The Next Production Revolution and Employment

Dr. Robert D. Atkinson

President, ITIF

October 2018

@RobAtkinsonITIF

@ITIFdc
About ITIF
§  The leading science and tech policy think tank in the Americas

§  Formulates and promotes policy solutions that accelerate innovation and

boost productivity to spur growth, opportunity, and progress
§  Focuses on a host of issues at the intersection of technology innovation
and public policy:
–  Innovation processes, policy, and metrics
–  Science policy related to economic growth
–  E-commerce, e-government, e-voting, e-health
–  IT and economic productivity
–  Innovation and trade policy

2
ITIF Publication Highlights

3
New Technologies Are Coming

§  AI
§  Robotics
–  IOT
–  Autonomous systems
–  Blockchain
–  Genetic innovation

4
Impact on Jobs: Many Share This Anxiety

5
We Hear Dire Warnings
§  “Technical change is accelerating”

§  “A new era of production has begun in which there may soon be no more need
for a vast pool of workers.”
§  The U.S. Secretary of Labor says “we must ask ourselves, is automatic
machinery … going to leave on our hands a state of chronic and increasing
unemployment?”
§  The President has stated “I regard it as the major domestic challenge to maintain
full employment at a time when automation, of course, is replacing men.”
§  Fortune 100 CEO stated “it is entirely possible … we will have a permanent
segment of our society unemployed, but which will have to be provided for.”
§  We need “an unqualified commitment to provide an adequate income as a matter
of right.”

6
From the Past…

§  1927, 1984, 1967, and 1984

§  We should heed the words of Senator Paul Douglas

“improved machinery and greater efficiency of
management do not throw workers permanently out of
employment. Instead they raise the national income
and enable the level of earnings and of individual
incomes to rise.” [1930]

7
Past Predictions of Employment Doom Have Been
Wrong
§  Marvin Minsky (1970): “in from 3 to 8
years we will have a machine with the
general intelligence of an average
human being.”
§  Gail Garfield Schwartz (1982): “perhaps
as much as 20% of the work force will
be out of work in a generation.”

§  Nil Nilson (1984): “We must convince

our leaders that they should give up the
notion of full employment. The pace of
technical change is accelerating.”

8
Today, Worker Dislocation Rates Are Down
Quarterly Job Losses as a Share of Total Employed
10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Bureau of Labor Statistics, Business Employment Dynamics (gross jobs gains, seriesBDS0000000000000000110001LQ5).

9
 Occupational Churn is Down
Rate of Occupational Change by Decade
70%

60%

50%

40%

30%

20%

10%

0%

Source: ITIF analysis of IPUMS occupation data.

10
And Productivity Growth is Down

§  Since 2008 U.S.

productivity growth was
half the rate from 1995
to 2008. (1.2%).

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But Many Claim Unprecedented Change is Coming

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“This Time is Different?”

§  “…half the jobs … might be eliminated by

innovations such as self-driving vehicles,
automatic checkout machines and expert
systems. (Larry Summers)
§  “Brain work may be going the way of
manual work.” (The Economist)
§  “75% unemployment by 2100,” (Martin Ford, The
Rise of the Robots)

§  47% of U.S. jobs eliminated by 2035.

(Osborne and Frey)

13
Leading to Unprecedented Job Destruction
§  “Highly educated workers are as likely as less educated
workers to find themselves displaced.” (Paul Krugman)
§  80 to 90% of U.S. jobs eliminated in 10 to 15 years. (Vivek
Wadwa)

§  “The robots will probably decide not to kill us, but they’ll
be taking our jobs—and sooner than you think.” (Mother
Jones)

§  Brynjolfsson & McAfee: “It may seem paradoxical that

faster progress can hurt wages and jobs for millions of
people, but we argue that’s what’s been happening.”

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But Technological Change Has Always Been Gradual
§  “Misled by suitcase words,
people are making category
errors in fungibility of
capabilities—category errors
comparable to seeing the
rise of more efficient internal
combustion engines and
jumping to the conclusion
that warp drives are just
around the corner.” — (Rodney
Brooks, MIT)

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Pace of Change is Always Slower

§  New technology systems don’t emerge fully formed.

