In this 2012 Making Sen$e report, “Man vs. Machine,” Paul Solman examines the future of the American worker.
Paul Solman: “Man vs. Machine.” Long the staple of science fiction, “the end of work” now beckons as reality. Journalist, author and Friend Of Making Sen$e (FOM$) Frank Koller attended a conference on the debate at Cornell University recently. He was accommodating enough to file this report.
Koller’s book, “Spark,” fired our renewed interest in the remarkable Rust Belt manufacturing firm Lincoln Electric, on which we reported in the early 1990s and again in 2011, with Koller prominently featured. A firestorm of comments followed, which we summarized on the Making Sen$e Business Desk. Finally, Koller himself weighed in. Now for Koller’s take on the future-of-work debate.
Frank Koller: Story One goes like this: “If you’re talking about 100 years from now, all jobs will be gone … including the creative ones.”
Story Two sounds like this: “The recovery of jobs is not all that bad … it’s moving in the right direction.”
Okay, are these two folks living on the same planet? Yes. In fact — amazingly and thankfully — they were in the same room, sharing ideas about changes in the American workplace brought about by new technologies.
Four years after the Great Recession officially ended, millions of Americans are still unemployed and millions more remain underemployed. (For most, the distinction is unimportant: they’re all hurting.)
The economy has been growing slowly, but corporate profits have soared as businesses have embraced new labor-saving technologies, doing everything and anything they can to avoid hiring permanent workers, leaving governments from Washington to Smallville struggling to figure out how to ensure the survival of America’s beleaguered middle class.
To be accurate, it’s not just governments who are struggling to understand what’s going on. Almost everyone — in business, technology, finance, labor, academia and society at large — seems unsure about what’s happening, which makes figuring out what to do next exceedingly hard.
This challenge has been made more difficult because there have been very few times when a truly broad group of people from opposing corners of the economic landscape has come together to share their experiences, their worries and their expectations for what is clearly a national crisis.
So, to help get a dialogue going, Cornell University’s School of Industrial and Labor Relations recently brought together 40 leading economists, policy makers, engineers, bankers, corporate executives, social scientists, philanthropists, journalists and statisticians for a day-long exploration of how technology is shaping — or misshaping — the American workplace.
Coming up with answers was not the goal: Cornell’s belief was that searching for consensus in a one-day meeting would be futile. Initially, I wondered about the utility of that, given the gravity of the economic challenge facing the country. But it was a good decision. The range of views on what’s happening was so wide — and surprising — that reaching realistic solutions would have been, well, unrealistic. Precisely because this kind of a meeting has been so rare, the meeting imposed the Chatham House Rule on attendees: we could talk afterwards about what was said, but not about who said it. (I later asked some of those who attended if I could quote them directly; almost all said yes.) If I had to sum up a fascinating day — well, let’s save that for the end, after you’ve seen the amazing diversity of views on the future of work.
Here’s perhaps the fundamental question about what’s going on in the American economy as it struggles to recover from the Great Recession: “How is this recovery different from other recoveries?” Or is it?
To put it in economese, is the persistently high level of unemployment a result of cyclical factors (the traditional ups and downs of economic growth) or structural factors (new game-changing technologies, dramatic shifts in the global economy)? The NewsHour has covered this debate several times, including economists duking it out in one recent instance.
From one decades-long leading student of the American economy came a succinct one-liner in favor of cyclicality: “This isn’t a jobless economic recovery as everyone insists on calling it; it’s simply just not yet a recovery.”
In other words, as painful as the waiting certainly is, the economy will heal — and once again, create jobs — in time.
“Brace yourselves,” countered Eric Brynjolfsson, from MIT’s Sloan School, co-author of “Race Against the Machine,” a much-talked-about recent book which argues that the introduction of new transformative technologies has only just begun, and that we’re dangerously unable to perceive what’s actually going to happen. (Brynjolffson was featured in a Making Sen$e broadcast story in 2011.) He added:
“Many of our intuitions about what’s coming next are going to fail us. All the disruptions we’ve been talking about today about the past 10 years, the past 20 years — as important as they’ve been and as hard-hitting as they’ve been for so many people — are just a small glimmer of the much bigger disruptions that we think are in store for us in the next 10 and 20 years, at least the ones that are related to technology.”
Princeton University economist Alan Blinder, who served in the 1990s as vice chairman of the Federal Reserve, took a more measured view. He believes that both cyclical problems and disruptive technological change are at play, along with the changing face of the global economy:
“In terms of the number of jobs, it looks like an awful lot of the problem is cyclical. That’s the first problem.
“The second problem is the lagging average wage. Until a few decades ago, India, China, and the former Soviet Union were isolated and not really participating in the world economy. But now they have roughly doubled the world’s labor force, in a couple of decades.
“What did they bring to the table? Capital? No. They had almost none. But they had a lot of labor. So, if you double the amount of world labor and you don’t change the amount of world capital much, then loosely speaking, the returns to labor are going to go down while the returns to capital go up. And this is about to end. And it’s not mainly about technology.
