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.

The Rise of the Robots


Euphemisms and corporates go together.

Vishal Sikka, the bossman at Infosys, in a recent letter to the stakeholders said: “Automation itself released about 11,000 FTE [Fulltime Employee] worth of effort through the year, a clear demonstration of how software is going to play a crucial role in our business model.”

Sikka did not specify what he meant by the phrase “released about 11,000 FTE [Fulltime Employee] worth of effort through the year”. Nevertheless, the broader point is that automation or the rise of the robots, will destroy many human jobs in the years to come.

This is not the first time that the rise of the robots or automation or mechanisation has been seen as a threat to human jobs. Similar concerns were also raised at the start of the industrial revolution in the Western world, a couple of centuries back.

The industrial revolution destroyed jobs, but it created many more new jobs, which finally led to economic growth and economic progress, the world had never seen before. What has changed this time around? If at all, it has.

Human beings essentially have two kinds of abilities: a) physical ability b) cognitive abilities i.e., the ability to think, understand, reason, analyse, remember, etc. As Yuval Noah Harari writes in Homo Deus—A Brief History of Tomorrow: As long as machines competed with us merely in physical abilities, you could always find cognitive tasks that humans do better. So machines took over purely manual jobs, while humans focussed on jobs requiring at least some cognitive skills. Yet what will happen once algorithms [another name for robots] outperform us in remembering, analysing and recognising patterns?

The trouble is that the rise of the robots hits at the heart of the model that has created economic growth world over, for the last two centuries. Companies employed individuals, and paid them a salary. The individuals then spent this salary to meet their needs. One man’s spending was someone else’s income. This benefitted other individuals and companies and so the cycle worked.

Henry Ford, the automobile pioneer understood this and paid his workers very well. As Edward Luce writes in The Retreat of Western Liberalism: “Henry Ford… raised the wage he paid to factory employees to $5 a day, a sum that in the 1920s would afford a comfortable middle-class lifestyle.”

By the time the 1950s came around, Ford started to invest in automation and at this point of time a very interesting incident took place. The auto union leader Walter Reuther was being given a tour of a new factory which had robots. And he was asked: “How will you get union dues from them?”

To which, Reuther replied: “How will you get them to buy your cars?” The point being that only when businessmen paid their employees did they go out and spend that money. This spending benefitted the businessmen they worked for, as well as other businessmen. Many employees of Ford, went out and bought Ford cars because they were well paid.

Once companies start employing more and mor robots instead of human beings, this model of economic growth and progress will go for a complete toss. As Luce writes: “The new economy requires consumers with spending power – just as the old one did. Yet much, like the farmer who eats his seed corn, Big Data is gobbling up its source of future revenue.”

The rise of the robots or Big Data or increased automation and mechanisation, will take away human jobs. As Luce writes: “Whether you listen to utopians or dystopians, all agree the share of jobs at risk of elimination is rising. McKinsey says almost half of existing jobs are vulnerable to robots.”

If robots take over, then humans don’t earn. If they don’t earn, how will they spend money. And if they don’t have money to spend, the question is, how will the companies run by robots, make money.

This is a question that nobody seems to have an answer for.

The column originally appeared in the Bangalore Mirror on July 5, 2017.