It’s the Technology Stupid!

The United States, indeed the entire world, is undergoing a massive economic and social change that our leaders have failed to recognize.  Two of the symptoms of this change are increasing unemployment and the decreasing value of labor.  These symptoms are not merely the result of economic cycles or government tax rates, but are a more permanent reality of a world undergoing massive transition. Any politician who stands before the people and says that they are going to stimulate economic growth which will create jobs and revitalize the middle class is either a liar or absolutely clueless.

All signs point to words like Disrupt, Shake Up, Challenge, Evolve and Change to symbolize disrupting the status quo with new ideas and technologies
We are going through a massive economic and social change that few seem to recognize.

The reality is that technological changes are displacing labor at an ever increasing rate such that it is foreseeable that jobs as we have known them for the past 150 years are going away.  Economic growth no longer equates to job growth, but to technological investment and implementation.

Don Tapscott, an author and authority on innovation, who I heard give an incredible talk at Legal Tech a few years ago, recently published an article in the Harvard Business Review in which he discussed what he calls the dark-side of the technological revolution. In his article he asserts, and I agree with him, that:

structural unemployment will be the biggest public policy issue for decades.”

Structural unemployment is unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand. In other words, it doesn’t go away simply because business picks up. It is static and there is little government can do, short of outlawing technology, to cure it.

Robots welding in a production line
Robots welding in a production line

This concern about structural unemployment was echoed in a lecture by then Lincoln Electric CEO John M. Stropki that he presented at the Chautauqua Institution in 2011. Lincoln Electric is a 120-year-old company located in Cleveland Ohio that is the world’s leading producer of welding equipment. The company is non-union, but promises its workers employment for life. During his presentation Mr. Stropki pointed out that in the past 40 years manufacturing employment in the United States has declined exponentially, but that the percentage of our National Gross Domestic Product coming from manufacturing has hardly declined at all. In other words, we’re producing more goods with less people. He was very candid in his assessment that manufacturing jobs are being displaced by technology and will not be returning. There is simply no tax break or other government intervention that will change this reality.

Tom Worstall, a contributor to Forbes magazine recently wrote an article addressing the myth of the decline in United States manufacturing and wrote:

It is absolutely true that manufacturing as a percentage of the US economy has fallen. But that’s not because manufacturing itself has shrunk, that’s because other parts of the economy, most obviously services, have grown faster than manufacturing. It is also true that manufacturing employment has dropped precipitately. But to decry that while production is still rising is to be most foolish. For having rising output combined with falling employment is generally regarded as a good thing. Labour, workers, are a cost of making something. An input into the system. And if we get more out of the system while putting fewer resources into it then this means that our system is becoming more productive. And another name for the system becoming more productive is that we’re all getting richer.”

I think that Mr. Worstall is incorrect in his assessment that we’re all getting richer. The unemployed workers who make up the rapidly shrinking American middle class are not sharing in the rewards of the increased productivity created by the technological displacement of the jobs. Instead, they’ve been economically and socially side-lined

Thanks to Uber, with a car and a cell phone you can be in the Taxi business.
Thanks to Uber, with a car and a cell phone you can be in the Taxi business.

We are facing the daunting challenge of incredible social and economic change resulting from the end of employment as we have known it for generations. I predict that in the future most people will not have the long-term relationship with employers that we’ve known in the past. Instead, most will be working some sort of freelance/independent contractor, if at all. Consider that technologies such as Uber, Elance, and Airbnb now allow the average person to enter industries that previously took a great deal of capital to enter. Of course, even some of these newly created industries are probably also doomed. Self-driving vehicles are currently in development and will likely displace the Uber driver. I suspect occupations such as truck driver and taxi driver will be obsolete in a generation. Even highly trained technical occupations such as medicine are vulnerable as we develop robotic surgery and computer programs that are already reading imaging reports such as CAT scans and X-rays better than human physicians.

In my own profession of law, I suspect that we are seeing the last generation of paralegals. Document automation, interactive case management software, and virtual assistants are rapidly taking the place of legal secretaries and paralegals. For lawyers, the prospect is better, but not especially bright. Highly systemized technology driven firms are dominating the market in the areas of Bankruptcy, Social Security Disability, and Personal Injury law – all of which used to the bread and butter of small and solo practices. Additionally, geography is becoming less of an issue in legal practice with electronic court filing, telephonic appearances by lawyers and witnesses (even for trials), and video conferencing all remove the necessity that a person utilize an attorney local to the community where the Court is located.

Jobs help form our identity
Jobs help form our identity

This prospect of employment going away isn’t just an economic change, but a disruption of the social structure that has existed in western culture for generations. Our occupations aren’t just how we make money, but they also provide us with a large portion of our identity, a sense of usefulness and purpose, and create access points to the larger world. Thus, we’re not simply facing an economic crisis, but an existential one as well. The question in my mind as I watch people seeking to lead, such as our presidential candidates, debate the issues is when we will acknowledge the new reality we live in and start working to find meaningful solutions rather than simply looking back towards prior glory days and trying to rework the solutions of the past.

 

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