“But then there is the third problem: what’s behind the trend toward greater wage inequality? The non-economist in me wants to think about institutions and social norms. Some of the increase in inequality has to stem from changing attitudes in our society. I just don’t believe that it’s only technology.”
The Promise and Perils of a Machine that Can Make Anything
The role of automation in the decline of manufacturing jobs has been front-and-center since the end of the recession. (Well, since the Luddites in the 19th century, but let’s move on.) Cornell University’s Hod Lipson is one of the country’s most prominent experts on the interplay of robotics, IT and manufacturing. Lipson’s next book is titled, ominously, “The Promise and Perils of a Machine that Can Make Anything.” I found his presentation both powerful and unsettling:
“Machines are better at learning than humans in many different areas. So now the question is, what will they learn and what’s the end game?
“Are we talking about the future of jobs in the next five years, 10 years, 50 years or 100 years?
“If you’re talking 100 years, there’s no doubt in my mind that all jobs will be gone, including creative ones. And 100 years is not far in the future — some of our children will be alive in 100 years.”
Trained years ago as an engineer myself, I get the enthusiasm for technological solutions to manufacturing problems. But given the persistent levels of unemployment, I asked Lipson if the engineering profession didn’t have to take a broader view. His answer was blunt — but also open to the possibility of change:
“In a way, we cannot help ourselves. We try to automate every difficult task that we see. It is rooted in the fact that the mantra of engineering has always been to try to alleviate drudgery and increase productivity — that was the good thing to do. That’s what we still train our students to do.
“But what I’m hearing here is that maybe we should redirect our efforts, and try to solve a new kind of problem. I’m not sure what that problem is. But I’m sure that if you can define what the problem is that we need to solve, then we can start thinking about how to solve it, using the same engineering tools.”
Thomas Kochan, the co-director of MIT’s Institute for Work and Employment Research, jumped in on that point. Decades ago, MIT was one of the first engineering schools in the country to focus on the public policy implications of engineering innovations. (Full disclosure: I’m an MIT grad). Here’s what he had to say:
“Instead of focusing on how do we drive labor out and how do we eliminate variability by standardizing everything, we need the engineering profession to think about the world’s big problems, and then to understand that it’s the interaction between skills, the way in which we organize our work, and the technology that really drives productivity.
“The engineering profession needs to catch up with the understanding of how technology can be enhancing to society, without just thinking about how it drives out labor, through innovations. I think if we focus more on enhancing human skills, we’d get a lot more societal benefit out of the next generation of technology.”
Lipson and the other tech experts took some pointed, albeit well-mannered, heat from people worried that more efficient production is nearly always equated with eliminating human workers. As one participant put it: “optimistically inventing stuff” with too little thought for the social consequences.
Among the worried was Gary Marcus, a psychologist at NYU who has written widely on cognitive development and artificial intelligence. Marcus himself is very tech savvy: among other involvements, he’s a registered app developer for Facebook. But he worries about where the new jobs for a whole society will come from, a society under increasing stress:
“I have a question for those of you here that are more optimistic about the future. What specifically do you think might be the future economic domains in which there might be large-scale employment? I’m not interested in the cases where there’s a cool new job that really, really smart people who read Wired magazine can do. What I am interested in are new occupations that hundreds of thousands of people could do, in game-changing ways like when the automobile industry once opened up.”
And what did happen to all those hundreds of thousands of people working in the auto industry when they lost their jobs? It turns out, surprisingly, that we don’t really know, even in this age of so-called “Big Data,” which is now a driving force in everything from social marketing to NSA intelligence gathering.
As Jaison Abel, senior economist at the New York Federal Reserve, said, there is a huge difference between those graphs in the media showing the dramatic erosion of incomes for millions of middle class workers and actually understanding what happens to individuals’ lives:
“Where are they going once they’ve been displaced? Are they leaving the labor market? Are they up-scaling into jobs at the high end of the skills distribution? Are they displacing people at the lower end of the skills distribution?
“A significant challenge is that a large swath of people will be displaced as technology continues to advance, and some kind of retraining will likely be required. And we really have very little understanding about the kinds of retraining programs that are beneficial and would potentially pass a cost-benefit test.”
Lars Vilhuber is a Cornell labor economist who’s previously worked with the Census Bureau. He echoed the call for more accurate information about who’s being hurt and how:
“There are a lot of things that we don’t know, and that at least with current data, we cannot know. We’d like to be able to say which are the jobs that are turning over a lot, which are the jobs that are being permanently lost, and where are people going to and from these different occupations, while at the same time capturing the huge local variations (across the country) … We’ve got some of that, but only a small snapshot of the real whole picture.”
