Tuesday, February 9, 2016

Automation: Will Machines Replace Humans to Become the New Workforce?

  Some are predicting the increased automation will lead to increased job creation. That remains to be seen. In the interim it is extremely likely that a lot of people will lose good paying jobs and then will have few prospects for finding another that pays as well as the one they lost. And for some time to come probably. This already is the current state of the job market and has been since the crash in October, 2008. The American economy has  never really recovered; thus the most successful companies are generally the ones who figured out how to cut their costs down to the bare bones while at the same time maintaining productivity.   The increased automation is just another step in the trend towered increasing productivity while decreasing costs. Labor costs to production are always the biggest. Plus machines don’t require healthcare, don’t strike, won’t quit and are less likely to expose their employer to lawsuits by screwing up or misbehaving. Naturally this also begs the question of why the government is not instituting a moratorium on all immigration, as it did from 1924 to 1965. Yes, immigrants helped build this country, but those days are long past just like the American Frontier. Now mass immigration is tearing down America rather than building it up.  Nothing says that because mass immigration was once beneficial to the country we need to continue allowing ad infinitum, long after it has ceased to be a benefit. The people who need to be protected now are American workers. But for now rich people need cheap house servants, industries like big hotels, big meat and big agriculture need cheap workers and the Democrat Party wants to replace those America white people who won’t vote for them with third-world migrants who will.
 
