Who Will Survive the Coming Jobs Crisis?

In last week’s column I wrote about robots, automation, technology and algorithms, taking over human jobs. One reader wrote in asking by when is this likely to happen. I wish I knew. There are no straightforward answers here.

Many new organisations formed over the last few years, barely have any people working for them. Nevertheless, they are worth a bomb. Social media is an excellent example. As Edward Luce writes in The End of Western Liberalism: “In 2006, Google bought YouTube for $1.65 billion. It had sixty-five employees, so the price amounted to $25 million per employee. In 2012 Facebook bought Instagram, which had thirteen employees, for $1 billion. That came to $77 million per employee. In 2014, it bought WhatsApp, with fifty-five employees, for $19 billion, at a staggering $345 million per employee.”

Of course, these companies did not destroy jobs. They did not create them in the first place. But there is a lot of technology being created out there which is helping companies in not recruiting as many people as they did in the past and firing the existing employees as well. As Luce writes: “Facebook’s data servers are now managed by Cyborg, a software programme. It requires one human technician for every twenty thousand computers.”
The point being that jobs which require people to sit in front of computers and manipulate data to manage a system or to present them in an understandable form, are going to go, sooner rather than later. For example, as is well known robots can now driver cars.

The other big question is when will companies start firing employees because they no longer need them, with robots, automation or algorithms, taking over human jobs. This is a tricky question.

As Paul De Grauwe writes in The Limits of the Market: “There are psychological sources of resistance: people who work with old technologies will not always switch to new ones because the change means part of their knowledge has become worthless.”

Over and above this there are economic sources of resistance. As De Grauwe puts it: “Old machines and tools have to be disposed of early, factories have to be closed own and employees sacked. This leads to serious opposition and delays to the introduction of new technologies.”

In the Indian case, it is very difficult for companies to sack employees en masse. It is more than likely for the local politicians and the media will get involved, and the company will end-up getting a lot of bad press. Given this, it is highly unlikely that the information technology companies which have thousands of people working for them, will end up firing employees en masse.

What they will do instead is that they will not hire the number of people that they have been doing in the past. In fact, this phenomenon has already been at play over the last few years, with the salaries at the entry level in information technology companies, remaining more or less flat. Chances are you can make more money owning and driving an Uber or an Ola taxi, than being a new trainee engineer at an information technology company.

It is also visible in a huge number of engineering seats in colleges not being filled up across several states.

When companies follow this strategy of not recruiting, it is a tad easier for them in comparison to firing people whose skillsets they don’t need anymore. That simply gives them a lot of bad press.

It is not just those working in information technology companies whose jobs will be under threat. As Luce writes: “Some types of medical surgeon and architect will be as vulnerable to remote intelligence as plant engineers or call-centre operators.”

And who is likely to survive this onslaught? As Luce puts it: “Ironically, some of the lowest-paid jobs – in barbershops and nail salons – will be among the safest. No matter how dexterous your virtual service provider, it is hard to imagine how she could cut your hair.”

Now that is something worth thinking about.

The column originally appeared in Bangalore Mirror on July 12, 2017.