Disruptive Change Is Accelerating
From people who work and live in the economy day-to-day, the stories were of relentless, often disruptive, change that is accelerating. David Paratore, CEO of Nanosteel, has a long history in manufacturing, from aerospace to jet engines to super conductivity, and had this to say:
“I am really passionate about technology. I love it … I’ve lived through the changes from technology now in four or five industries and a lot of those jobs are not coming back. What we’re asking people to do as a middle-wage earner is a lot different than what we needed them to do five years ago, 10 years ago.
“It isn’t just how you generate the technology or the innovation around it. It’s how you make sure these people can do all that we’re asking of them. And whether it’s making jet engines — or whether it’s steel, where the whole goal is to make 500,000 metric tons a year with 35 people, it really comes down to this … you have to know more.”
But for Hanan Kolko, a labor lawyer in New York City who represents many unions and most recently, the new Freelancers Union, the steady introduction of new technologies that demand us to “know more” and the now all-too-normal elimination of jobs that happens soon afterwards is ultimately self-defeating — and not just for those who are running those businesses.
“Until this social norm of trying to crush unions and workers in general is changed, you’re going to have more and more instability for working people. And it’s a very bad thing for the economy, because at the end of the day, if there’s not enough aggregate demand, there’s not going to be enough people with money to buy the stuff to keep our economy going. This is a structural change in the social norms of our economy that makes me pessimistic about the future.”
And yes, confirmed Steven Berkenfeld, a managing director in the investment division of Barclays Capital, the reluctance to hire any new employees at all has now become very widespread, for understandable reasons:
“When I speak to small companies, emerging companies, the general sense I get is that they will do anything possible not to hire a full-time, permanent employee. There are a lot of real disincentives to hiring people when you can outsource it, and so hiring someone is a big commitment. It comes with a lot of responsibilities and costs for the person doing the hiring throughout the whole tenure of that new employee, and it’s something that employers would rather avoid if at all possible.”
And finally, from one of the attendees who asked to be unnamed, came a reminder of how incredibly hard it is for the millions of Americans who are essentially out of the economic mainstream, just off the grid:
“We are talking here about wage gaps and we’re sort of talking about poverty, which folks don’t like talking about. A friend of mine, a teacher in New Orleans, recently said to me, ‘I have students in the ninth grade, and I can provide them all of the resources that I have, and stay after class and suggest they read certain books. But I cannot do much for the fact that they can’t see and they don’t have access to eyeglasses, or both of their parents are in jail, they live in the foster care system or they have asthma that has never been treated.’
“How can the educational system make up for those challenges that students face before they even enter the world of work with all its rapid technological change?”
Okay, So Now What?
By now, if you’re feeling like the views expressed are all over the map, bewilderingly so, and wondering “okay, now what?,” I’m with you. The challenge for the American economy in the 21st century — how to compete successfully in an ever aggressive global economy and yet ensure that a wide swath of Americans benefit from that success — is dauntingly complex. We’re only just starting to grapple with what’s coming and what’s needed.
If there was a conclusion, it centered on the responsibility of leadership in society and its institutions — in not surrendering to a paralyzing sense of inevitability about the march of technology and the jobs it is trampling in the process. From his seat on Wall Street, Steven Berkenfeld targeted the business community:
“There is a real need for corporate leadership, and there is a need for accountability. When companies engage in productivity layoffs with record profitability, unprecedented levels of cash and all-time-high stock prices, no one in the media says, ‘Isn’t this terrible?’ No political leader speaks up to protest. We don’t hear anything from the labor unions. The companies are applauded for it because they’re cutting costs and improving profitability, and that’s supposedly what a company exists for. But it’s not that simple. They do have other responsibilities.”
Let me finish with Thomas Kochan’s plea for a renewed sense of national activism to forcefully change the course of an economy that just doesn’t seem to be working for the benefit of the vast majority of Americans. In Kochan’s words, it just doesn’t have to be this way:
“In terms of a market failure, it’s the reality that it’s not in the interests of any individual firm in the United States to try to solve the jobs problem. So, we’ve got to figure out a way to deal with that…and the only way that you solve this is by getting people and institutions and organizations to work together, to engage these issues collectively.
“It’s about an institutional failure over the last 30 years. With the decline of the labor movement, you’ve seen a lot of institutions go downhill equivalently. We don’t see the kind of dialogue, we don’t see the enforcement of our social norms and social policies that discipline corporations, and that really provided the kind of collective spreading of wage patterns and wage norms across the society.
“We’ve got to rebuild those, but we can’t try to rebuild them in an old-fashioned way. Now we’re in a more digital economy, a more knowledge-based economy, and we need to invent the new institutions that will cut across and aggregate these interests to address these challenges. We’ve got to get the education community working with business and employers, working with labor and civil society.
“I’m not a believer that technology is going to naturally eliminate jobs and cut income, but if we don’t do anything about it, if we just leave it, as we have, to individual market forces and to individual corporate actions and to individual technology innovations, then that’s probably where we are headed.
“If we don’t start to take the leadership,” Kochan concluded, “it isn’t going to come from anywhere else.”
Frank Koller appeared in our 2011 story on Lincoln Electric.
This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions