As Artificial Intelligence Rolls in – A Slow Fade

Doctor monitored AI-driven automated da Vinci surgical 

Doctor monitored AI-driven automated da Vinci surgical system.

What do you get when you combine a massive tax cut, really inexpensive corporate borrowing rates and a pandemic? We’ve already learned yet again that supply side/trickle-down economics do not create lots of cool new jobs or even expand levels of research and development. That 2017 corporate tax cut, the one that is Joe Biden’s crosshairs, instead generated massive stock buybacks, some dividends and a few mergers and acquisitions… oh, and a multi-trillion-dollar federal deficit increase. Low interest rates help leverage those buybacks as well. Jobs and R&D… not so much.

Add a pandemic, and you get the opposite of job creation; you have a built-in excuse to lay off employees – many companies without the slightest intention of ever bringing those workers back – and enough down time to install artificially intelligent robots and other substitutes for those workers. Effectively, the money that used to be paid to those former employees now goes to the company that owns all that fancy new automation. So, workers on the whole make less, and companies make more. Hmmm. An income inequality accelerant. Robots don’t get meal breaks, miss work, need vacations, require healthcare or generate pension requirements. They can work way beyond 40-hour workweeks without a hint of overtime.

We’ve already seen AI-driven robotic replacements for some pretty sophisticated professions, including automated surgery (see my October 18, 2018 Job Displacement Blues blog, for example, and as pictured above), but the confluence of the above events has given corporate America a chance to reduce its labor force, eliminate workspace necessitated for human comfort (hence have lower real estate costs), and redefine the value of labor. 

The massive and immediate changes are heavily focused on unskilled and lower-skilled workers. Don Lee, writing for the May 6th Los Angeles Times, delves a bit deeper: “As the U.S. economy rebounds from the COVID-19 pandemic, employers are turning to greater use of automation, including robots, rather than calling back workers or hiring new ones in many cases… The trend is affecting almost every sector, including manufacturing, distribution, transportation, retail, restaurants and many kinds of personal and government services.

“Airports have been using mobile robots to spray disinfecting chemicals on their facilities — work that janitors had initially done wearing moon suits and other personal protection equipment… The Pennsylvania Turnpike eliminated toll collection by hand and switched to a cashless electronic system.

“Procter & Gamble, maker of detergents, diapers, toilet paper and a cornucopia of other household goods, found that strategically adding robots to its assembly lines made it possible to keep more workers on the job — and produce more goods — while complying with social distancing guidelines.

“Orders for robots in North America, mostly the U.S., surged 20% in the first quarter compared with a year earlier and were up 16% from the same three-month period in 2019, well before the pandemic, according to the Assn. for Advancing Automation. Nearly 10,000 robots were ordered in last year’s fourth quarter, the second-best quarter ever, statistics show.

“Although increasing automation has long been a trend, the pandemic — as well as recent trade wars and supply bottlenecks — drove home for managers the high cost of unforeseen disruptions in production… The World Economic Forum said last fall that 50% of employers plan to step up automation at their firms.” Even Bangladesh cannot provide labor cheap enough to replace automated machinery that can assemble, design and manufacture perfect items of clothing, from jeans to dressy gowns.

The political ramifications of ramping up AI-enabled automation, replacing manufacturing, property cleaning, maintenance on complex systems, warehouse control, and even accounting, financial analysis and legal research… are very challenging. Driverless trucks and taxis will precede driverless cars. But there are big social questions on a massive scale. 

As more jobs are automated, the labor value of most forms of advanced education will also fade. If fewer people are working, and less money is paid to people, exactly who is going to buy those automation-produced goods and services?  The consumer base will contract as well. Will income inequality soar as the workers make less and those who own the automation make more? Does this suggest that universal basic income/true socialism might be inevitable or will we find a way to shift human effort into different highly remunerative labor? Time will tell. Meanwhile: red alert!

I’m Peter Dekom, and clearly our existing political and economic systems were never designed for this level of job displacement and income redistribution.