January 23, 2013

All over the world, technology replacing employees

Technological advances mean many jobs lost in the recession are gone for good, while those that have come back pay less.

The Associated Press

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Rosser Pryor
click image to enlarge

n this Jan. 15, 2013, photo, Rosser Pryor, Co-owner and President of Factory Automation Systems, sits next to a new high-performance industrial robot at the company's Atlanta facility. Pryor, who cut 40 of 100 workers since the recession, says while the company is making more money now and could hire ten people, it is holding back in favor of investing in automation and software. (AP Photo/David Goldman)

Related headlines

• Startups account for most of the job growth in developed economies. Thanks to software, entrepreneurs are launching businesses with a third fewer employees than in the 1990s.

It's becoming a self-serve world. Instead of relying on someone else in the workplace or our personal lives, we use technology to do tasks ourselves. This trend will grow.

The lingering pain of the Great Recession is not entirely a result of technology's advances. Other factors are keeping companies from hiring -- partisan gridlock in the U.S., for instance, and the debt crisis in Europe, which has led to deep government spending cuts.

But to the extent technology has played a role, it raises the specter of high unemployment even after economic growth accelerates.

THE JOBS OF NO RETURN

After the recessions that ended in 1991 and 2001, jobs lost were slow to return, but they all returned within three years.

But 42 months after the Great Recession ended, the U.S. has gained only 3.5 million, or 47 percent, of the 7.5 million jobs that were lost. The 17 countries that use the euro had 3.5 million fewer jobs last June than in December 2007.

The lack of midpay jobs is almost entirely to blame.

Fifty percent of the U.S. jobs lost were in midpay industries, but Moody's Analytics, a research firm, says just 2 percent of the 3.5 million jobs gained are in that category. After the four previous recessions, at least 30 percent of jobs created -- and as many as 46 percent -- were in midpay industries.

Some of the most startling studies have focused on midskill, midpay jobs that require tasks that follow well-defined procedures and are repeated throughout the day. Think travel agents, salespeople in stores, office assistants and back-office workers like benefits managers and payroll clerks, as well as machine operators and other factory jobs. An August 2012 paper by economists Henry Siu of the University of British Columbia and Nir Jaimovich of Duke University found these kinds of jobs comprise fewer than half of all jobs, yet accounted for nine of 10 of all losses in the Great Recession. And they have kept disappearing in the economic recovery.

TECHNOLOGY UP TO TASK

The uncomfortable truth is technology is killing jobs with the help of ordinary consumers by enabling them to quickly do tasks that workers used to do full time, for salaries.

Check out your groceries or drugstore purchases using a kiosk? A worker behind a cash register used to do that. Buy clothes online? You've taken work from a salesman.

Software is picking out worrisome blots in medical scans, running trains without conductors, driving cars without drivers, spotting profits in stock trades in milliseconds, analyzing Twitter traffic to tell where to sell certain snacks, sifting through documents for evidence in court cases, recording power usage beamed from digital utility meters at millions of homes, and sorting returned library books.

The Hackett Group, a consultant on back-office jobs, estimates 2 million of them in finance, human resources, information technology and procurement have disappeared in the U.S. and Europe since the Great Recession.

IF ONLY HISTORY REPEATS

What hope is there for the future?

Historically, new companies and new industries have been the incubator of new jobs. But even these companies are hiring fewer people. The average new business employed 4.7 workers when it opened 2011, down from 7.6 in the 1990s, according to a Labor Department study released last March.

Technology is probably to blame, wrote the report's authors, Eleanor Choi and James Spletzer. Entrepreneurs no longer need people to do clerical and administrative tasks.

Technological innovations have been throwing people out of jobs for centuries. But they eventually create more work, and greater wealth, than they destroy. Many economists are encouraged by history and think the gains eventually will outweigh the losses. But even they have doubts.

"What's different this time is that digital technologies show up in every corner of the economy," says MIT's McAfee, a self-described "digital optimist." "Your tablet (computer) is just two or three years ago, and it's already taken over our lives."

 

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