmists' that are saying gardening and hospitality staff are going to be replaced anytime soon. What are being discussed are radiologists, financial analysts, call center staff etc.
There's a great interview with Ellen Shell about this exact thing[0].
The argument is obvious in retrospect but, call me a dummy, I hadn't considered it until I heard it.
The act of automating is expensive, regardless of the work involved. You want a big return on investment. so You're going to automate the expensive, high-skill jobs first and work your way down. Radiologists, and financial analysts are expensive so we automate away their jobs.
If you want a decent paying job for the foreseeable future, become a plumber.
The thesis was that everyone keeps getting automation wrong, and why the coming revolution will be far more different than what has come before. I even tried to extrapolate and show from the history of AI, just how wrong we've gotten it before and the few things that we keep on systemically underestimating.
Technology creates new jobs but reduces the number of people and processes needed to do the same job.
Technology creates new value but reduces the value of the contribution humans make.
Technology creates new markets but shrinks the amount winners in those markets
Technology compresses, through digitalization, the number of steps involved in delivering products. (Music and movie industry to name two examples)
Technology increases your technical advantages but forces other competitors to do the same thus reducing the advantage of the individual until you own most of the market.
Globalization creates bigger markets and temporarily offsets the need for technology to provide a more cost-effective competitive advantage.
Outsourcing is the step before automation.
Technology keeps improving while humans don't.
The value added by the individual in a job function is mostly only a fraction of what the human is capable of doing.
Technology is really good at solving these simple tasks and are becoming better and better.
Ironically a cleaning lady will be out of a job much later than a radiologist is.
The jobs that are left for humans are low-value jobs and will be pushed down even more as more and more humans become available to the job market because technology renders them useless in other situations.
It's really pretty simple. "The jobs" didn't go to robots, they went to humans in China. Blaming automation is just a way to sweep under the rug the results of the last 20 years of American trade policy.
Even if all those jobs eventually get automated, at this point they will be done by robots in China, not in America. It's still a big loss for the US.
Automation will bring the robots back to USA, actually.
Since robots cost the same to operate in US and they do in China, factories will shift location closer to the markets they supply.
EDIT: my point was not clear enough. I'm saying in the long-term automation will reduce the cost of labor close to zero, leaving only the cost of inputs and distribution (supply chain). Not to mention the IP risks of locating tech in China, advanced automation will make it more cost effective to shift production to be located next to the markets where those products are sold to consumers. China is well aware of this, which is why the current government policy is focused on boosting the local innovation and technology economy.
No, because it won't be a discrete shift from 100% humans to 100% robots - things will get automated in small parts. And even without that, the factories rely on the nearby supply chains. Eventually, when you'll try to move something back to the US, you won't be able to because there just won't be any ecosystem there. E.g. https://www.nytimes.com/2019/01/28/technology/iphones-apple-...
Classic "We moved the supply chain to China because it's cheaper --> We can't build stuff in the US - all the factories are in China!"
The problem is, supply chains are not as entrenched as you claim.
Given a long enough time horizon and advanced enough automation, robots will move back to USA. Especially consider the IP risks and political concerns WRT China.
It will take a long time for all industries, some will happen before others, but there will be more vertical integration through automation and it will become more cost effective to have factories (not jobs, there will be no jobs from this) for products next to the markets they serve.
This is what most economists believe, and what the Chinese government believes, which is why they are pushing to develop AI and innovation.
But factories won't physically move at all. As costs change, makers will just spend money to create new factories wherever costs are lowest -- labor, raw materials, power, regulations, shipping. The old factories (and companies) will close, as they did in the US starting in the 1960's, and new ones will arise somewhere else, usually run by someone else.
The effect will be the same though: the site of manufacturing will change. But like the Star Trek transporter, no matter actually gets moved.
Careful - that something happened in the past is no guarantee it'll happen again, especially if conditions change.
> wherever costs are lowest -- labor, raw materials, power, regulations, shipping.
Due to automation, labor costs will be less and less of a factor. Ocean shipping is already very cheap, and comprises a negligible fraction of the cost of most products - it's how markets in Europe are full of Chinese garlic. Raw materials can be shipped, so those are also not much of a factor. That leaves only power and regulations as factors. A smart country is likely to make sure those don't work against it, and to outsource only the most environmentally-harmful production steps.