Early versions are less advanced than later ones.
§  Even though new technologies are better than old, old
technologies are usually not completely scrapped, at
least until their value is significantly depreciated.
§  Not all organizations are first adopters.

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Tech-Based Occupational Change is Often a Long Process
Number of Elevator Operators, 1870–1990
120,000

100,000

80,000

60,000

40,000

20,000

0
1870 1880 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

Source: ITIF analysis of IPUMS occupation data.

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Most Occupations Are Hard to Automate
§  Brick masons and block masons
§  Machinists
§  Cartographers and photogrammetrists
§  Dental laboratory technicians
§  Social science research assistants
§  Firefighters
§  Pre-school teachers
(Randomly selected U.S. occupations)

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Can You Order the Occupation By U.S. Job Change:
2010-2015?

§  Network and Computer Systems Administrators

§  Computer Operators

§  Economists and market researchers

§  Taxi Drivers & Chauffeurs

§  Reservation and Transportation Ticket Agents and

Travel Clerks
§  Shoe and Leather Workers and Repairers

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Can You Order the Occupation By U.S. Job Change:
2010-2015?

§  Shoe and Leather Workers and Repairers 27%

§  Taxi Drivers & Chauffeurs 17%
§  Reservation and Transportation Ticket Agents
4%
and Travel Clerks
§  Network and Computer Systems Administrators -11%

§  Economists and market researchers -17%

§  Computer Operators -34%

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Occupations at High Risk According to Frey and
Osborne
§  Dental technicians §  Carpet Installers

§  Models §  Veterinary Assistants

§  Manicurists and pedicurists §  Insulation Workers

§  Bicycle Repairers §  Property Managers

§  Radio and Cellular Tower Installers §  Barbers

§  Fence Erectors §  Shoppers

§  Electrical & Electronics Installers §  Drywall & Tile Installers

§  Terrazzo Workers and Finishers §  Aircraft Mechanics

§  School Bus Drivers

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 Technology Also Creates Jobs
Growth of Computer Occupations Relative to Overall Employment
Growth
140%

120%

100%

80%

60%

40%

20%

0%
1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 2000-2010 2010-2015

Source: ITIF analysis of IPUMS occupation data.

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Technology Creating New Jobs/Technology Eliminating Jobs
90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 2000-2010 2010-2015

Source: ITIF analysis of IPUMS occupation data.

23
 Typology of AI Functions
§  Process automation (self-driving cars, replacing lost credit
cards, reading legal documents, etc.)

§  Cognitive Insight (detecting fraud, diagnosing disease, targeting

of ads, etc.)

§  Cognitive Engagement: (technical support, product

recommendations, customized health care plans, etc.

Source: Davenport and Ronanki, “Artificial Intelligence for the Real World.”

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Much of Artificial Intelligence Will Boost Quality, Not
Eliminate Jobs
§  Health care diagnosis

§  Fraud prevention

§  Student feedback

§  Disability access

§  Reduced human trafficking

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So, Impacts Will Be Manageable

§  The OECD estimates around 15 percent of U.S. jobs will be lost

to automation over the next 15 years.

§  ITIF estimates 20 percent.

§  McKinsey Global Institute estimates around 25 percent. If this

were the only source of productivity growth in these economies
it would be equivalent to approximately 1.4 percent annual
productivity.
Sources: Miller, The Innovation Files; Manyika et al., “Jobs Lost, Jobs Gained.”

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So, Impacts Will Be Manageable

§  As McKinsey concludes, “Very few occupations will be

automated in their entirety in the near or medium term. Rather,
certain activities are more likely to be automated, requiring
entire business processes to be transformed, and jobs
performed by people to be redefined.

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 Automation Technologies Create Employment Through
Several Channels
1.  Automation reduces prices but also spurs demand, leading
to compensating job creation in other sectors.

2.  Creates employment in automation-producing firms/

sectors.

