Is the Real Crisis Too Few Jobs Or Too Many Workers?


crisis

Robots are coming, and they’re going to take your job! Sure. We all know that. Cars will drive themselves. New factories will have all robots and no workers. Your manager will be replaced by an AI. Half of all jobs will go away. Forever. The age of “work” may be coming to an end. Of course, there is another theory.

In 1927 the glocal population reached 2 billion. Today it is 7.6 billion. By 2100, the population will peak at 11 billion and then fall. 25 nations already have zero growth or a declining population. Worse still, as the world’s population ages, more of the population will be retired. The world is facing a global worker shortage!

A crisis is headed our way, but which one? Will it be too few workers or too few jobs? It’s like a plot from Star Trek “Discovery”, with America caught between alternatives universes! How did this happen? Let’s go back in time and see!

Post War: World War II changed everything! Workers once relied on personal skills and instinct, and productivity came from personal determination and drive. After WWII, science and technology took over. Germany might engineer better tanks and the UK could be more innovative (penicillin, radar, jet engines, computers, even the “Jerry can”). But it was America productivity that won the war.

Before World War II, airplanes were produced by the handsful. By the end of the war, planes were built by the tens of thousands, with each new model dramatically superior to the one it replaced. In just a few years, propeller-driven biplanes were replaced with jets.

The same techniques that won the war were adopted to consumer manufacturing. Washing machines, vacuum cleaners, motorized lawn mowers, and an endless catalog of luxury items became affordable enough for every family.

Peter Drucker, the most influential management theorist of the last century, said that productivity in America rose 50 fold during the 20th century. Everyone could have a job, work a mere 40 hour week, and afford the newest consumer goods. Technology had delivered the age of leisure!

Globalization: The war had destroyed much of the world. America, however, was protected by the natural barrier of the Atlantic ocean. With zero war damage and huge factories built for the war, America was in the perfect position to rebuild the world.

In rebuilding the war-ravaged world, America replaced many Europe brands around the world, becoming the “Factory of the World”, and the Global superpower of the 20th century. But how would America, with just 5% of the world’s population, get the rest of the world back on its feet? The answer was… PRODUCTIVITY!

Technology and scientific management would deliver unheard of levels of productivity. America alone could produce more goods than the entire world once did! The cost of just about everything fell, and prosperity spread across the globe. Everyone wins… at e\least for a while.

The Treadmill: Prosperity did follow, but the world would not stand still. The Population was rising. In 1804 world population was 1 billion, in  1927 it was 2 billion, and in 1960 it reached 3 billion. The world didn’t just have more people, the speed of population growth was accelerating. The speed of growth was accelerating. Developed nations worried about their standard of living, and developing nations worried if they had enough to eat. As we would see in the 20th century, a hungry nation is never very far from revolution, and prosperity does bring peace.

http://www.worldometers.info/world-population/world-population-by-year/

Factory productivity rose still higher. Agricultural scientists created a “green revolution” that doubled the world’s food supply. There was enough for everyone, but a continuously rising population meant continuous productivity improvements in every business. Factories were automated, workers were freed for more complex tasks, and education standards were raised. A new degree, the MBA, was created to drive higher productivity. Today, every corporation has MBAs and departments to improve productivity.

Continuous improvement not only made goods cheaper and more plentiful, it shrank electronics that could fill a room into a device that fits in your pocket. TVs, computers, cellphones, tablets, and other electronics followed Moore’s law, cutting the cost in half every year or two.

End Of The Begining:  Global population will peak at 11 billion, in 2100. African nations will continue growing for some time, but at least 25 nations have already reached zero growth or have a declining population. But this understates the problem.

America’s population is 325 million and will to grow to 400 million by 2100. But with older citizens and fewer children born, our population should have already declined. Only immigration has kept America growing, preventing massive worker shortages. This could change tomorrow if we rewrite our immigration policy.

Turning Point: We need a growing population because we’re aging. The retired portion of our population is growing. Older citizens need more services. In 1960 just 5% of our economy was in healthcare. By 2025 it will rise to 20%. Restaurants, hotels, house cleaning, and other services have expanded, requiring new workers.

When our workforce transformed from agricultural to factories and services, many ex-farm workers moved from the agricultural South to the industrial North. In the 1970’s, tens of millions of women who were previously excluded from work (and college) joined the workforce. But it still wasn’t enough.

We added computers, and automated, and offshored work. We even turn a blind eye to an estimated 11 million illegal immigration, who performed work that no longer attracted Americans (agriculture, fast food, construction, and caring for our homes). Any serious reductions in immigration (legal and illegal), and we would have a huge hole in the workforce.

http://www.pewresearch.org/fact-tank/2017/04/27/5-facts-about-illegal-immigration-in-the-u-s/

Crunch the Numbers: In the mid-1970s, the speed of population growth peaked and then slowed. Today’s growth is just half of that of the ’70s. But corporate expectations were developed during that “peak” period. And we followed a simple system… productivity brought new jobs, new jobs brought more employment, and more employment delivered prosperity. But what happens when productivity continues to speed up, while the market grows more slowly?

http://www.worldometers.info/world-population/world-population-by-year/

Robot Revolution: Early automation replaced human muscle with machines. Think about how much easier it is to work around your house with an electric sander than a piece of sand paper. Add to that artificial intelligence (AI), and you can replace knowledge workers like lawyers, programmers, doctors, accountants, and managers. If a powered screwdriver is better than a manual one, think about a screwdriver that you just point at the work and it gets done. That’s what automation plus AI will deliver.

A few years ago, an industrial robot cost $150,000. But it needed an additional $300,000 to $450,000 for programming. To perform one job, in one factory. Change the work (even slightly) or move the robot to a new location, and you need to reprogram the robot.

Today’s robots cost less, and are “smart”. They can work out little issues on their own. For bigger tasks, another AI writes most of the programming, rather than relying on expensive human programmers.  This is a gamechanger, lowering the cost and increasing the span of jobs suitable for automation. That’s why experts expect robots to wipe out at least half of the world’s jobs, in just 20 to 30 years.

Our Future: Due to its inexpensive labor, China became the land of outsourcing, China is where most of the world’s “stuff” is made. But the cost of labor has been rising. Now their population is hitting the tipping point where it will shrink. By 2100 China’s workforce will plunge from 1 billion to just 500 million, while the market they serve will more than double in size. Just to keep up, they need a 400% increase in productivity.

The solution is… automation, robots and AI’s. China already buys more industrial robots than any other nation. Now, China is ramping up to be the world’s largest robotic manufacturer. A million robots will be sold every year by the early-2020’s and ten million a year just a few years later.

If each robot replaces just 5 workers, in less than a  decade robots will replace 50 million workers every year. China intends to retain the title of “Factory of the World”, until at least the end of the century. China can only do this if they implement the most advanced automation. That means that China will consume almost every robot they produce for the next few years. By the mid-2020s they can then shift their attention to global sales. China will build… and control… most of the world’s robotic workforce.

Happily Ever After?: Robots will take over. Period. The real question is how fast and with how much disruption. The speed of new automation probably won’t match the speed of workforce decline. But we should try to match these two trends so that disruption doesn’t become disaster.

In the last century, the 40 hour work week became standard. Much of the disruption in our century could be defused by implementing a 30 hour work week. Of course, working fewer hours could raise costs, but adding all those robots will lower cost. So, it’s a Goldilocks world… too hot, too cold, and just right.  This could all end with a happily ever after 22nd century. We just have to make the right choices!

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