There are still tariffs, but being willing to host polluting industries is otherwise dangerously close to being the only advantage an under-developed country has left.
> robots cost the same to operate in the US and they do in China
Nope. Labor, land, resources are all typically cheaper in china. It's also close to other manufacturing. I've read on this elsewhere; it's called "economies of proximity" or some such (I can't recall exactly). But it means you don't have to ship inputs or outputs as far.
But here's the possible issue: Chinese factories start industrializing. They stay near the others. Because everyone's still in China, the next generation will be built there.
This is a big part of the reason why America winning the "AI arms race" is so important.
Not everything will be automated simultaneously. In order to build a factory that is completely automated there is still human labor in building the factory itself, building infrastructure, mining and transporting materials, etc.
China has aging population (median 41 years age) and things get further complicated by one child policy, which are not reversing even with relaxation of it. Their attempts to pivot to consumption economy did not yield much of a result. Once their shawdow financing faces a day of reckoning, we have to wait an see what their real consumption capacity is.
That is surprisingly old for China. I looked up a random source on the internet that was close to that. Doesn't really change your point though.
This article says Chinese median age in 2019 is 37.3 and us is 36.5. That's interesting that we are the same. China has the other problem of producing too many men and not enough women, leading to increasing problems of pressure. That problem of not enough women to match the men seems like it will be a worse problem.
The economy is not bigger in China yet. Also, the competition in China will be more fierce for US companies than in domestic markets, meaning they will have less market share.
What are the biggest reasons companies send jobs overseas? It has always been my impression that companies do this because regulations in the US are too strict, and minimum wage is too high to support certain work.
Saying that something moves to China because minimum wage is too high has always been an interesting topic for me. With a positive spin this argument becomes "the American government has set a standard of living which is too high to allow such manufacturing processes or subjective abuse of labor". Reducing regulations or lowering minimum wage would verly likely not result in a better standard of living, even though it would be most economically efficient for everyone to be working for peanuts 60hr/week.
It seems to me that it is part of the governments job to say "yes this is economically feasible, but not socially acceptable." Outsourcing breaks this dynamic by introducing moral hazard--we can have our cake and eat it too. I think if there were a minimum global standard of living, most cheap plastic shit just wouldn't get made.
The traditional model is that US employment is driven by fiscal and monetary policy. So the Gov. and central bank stimulate the economy until it reaches full employment, then put on the brakes when inflation gets too high.
With this model, even if some jobs shift to China or are automated, that just means the central bank can step on the gas a little bit more, and employment and standard of living is unaffected.
One problem with this model is structural problems where say jobs are being created but are in a different place than the ones being destroyed. People may be unwilling to move or it may be too expensive. They also could require different skills.
Another issue is that the central banks are limited in their ability to lower interest rates (their traditional way of stimulating the economy and getting out of recessions). Fiscal policy (Gov. borrowing and spending) is not expensive at all now (the Gov. currently pays hardly any inflation-adjusted interest on the debt), but if interest rates were ever to rise substantially having a large debt could be a problem. Spending the money efficiently also could be a challenge and it's politically controversial to do it at all.
Personally I think something like a UBI is probably a good idea to insure against things just imploding. In the event of a recession they could just increase it to stimulate the economy, which probably can happen a lot faster than infrastructure projects etc. And if automation accelerates, it may be tough for large numbers of people to adapt quickly (even if they eventually do).
Brilliant comment, I've had this understand for a while myself. We can legislate ourselves to a higher standard of working/living, but the work then becomes a premium and will support fewer people, as outsourcing occurs, to automation and other workforce that doesn't demand such benefits.
What does that make the person who demands a better working condition for themselves, but is fine that a percentage of work is outsourced to a sweatshop?
Labor and wage regulations economically function akin to a "carbon tax" on labor. In addition to encouraging outsourcing, they are encouraging the early adoption of technological alternatives (robots/AI) that face no such restrictions.
I don't see why you're being downvoted. Regardless of whether it's good or bad, regulations on resource extraction, manufacturing, wages, unions, pollution, among many other business practices are the reason why those jobs went abroad as soon as other countries stabilized with their own market economies.
Even the most mundane industries were operating in the US just fine up until the mid 1900s.
You can rightfully critique and regulate the golden goose, but there is a point at which it becomes incapable of producing as many golden eggs as other countries.
It is a combination of factors that lead to this, I will just give you a quick example, please note that I will not cover all factors.
* Product X is made by 3 companies in the US. It costs them $20 to make the product and it is sold for $30-33.
* Government increases minimum wage, which leads the cost to go up to $23 (e.g. cost of raw material is impacted, labor, etc), the producers increase the price to $33-35 while still taking a personal hit in their returns.
* Unexpected economic disruption or shortage in a certain raw material leads to increased costs to $25 and increased consumer price to $36-38
* Government implements a new legislation that impacts customer demand negatively and increases cost of production to $28. This leads to increased consumer price to $39-40
Throughout this process, supply/demand dictates that the increase in prices may impact negatively the demand for the good produced.
* One of the companies realize that it can produce the goods in a country called Melo for $5. It shifts a good portion of its production there, allowing it to sell the goods to consumers for $20.
* Customers sensitive to price will flock to the cheapest good. All the other companies decide to move their production to Melo country to remain competitive.
In part, consumers are willingly exchanging a few jobs here and there so that they can get goods & services at a cheaper price. Economics is full of trade-offs, understanding them is essential for a country's long-term success.
So essentially you're saying, between rising minimum wage, other government involvement, various economic reactions, competition between companies, and the customers desire for cheaper products drives production overseas?
If American society insists that we legislate ourselves into a more comfortable environment (higher min wage, better working conditions) then I think we'll have to accept that certain production will just never happen here.
Automation is similar to outsourcing, in that you have a black box that you put in $.20 of resources and get out an item with no US labor. Even if you can solve the issues with outsourcing that probably doesn't help the majority of the problem.
The other thing with tariffs is if you put tariffs on steel that hurts automakers (since foreign ones have cheaper steel). You can then put tariffs on cars, everything, but then everybody puts tariffs on you. Also things like computers are more expensive which might hurt productivity. Most economists don't seem to think the whole thing is worth it, and there's countries like Brazil that do big tariffs and it doesn't seem to help them any.
Without tariffs, you can pick between work not being done here, or a race to the bottom against dictatorships and oligarchies that have no concern for the welfare of their citizens.
We're currently pursuing option #1, but neither one sounds fantastic to me.
There's not much difference (from the perspective of the US economy) between outsourcing to China to make a widget for $.20, and automating it in the US to make it for $.20/item. Each of them are a black box where you put in $.20 of resources and get an item, with no US labor.
I think legislation like minimum wage is only a small part of the story too. Lots of people get paid more than minimum wage and we couldn't just put min. wage at $100/hr.
I think the fundamentals we are looking for are productivity and macroeconomic policy. Traditionally, the Gov. and central bank stimulate the economy until it reaches full employment, then slow it down when inflation is high.
Productivity will determine how much people produce/consume (in total) when everyone is working. Of course there's issues of how those goods are distributed (which is probably not quite as bad as the wealth gap, the rich put a lot of money in stocks etc instead of consuming it).
There's also structural problems where the job locations/skills don't match with the workers. While I don't see why in the long-run we can't just produce more of what people want (health care, going out to eat, housing, vacations, etc), if millions of people are displaced rapidly by online shopping, self-driving cars etc I think it will be hard for people to adjust quickly.
Also maybe most worrying is some of the macroeconomic stuff that has been relied on to keep the economy closer to full employment is in uncharted territory. The central bank has less ability to stimulate the economy to get us out of a recession than maybe it's ever had, and the alternative of fiscal policy (gov. spending) is controversial so I'm not sure how much it can be relied on in the US either.
It is largely incorrect to blame loss of US manufacturing jobs to minimum wage legislation. If a company is paying $20/hour in the US, well above the minimum wage, and can outsource an equivalent job for $6/hour, that's just what it will often do.
Minimum wage doesn't come into it. No employee earning $20/hour is going to accept that tomorrow she'll get $6/hour for the same job. (One reason is pride. Another is information asymmetry. As an employee being offered a $14/hour wage cut, you can't know whether the company is telling the truth about the equivalent cost of labor in China, or is just trying to cut your wages.)
I think the argument that a large percentage of people in the US need to lower their wages to 'compete' with developing countries is not true, and even making that argument is more likely to lead to trade barriers erected than wages being lowered.
The problem with the simple model of free trade where workers just lose (why pay $10 in the US instead of $2 in Mexico etc) is that they do not pay workers with dollars in Mexico, they pay pesos. The dollars actually stay in the US. What the total effect of free trade is depends on what happens to those dollars. Are they being used to buy US goods, investments, government debt (then what is the government doing) etc.
Why does it matter that someone pays with dollars and at a certain point that is translatted into pesos. By the way, not all industries work this way, a fair number of them use us dollars (more than just oil).
The fact that you pay in pesos eventually means if pesos lose value internationally you could pay them less (but dollar cost is the same). But that's not guaranteed.
It matters because the dollars stay in the US and something must happen with them. So it's not like we are just sending them money and getting nothing in return. As soon as they are exchanged for pesos, that means someone else bought dollars and is going to do something with them. Some industries are priced in dollars but the only major country where people actually spend dollars (without exchanging them) is the US.
A trade deficit means overall the other country is buying more investments instead of goods. But those investments are in the US. To actually spend the money somewhere else they would need to exchange it again.
And those investments in the US aren't inherently a bad thing. If it's just buying US government bonds and the government not doing anything productive with that money it might be a bad thing though.
The short answer is that corporations have decided to externalize production as much as possible into global supply chains.
It's cheaper, it buys you flexibility and it makes "re-tooling" for other product lines a matter of switching suppliers.
There are many excuses that allow a company to end-up in a situation where they're little more than finance, product/sales/marketing management, and scm-specialists sitting in cubes with headsets on "hitting their numbers". I find it all very sad and unsustainable in the long term. If China eventually "eats our lunch" economically, we will have richly deserved it as a nation.
Okay I read that. It basically says if you took away the computer industry growth the us grew at an anemic rate, like 0.2%. Or most of the growth was in one particular sector. I don't think they were arguing that the growth is somehow overinflated, just that it was focused on one sector. Does it matter that it was flat everywhere except in the computer field? I think there must be something more you are getting at.
The focus on "AI" and its impact on labour markets is an important one, but definitely more "trendy" than others which may be why it tends to outshine the rest (like demographic change) - what it IS doing is sparking a great conversation though about the "navigation problem" that plagues certain demographics in accessing opportunity when confronted with rapid change (regardless of the source).
Echoing Autor's comments: "It’s a great time to be young and educated. But there’s no clear land of opportunity” for adults who haven’t been to college..."
We live in a world with almost infinite amounts of information, yet how we process and use that information (including labour market information) will be our next challenge. And understanding labour market shifts in the context of multiple forces AND their interactions (i.e. how does a job become automated in practice IN the context of a higher rate of retirement; what does a person actually need to perform well in a job, etc.) will require some novel innovation that I think data + AI can actually help us solve.
yes, yes, the classical economists reaction to AI is to simply consider it equivalent to the machines of the past that replaced human labor.... in the past workers may have had to find new work but since machines need operators eventually everyone found a place... the problem is that AI doesn't replace labor, it replaces operators.
People are missing the point of the article which is that the number of young people who are willing and able to do the service jobs is a limiting number.
I think that demographics will play a huge part for a decade or two. There are two breakthroughs that I anticipate will happen and will change things.
The first thing we need is a really efficient and powerful artificial muscle combined with truly biomimetic mobility. This is the type of thing that needs to be invented to get humanoid robots that are truly dexterous and fast.
Along the same lines we need more general purpose AI to go in those new robots. It doesn't actually need to be fully human-level AGI in terms of generality or capability. It just needs to be more general purpose than current systems and be integrated into the fast dexterous robots.
I'd love to know how are those experts betting on their predictions ? Do they trust their guts enough to bet, by going long or short ? What is a good bet if you believe what they say? Go long robotics companies? Or maybe there's something less obvious ?
Seems like every economist is saying that we need more people working more jobs to support the rapidly growing cohort of retirees- yet a massive housing crisis still continues in most major cities.
The housing crisis is how we convince more people to work more jobs for the benefit of retirees. The cash flows towards rent winds up in the pockets of real estate owners, and the cash flow from mortgage payments winds up in Agency bonds largely owned by retirees.
Imagine a society with two classes - an upper class creating & sustaining 'services' like horse-walking or tinder coaching, a lower class forced to choose between unemployment and being the other class's glorified servants.
We need to be looking at ways to level the playing field - provide opportunity and education to those who were not fortunate enough to be born into it. Celebrating the stability of jobs which make people feel like second class citizens feels like shrinking away from the problem.