3.  Expands output by making possible new products/

services.

4.  In industries where technology serves as a complement to

workers, makes output more valuable, increasing demand.

Source: Deloitte, Technology and People: The Great Job-Creating Machine

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 No Correlation Between Productivity Growth and
Unemployment
Average unemployment rate and total change in productivity in select nations, 1990-2011 (%)

ESP
15
Average Unemployment

JAM
ARG
VEN FRA FIN
10 ITA GRC
TUR IRL
CAN BEL CHL EST PER
AUS SWE GBR
NZL USA PRT
DNK
5 NLD
HKG NOR
LUX CHE AUT JPN KOR

0.0 0.5 1.0 1.5 2.0

Change in P roduc tivity
Source: World Bank and Penn World Tables

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If Anything Strong Productivity Means Lower
Unemployment
U.S. Change in Productivity and Average Unemployment Rate by Decade,
%

Source: ITIF, “Are Robots Taking Our Jobs? Or Making Them?.”

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Not All Workers/Jobs Will be Impacted the Same

§  Occupations employing more younger workers and

more lower-wage and less-skilled workers are more
likely to be automated.

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Different Demographic Impacts of Projected
Automation

§  Wage level: -0.59 and -0.52

§  Years of schooling: -0.64 and -0.51

§  Gender (women): 0.11 and -0.07

§  Race (non-whites): 0.21 and 0.27

§  Age: -0.10 and -0.11

Sources: First coefficient from Osbourne and Frey rankings; 2nd from ITIF.

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What Should Policy Makers Do? First, Don’t:

§  Panic,

§  Slow the rate of innovation and

automation (e.g., robot tax), or

§  Put in place Universal Basic

Income

33
What Should Policy Makers Do?

§  Speed the development and adoption of tech-based

automation.
§  Reduce the risk from job loss (e.g., universal health coverage,
better, unemployment insurance).
§  Improve worker training (e.g., worker training tax credit,
industry-led skills alliances, apprenticeships, credentials).
§  Embrace more fundamental education and training reforms.

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Workers Will Need Different Skills

§  As Manuel Trajtenberg wrote in a study of the NPR and

workers, “the skills employers desire and demand are poorly
related to the competencies taught in school. Employers want
workers with strong analytical, creative, and adaptive
capabilities, which are competencies few secondary or
collegiate schools impart.” (Trajtenberg, “AI as the Next GPT: A Political-Economy
Perspective,” 2018)

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21st Century Skills Needed
§  “type I”: §  “type II”: §  “type III”:
analytical, interpersonal, emotional,
creative, communication
adaptive self
§  effective confidence
§  critical & creative
thinking communication §  self-awareness
§  interpersonal
§  analytical & research relationships/abilities §  empathy
§  sense making §  social intelligence §  coping w/stress
§  novel adaptive §  virtual collaboration §  manage cognitive load
thinking
§  coping w/emotions
§  design mindset

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Workers Will Increasingly Need Double Deep Skills
Employment by Levels of Job
Digitalization
§  “Double-deep” employees:
“those individuals who know
both their job – be it
marketing, engineering,
accounting, and so on – as
well as the IT relevant to that
job.” (David Moschella, Leading Edge Forum)

Source: Brookings Analysis of O*NET and OES Data

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Schools Are Underperforming

§ More California students take pottery than take

computer science.

§ 87% of U.S. high school students pass a geometry

class, but just 7.7% pass statistics.

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Colleges Need to Do Better
§  On the Collegiate Learning Assessment 45% of students did not
demonstrate any gains over their first two years of college, and 36% had
no gains over 4 years. (Richard Arum and Josipa Roksa)

§  Among 2nd semester seniors of four-year colleges, just 38%, 40%, and
34% were proficient in prose, document, and quantitative literacy,
respectively.

§  34% of U.S. business leaders believe that higher education institutions are
not graduating students with the skills and competencies needed by their
firms.

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 Thank You

Robert D. Atkinson

ratkinson@itif.org | @RobAtkinsonITIF

@ITIFdc