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Aside from techies, financial people appear to be the most aware of the fundamental changes now occurring in the workplace caused by automation. People who analyze economic trends, including employment, have to look at the facts and numbers — unlike, say, politicians who are either clueless or hiding under the bed. (See my new Social Contract article, Presidential Candidates: Why Is Automation’s Job Destruction Not Being Debated?)
And, as noted in the following article, some financial analysts now have robo-advisors which utilize algorithms to generate investing advice. Furthermore, the big changes to the workplace are “coming more quickly than you think — in less than a decade.”
In many ways, the transformation is happening now, only Washington and most of the media are in snooze-mode.
With such radical change coming down the highway, the least that could be done would be to end immigration, which has become an obsolete institution. America won’t need to import labor when robots and software will do major segments of the work that needs done. Oxford University researchers predicted in 2013 that nearly half of American jobs could be automated within 20 years. The Gartner technology consultants predict that one-third of US jobs will be done by a computer or robot by 2025.
America already has a homegrown underclass, angry about how their prospects for a decent life have been gutted by government policies of outsourcing and excessive immigration. There’s no reason to enlarge the Spanish-speaking one.
Will robots zap the job market? Knowledge-based automation could make machines the new workforce, by Dustin Walsh, Crains Detroit, February 7, 2016
David Sowerby, who has managed investment portfolios for more than 25 years, does not fear the robot revolution.
But should he?
The rapid innovation of automation, largely originating in manufacturing operations, is expanding into new industries, such as the financial sector, and will challenge our concept of the labor force, according to experts. And it’s coming more quickly than you think — in less than a decade.
This quarter, Bank of America Corp.’s Merrill Lynch is serving clients with online robo-advisers, which use algorithms to assess dozens of factors and generate investing advice.
Bank of America, in an extensive study published late last year, predicts advancements in robotics and automation will displace up to 25 million workers globally in the financial and legal services sectors by the end of 2025, with the potential to do the work of more than half the 230 million-person global base of knowledge-based workers in the same timeframe.
Experts are split on the ill effects of automation, but they agree that the labor force must play catch-up, and fast, to face a world where a large portion of current jobs will be done by computers.
At Bank of America, robo-advisers are a win-win for the bottom line. The firm is able to target clients with investable assets below $250,000, who generally don’t get access to its live Merrill Edge advisers, at lower cost to the client.
“Really, we’re targeting the untapped market (with robo-advisers),” said Beijia Ma, strategist on the thematic investing team at Bank of America in London and researcher on automation. “But, as that software gets better, me and my colleagues, the thundering herd of Merrill Lynch, maybe we wouldn’t be as necessary.”
Robo-advisers use the same software as their human counterparts and relay portfolio management advice but are not involved in more complex scenarios such as tax or estate planning.
Robo-advisers could advise clients on holdings totaling $2.2 trillion by 2020, up from $16 billion in 2014, according to a June 2015 report by Southfield-based business management consultantA.T. Kearney Inc.
But for Sowerby, the threat of automating senior investing analysts seems trivial.
“I certainly don’t dismiss it. I think robo-advising is, and will be, embraced by the younger generations, who are more likely to trust the algorithms that brought us Facebook, Twitter, etc., than a financial adviser,” said Sowerby, the portfolio manager and chief market analyst forLoomis Sayles & Co. LP in Bloomfield Hills.
“But we gain our value by thinking forward on investing during troubling times, not by how well the market performed yesterday,” he said. “I’m not sure a robo-adviser could have talked a client off the proverbial ledge when the market was in peril in 2009. But, hey, if at minimum robo-advisers get these young people in the (investing) pool, then applause.”
From line to foreman
Robots are nothing new to the factory floor — General Motors Co. used the first industrial robot in 1962 — but now even decision-making is automated.
At Dassault Systemes Corp. in Troy, software engineers have created the digital factory, allowing manufacturers to monitor in real time their entire operation from product assembly to logistics.
The Dassault system lets manufacturers design and test parts in a simulated production environment, then monitors all resources from staff, to production, to customer delivery.
“We’re not to artificial intelligence yet, but we’re getting closer,” said Patrick Michel, vice president of user experience at the U.S. subsidiary of France-based Dassault Systemes SE. “Our system allows manufacturers to know what’s happening in real time, and the system can make optimized decisions. So often, decision-making happens at the local level from the gut, without taking in the big picture. That’s where we come in.”
Dassault works in 12 industries, mostly manufacturing, but Michel said the company could expand in the future to other industries, such as the financial sector, that are interested in identifying patterns and improving overall efficiency.
A remade economy
The use of robo-advisers is only a microcosm of the potential scope of automation, Ma said, which is creating concerns of how economies will handle the potential displacement of millions of jobs.
“A fear definitely exists out there,” Ma said. “I don’t think there’s a clear answer whether we’re going to adapt (jobs) fast enough to keep up.”
Martin Ford, a University of Michigan graduate and author of the book Rise of the Robots: Technology and the Threat of a Jobless Future, believes automation will bring with it radical change and immense job losses.
“A lot of people associate automation with low-wage jobs and factories … but the big disruption is not going to be in manufacturing, it’s going to be in the white-collar sector,” Ford said. “We’re going to automate jobs even though they require a college degree. It’s an inescapable global phenomenon.”
Without a radical rethinking of our taxation and economic structure, Ford said, automation will lead to mass unemployment and unravel the purchasing power automation is designed to create.
“This isn’t only about unemployment, it’s about economics,” Ford said. “We have to have people who can buy the products we’re producing, and without discretionary spending, that’s not going to happen and will lead to economic stagnation.”
Ford’s theory to alleviate the negative effects of automation is to create a minimum income, guaranteed by the government through taxes, to allow citizens to maintain purchasing power and, hopefully, spur innovation.
“There’s a utopian outcome possible where no one has to do a dangerous job and have more leisure time, but we need to make a conscious choice,” Ford said. “Without a guaranteed income, companies and the wealthy are going to own the machines and undermine the mechanism that gets purchasing power into the hands of consumers.”
Ma agrees that fundamental changes to our system must occur, such as increased taxing of companies like Google Inc., Apple Inc., and others that control as much as 75 percent of artificial intelligence intellectual property, but that automation is necessary.
While automation could, in theory, replace millions of jobs, it’s needed to push gross domestic product growth, said Ma.
“Historically, GDP growth has been driven by population, but the labor force is shrinking,” Ma said. “Our global GDP growth will be lower, so the only way to push growth is with productivity or automation.”
The U.S. labor force — defined as those who either have a job or are actively seeking one — dropped to 62.6 percent, a 38-year low, throughout much of 2015 from more than 66 percent in 2007. Labor force dropout remains an issue in the U.S., especially as the baby boomer generation continues to retire — at a rate estimated at more than 10,000 per day.
Fewer workers mean a weaker economy, but growth can be buoyed by increases in productivity.
Productivity, often cyclical, rose sharply coming out of the Great Recession at 7.9 percent in the second quarter of 2009, but has fallen recently by 3 percent in the last quarter of 2015.
It’s no surprise that Japan and Germany, countries with the oldest average age, have embraced rapid integration of automation, Ma said.
The average U.S. work week was 34.4 hours in 2015, compared to just 26.37 hours in Germany, according to data by the Organisation for Economic Co-operation and Development.
“If we can maintain the growth and create jobs fast enough, it’s going to be a good thing,” Ma said. “We’re going to be left with more free time, and people won’t be doing as much physical labor.”
Dustin Walsh: (313) 446-6042. Twitter: @dustinpwalsh

SIDEBAR:

IMPACT ON THE JOB MARKET
By the end of 2025, computers could do the work of as many as 140 million workers in knowledge-based jobs.
Computers could displace as many as 25 million workers in the financial and legal services sectors.
Job areas impacted (largest to smallest):
1. Clerical
2. Customer service and sales
3. Education
4. Health care
5. Science and engineering
6. IT

Sources : McKinsey Global Institute; Bank of America Merrill Lynch

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