Economists Warn Emerging Tech Will Hit Rhode Island’s Workforce Hard

Advances in automation, robotics and artificial intelligence are setting the stage to radically alter employment opportunities in the coming decades.

by John Kostrzewa, The Providence Journal / July 9, 2018

(TNS) — The economy is changing, more radically and faster than you think.

Developments in robotics and artificial intelligence are disrupting jobs, the workplace, business models and the social contract between employers and workers.

The changes, already evident, will accelerate into a seismic economic shift that will rival the transition from an agrarian to an industrial economy a century ago.

And it won't happen in some far distant future, but in the next 20 to 30 years.

Those are some of the findings of Darrell West, vice president of the Governance Studies program at the Brookings Institution, and dozens of other economists, analysts and researchers who explain their forecasts in his new book, "The Future of Work."

West, a former director of the Taubman Center for Public Policy at Brown University, writes that the coming changes will require public and private decision-makers to develop new models to ensure that people have income, health care and retirement benefits, all of which are now connected to jobs that will disappear. Without those staples, economic inequality and anxiety will deepen to dangerous levels and threaten everyone's future.

The issues West and other experts point out are crucial to Rhode Islanders. The state's economy, once ranked as the worst in the country, has improved since the last recession.

But there have not been enough structural changes to cushion the passage from a post-industrial economy to a digital economy powered by robots and artificial intelligence.

Also, the state's K-12 education system, a key to developing the basic skills required in the new, knowledge-based economy, still lags well behind those in other states that will compete for workers, jobs and wealth

Already, the nature of work is changing.

Robots programmed by humans are building cars and vacuuming houses. Security bots are protecting property. Virtual digital assistants are managing offices. Driverless cars that exceed human performance are just around the corner.

But it's artificial intelligence that will give machines that capability to develop and imitate intelligent, human behavior. AI will drive the biggest changes and make simple, human-directed robots into thinking machines. In effect, machines will learn from themselves and design sophisticated algorithms and complex software to solve problems and make decisions on their own.

AI, and the new cognitive machines it creates, will increase efficiency, productivity and profits and cost less than workers who require a paycheck, health care, sick days and vacations — and who sometimes make mistakes.

The transition in corporate America is already underway, the data shows.

West reports The Pew Research Center studied the biggest U.S. companies by market capitalization, a way to value companies by multiplying the stock price by the number of public shares, and compared how the lists changed over time.

In 1962, AT&T and General Motors were the two biggest public companies in the U.S. with market caps of $20 billion and $12 billion respectively. AT&T employed 564,000, GM 605,000.

By 2017, they had been replaced by Apple and Google, valued at $800 billion and $679 billion, respectively. But Apple had only 116,000 workers and Google only 73,992.

Other tech giants, such as Microsoft, Facebook and Oracle also have grown to huge values with smaller workforces compared with the industrial-age behemoths.

That trend is poised to continue. Despite full employment in the current booming U.S. economy, West quotes several highly regarded analysts who forecast an inevitable restructuring of the workplace, one that will occur in less than a generation.

"Machines will replace people for most of the jobs in the current economy," said Andrew McAfee, an economist at the Massachusetts Institute of Technology.

"We may have a third of men between the ages of 25 and 54 not working by the end of this half-century [2050]," predicted Lawrence Summers, an economist and former U.S. treasury secretary.

The job losses in some sectors also threaten to widen the geographic and racial income inequalities between, and within, rich and poor countries, states and communities.

The biggest job losses will show up first in low-skill occupations. Already, fast-food restaurants are installing computer-operated kiosks to replace clerks. Health-care providers are using robots to schedule meetings and appointments. Factories are sorting shipments with automation. And shippers are preparing to deliver packages with drones.

In West's book, Aaron Smith and Monica Anderson, researchers at the Pew Center, calculate that the steepest job losses in the early stages of the transition will be in hospitality (42 percent), retail (41 percent) and finance (41 percent).

Those are the types of jobs that some states, such as Rhode Island, have added since the recession to compensate for the loss of manufacturing jobs, according to data from the Rhode Island Department of Labor and Training.

After AI and automation decimate lower-skill jobs, the new technologies will then displace workers in higher-skill, white-collar industries such as legal services, medical technology, tax preparation, financial planning and insurance underwriting.

As those jobs disappear, new jobs will be added in emerging technologies and in occupations such as data scientists, network managers, designers, computer programmers and analysts. Still, it's not clear how many of those jobs will be created, or when.

What's clearer is that future workers will have to upgrade their skills or learn new ones as work requirements change and people have to find new jobs.

West writes that K-12 and higher education will have to be restructured to meet new demands for vocational and professional skills.

Formal education, which now typically ends by age 25, will become obsolete, West says, and will have to be augmented by continuous, lifetime learning.

There will have to be other changes to education as well.

Affordable community colleges will have to play a bigger role in training and retraining the workforce. Private businesses will have to design their own specialized programs to stay competitive.

And rather than being taught by an instructor in a traditional classroom, students will take advantage of "distance learning" made possible by digital tools that connect them with online courses.

As the job requirements change, so will the curriculum in K-12 and higher education, but West provides few clues about what the new curricula will be — largely because of the uncertainty about the jobs that will be created.

"Sixty five percent of children in grade school today are predicted to work in jobs that have yet to be invented," according to a 2016 study by analysts Daniel Araya and Heather McGowan and published by Brookings.

As machines do more labor, employers will hire fewer full-time employees and fill specific needs with part-time, temporary or contract workers.

That disruption will break the traditional link between a job and income to feed a family and provide health-care and retirement benefits.

West writes that policymakers will have to rethink the concept of work, reconfigure the social contract and decide who will pay for it. He borrows from the progressive agenda to call for worker-controlled benefit exchanges, paid family and medical leave, an expanded earned-income tax credit and a "solidarity tax" on wealthy individuals to provide income and benefits for people without full-time jobs.

Most of the reforms West suggests are not yet the focus of public debate, but some are starting to be discussed.

For example, in a recent speech in Providence, Democratic presidential candidate Andrew Yang, a Brown graduate and founder of Venture America, a nonprofit job-training program, called for those who benefit from automation to pay a tax that would be redistributed as a monthly $1,000 "Freedom Dividend" to all Americans, employed or not, from 18 to 64 years old.

West writes that legislating new worker-benefit programs in a digital economy may seem improbable at a time of intense partisanship, polarization and tribalism that has brought gridlock to Washington and state capitols across the country.

But he also points out that the U.S. went through another radical economic shift, from an agrarian to an industrial economy, from 1890 to the 1930s. It took decades, but leaders broke up corporate monopolies and adopted an income tax, unemployment insurance and Social Security while expanding education opportunities.

Those changes led the U.S. to an unprecedented period of prosperity after World War II.

Now, leaders need to do it again, West writes.

"Even if it is a bumpy ride, there are sensible economic and political reforms that will help people navigate the treacherous terrain ahead," he says.

©2018 The Providence Journal (Providence, R.I.) Distributed by Tribune Content Agency, LLC.