Automation and Social Inequality
When we hear the word “automation”, the first thing that would come to our minds would be the big industrial robotic arms in car factories. While this is true, it’s far from being the only truth. Automation is all around us, and has shaped our past, present, and will shape our future in uncountable ways.
By definition, automation is the creation and application of technologies to produce and deliver goods and services with minimal human intervention. By this loose definition, a lot of human innovation can be classified as some sort of automation.
While the number of workers currently involved in agriculture is much lower, the productivity per worker is much higher, this likely results from several factors. In my opinion, the most important of them being advancements in agricultural technology.
Another striking example of that is e-commerce. It’s hard to picture e-commerce platforms as some sort of automation, but you have to think of it this way: before e-commerce, people mainly bought from either brick-and-mortar retail stores or small and medium-sized family-owned storefronts. These stores, regardless of their size, had to employ people for in-store jobs.
The shift to e-commerce has also caused a shift in employability. Fewer people are now being employed for in-store jobs, and more and more are being employed for warehouse jobs. According to a study by the credit insurance company Euler Hermes, 670,000 net jobs have been lost in the US in the period from 2008 to 2020 because of that.
Warehouse jobs are by nature highly automatable. You can already see the robot fleets employed by Amazon dashing through their warehouses. The delivery process is theoretically even more automatable due to advancements in drones and self-driven vehicles.
What’s next?
When we think about a perfect candidate for automation we certainly have to consider truck driving. Simply put, it’s an unwanted job. It’s physically demanding, it makes having a social life very hard, it’s somewhat dangerous, and it pays relatively little. That’s precisely why the truck driver shortage in the US is expected to reach over 100,000 drivers by 2022. In a case like this, where both human needs and economic needs align, automation becomes a necessity instead of a luxury.
Some other lucrative targets for automation are cashiers, call center workers, insurance workers, and radiology specialists. These are all jobs that machines have the potential to perform even better than their human counterparts.
Where are these people supposed to go?
The prevalent assumption here is that when automation kills a low skill job, it creates other high skill jobs to replace it. After all, all of these machines need to be designed, built, and maintained by engineers. They need high skill workers to configure and operate them. And they definitely need scientists and academics to theorize them.
It is unreasonable though to imagine that a truck driver would suddenly be able to find the necessary training or even the opportunity to work as an emergency operator for a level 5 autonomous truck. Needless to say that it would be completely uneconomic and even ridiculous to automate all the trucks just to hire back all the truck drivers, train them, and then give them higher wages.
It’s very clear then that thousands of truck drivers will go out of jobs. While it can be beneficial to get humanity rid of such a physically demanding job in the long run, it’s very dangerous in the short-run. Simply, how are these people going to feed their families? How are they going to suddenly replace their jobs that they have been doing for years if not tens of years?
You can already imagine the feeling of anxiety and insecurity brewing inside these workers’ minds.
The economic and social impacts on the displaced workers themselves, and their immediate families, is unfortunately far from the only negative effect on society. A recent study published in the Labour Economics journal shows a strong causal link between involuntary job loss and increased criminal activity. The study cites multiple important factors behind these effects, including disruption of daily schedules, distress, and, of course, financial concerns. While the study focused on Norwegian workers, it’s only logical to assume that these results also hold in most other places in the world.
Solutions
When presented with a problem, we usually try to find the root cause. If we eradicate the root cause, then we would solve our problem. However, in this particular case, it would be unwise. We cannot fix this problem by stopping technological evolution or abandoning automation and digitization.
Job displacement is the kind of problem that we will never be able to eradicate, but we have to keep mitigating and containing.
Education
One important solution that we have to consider is making our education systems more affordable and more accessible.
Our current education systems, all over the world, are built around a once in a lifetime model. You go to school exactly once and then to further education — like universities or technical institutes — one or even zero times. That makes it very hard — for both the students and the education systems — to adapt to the rapid change caused by automation and job displacement.
Imagine a young person that spends years of their valuable youth life, and a huge amount of money, training for a specific job, only to find that job eventually replaced by a machine.
What if that same person could attend the training in a more concentrated way, spending less time and considerably less money? That would make mid-life career adjustments much more accessible and eventually lead to reduced post-displacement stress and anxiety. Programs like Nanodegrees and micro-credentials provided by online education platforms, if subsidized properly, can have a huge impact on mitigating the effects of job displacement.
Entrepreneurship
When a worker loses their job due to automation, another possible direction for them to go to is entrepreneurship. Starting a business after job loss can be very attractive. It can alleviate the fear of being displaced again and can be considered as a second chance to pursue something they actually like and think they can be good at. However, it’s sometimes very hard to start a business if you’re already at low or zero income. Building a business takes time, and they still need resources to sustain their families until they break even. That’s why it’s important to think about social safety nets.
Universal Basic Income
The anxiety to feed your family while having no income, being unable to fund your small starting business or the discontent due to being forced to work a job you don’t like because it’s the only currently possible opportunity. All of that can simply be solved by a universal basic income.
A universal basic income - also called guaranteed income or basic living stipend - is a payment that is given to all citizens regardless of their wealth, status, or any other requirement. In short, it’s an equal amount of money that is given each month or year to every citizen of a country.
This has the obvious effects of an increased sense of safety and generally reduced anxiety and fear of poverty due to job loss. It also has some hidden benefits, one of which is that workers would actually be less inclined to work jobs that they don’t like and would instead spend more time pursuing education or starting up their own businesses. This has positive impacts on society as a whole.
A majority of automatable jobs are jobs that humans do not like to do, but are rather forced to do out of necessity. What if we take away that necessity, by providing an alternative form of income? Some of these workers would pursue different jobs or seek further education out of their own volition. This would also have a huge impact on the market. Some industries will suddenly have declining numbers of workers. Which means higher wages for these workers. For these industries, the only option to stay in the market is to automate.
Automation that is brought by the human need for stability and desire for happier and more meaningful lives, is in my opinion much more sustainable than automation that is brought by corporate greed and the desire to senselessly generate more profits.
Universal Basic Income might seem like an idea out of this world. After all, wage labor is one of the pillars of our capitalist economies. It’s almost a universal assumption nowadays that you don’t earn money unless you work. But while that’s mostly true, many countries already have social security systems that provide services to their citizens regardless of their work output. Consider the already established tax-funded healthcare systems, education, and public child care in countries all over the world.
Experiments were carried out across multiple countries to assess the feasibility of Basic Incomes. The most notable of these, in my opinion, is the Finnish experiment. The results showed that Basic income recipients worked the same amount of hours as the control group, but their self-perceived depression rates were lower and their satisfaction with life was higher. That is a success in itself.
Other notable experiments include Germany’s privately funded trial where 120 Germans are set to receive a monthly amount of $1,400 for the duration of 3 years. The results will be compared against 1,380 people as a control group.
The American entrepreneur, politician, and presidential candidate Andrew Yang built his campaign around a Universal Basic Income of $1,000 a month for every American as a response to job displacement by automation. Unfortunately, his idea was far too detached from mainstream American politics.
Where to get the money?
The two main ideas we discussed: more accessible education and universal basic income are literally trillion-dollar ideas.
A simple $1000 per month stipend for every adult in the US, would cost $2.8 trillion each year.
Automation driven job displacement is an economic problem. Companies automate processes to lay off workers and reduce costs, ultimately to increase profits. There’s also a cost for automation: the money required to buy and maintain the machines, to buy the software, or to train new workers on these new machines. Before automation, a certain percentage of the companies’ income went to wages. After automation, part of that money goes towards the cost of automation. Another part is instead saved by the business owners, potentially increasing their wealth. This, in a way, means that more money is funneled away from low-income workers and towards the already high-income business owners. It is safe to assume that automation generally drives higher income inequality.
One important way to combat this inequality is better taxation. Increased taxes for the business owners and the generally wealthy, that is then reallocated as universal basic income, can serve as a great equalizer.
Open-sourced innovation
Another dangerous aspect of automation is what I call “automation driven monopoly.” Any big company can theoretically spend a tremendous amount of resources to come up with a new idea or technology with the potential to automate certain jobs, reducing costs by a huge factor. They can then use this technology to drive smaller companies with lesser resources out of the market. This has the potential to not only hurt the workers of the big company but all the workers laid off by the smaller companies as well. This wouldn’t be much of a problem if this innovative idea first came from university academics or public research institutes and was then open-sourced to the public, small and large companies alike.
To be able to achieve that, these research institutes and universities need to be heavily funded, which also requires huge amounts of money, whether through contributions from corporates that eventually benefit from the technologies they produce, or again, through government funding and increased taxation.
Choices
Like any other economic problem, it’s important to do a cost-benefit analysis for each of the possible solutions. On one hand, we have the cost of increased taxes that could potentially drive some businesses away. On the other hand, we have increased social safety, reduced crime rates, and generally happier populations.
Further readings
The Effects of a Universal Basic Income During the COVID-19 Pandemic in Kenya.
