Economic Policy
• Published
October 17, 2022

The Future of Automation in the Economy

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Since the dawn of time, humans have been creatures of discovery and innovation. Whether it be forging wooden tools, building shelters, or developing computers, technology has been at the center of human development. In the 21st century, rapid innovation and advancing technologies have allowed society to prosper and utilize the resources around people’s surroundings to build a brighter future. Most recently, an emerging force in technology has been the development of artificial intelligence (AI). Algorithms and models can be developed to effectively teach themselves the way in which they should make decisions. These groundbreaking innovations have become so powerful and full of potential to the point that they have been the driving force of the phenomenon that has been named the “Fourth Industrial Revolution.” Without a doubt, the future of our society will be in large part built on automation similar to the internet’s influence on our daily lives in the present. In fact, to put this into perspective, 75 million jobs will be displaced by 2022 due to automation. Consequently, it’s imperative that we explore the nuances of this issue, answering the question: “How will automation affect the availability of employment opportunities in the American economy?” Before diving deeper, however, it’s important to understand that automation is becoming more widespread at a rapidly increasing rate. To put it simply, employing AI makes economic sense for businesses, serving as a beneficial catalyst to productivity. Nevertheless, the benefits of automation don’t come without its costs and downfalls for both blue-collar and white-collar workers. Nevertheless, the future is promising with the creation of new jobs, security of current ones, and development of solutions to this issue. Due to the increased demand for high-skill labor, humans’ exclusive abilities working alongside AI, and the emotional/humane aspect of certain jobs that robots and technology simply cannot replace, more employment opportunities will be created than those lost.

It’s absolutely imperative to understand the relevance and significance of automation. The fact of the matter is that automation is no longer a vague conceptual idea that “may” or “may not” take place. However, at the same time, it’s also not as extreme as it’s often depicted in science-fiction movies like I, Robot. The dystopian scenario of robots and AI taking over is fictional, but there is some truth to it. Undoubtedly, automation will have a tremendous, everlasting impact on our future economy. Mark Cuban believes, “Whatever you are studying right now, if you are not getting up to speed on deep learning, neural networks, etc., you lose.” To put it simply, AI will most likely be the foundation of our technology-based future economy. Even today, technology companies dominate the fastest-growing industries not only in the United States but also around the world. The potential of automation lies at the center of the algorithms and models used to develop AI. Machine learning algorithms are capable of taking in absurdly large amounts of data to analyze patterns within the given datasets to “train” themselves. AI’s ability to make informed, data-based decisions in a short amount of time often makes it a better alternative to human workers. Furthermore, due to the fact that AI is built on data, as the data accessible to an algorithm increases so does the precision and accuracy of the model. This means that the more an algorithm’s usage rises, the more data is created. Therefore, AI grows stronger at a rapidly increasing rate. These advantages make them superior to the limited capabilities that humans have in the objective view that a business, for instance, would hold. Overall, 50% of work activities can be automated. In fact, “roughly 47% of jobs were at high risk of being automated with advances in artificial intelligence.”

Automation will inevitably play a considerable role in the future economy, and the federal government is largely the only collective entity with remotely any power to regulate the pace of automation. However, in the face of global competition and potentially massive economic benefits, American companies – Google, Facebook, and Amazon – are investing hundreds of millions of dollars into research to solely develop AI technology. Reaching the billion-dollar benchmark in R&D (Research and Development) expenditure for artificial intelligence will be no issue for companies in Silicon Valley, as venture capital firms widely view startup companies oriented towards AI development as the jackpot for future long-term returns. This is why the fuel powering AI – data – has recently been referenced as the most valuable resource, replacing oil.

Other countries’ economies globally are also getting in on the action. Most notably, China has become a serious contender on the international stage when talking about growth within service-based, technology industries. More specifically, the government’s willingness to collaborate with the private sector to further advance technology, whether it be through subsidies, loosened regulations, or other forms of financial support, has skyrocketed the country’s stock as the leader in AI. This mutual competition has fueled the incentives for countries to take the extra step in their technological endeavors. Indeed, “researchers predict there is a 50% chance that machines will be capable of taking over all human jobs in 120 years.” This rapid development has been just as fast in recent years in the United States with automation potentially eliminating 73 million jobs domestically by 2030.

Despite the monumental changes that will occur as automation becomes more prevalent within the U.S. economy, there are numerous societal benefits to the economy. Statistics that indicate facts like 75 million jobs being displaced by 2022 do not tell the whole story. The other half of the story is the simple fact that automation has benefits that outweigh the harms. Looking through the perspective of a business, it makes more economic sense for businesses to utilize AI and other advanced technologies in most cases. Although the extent of automation’s impact on displacement is not as extreme as it’s frequently portrayed, the “science-fiction” idea of robots playing a huge role in the future of our society is becoming the reality. But, the truth is that the role that automation plays is an overall beneficial one. Economic growth and prosperity increases, as businesses are able to ramp up their productivity. Holistically, automation improves a company’s performance, reduces errors in work, and increases the quality and speed of production. Especially during a time of low productivity growth, automation would help the economy tremendously. Unfortunately, the U.S. economy is currently in a slump with investor confidence down, unemployment at an all-time high, and the COVID-19 pandemic halting any potential growth in its devastating recession. With an aging population and declining workforce, the outlook hasn’t been as bright. Thankfully, automation can serve as a catalyst reversing this trend and jumpstarting economic progress once again.

Oftentimes, people operate under the assumption that only blue-collar workers will be affected by automation. This creates a false sense of security which can be detrimental for high-skill laborers that have the potential to be affected but are not planning ahead of time. AI will displace specific elements of all jobs to a certain degree. However, the area in which it will have the most impact is in the type of activities that it’s notoriously superior at. For instance, AI most likely will take the place of humans when performing redundant or repetitive tasks. These tasks don’t require much of the unique characteristics that humans have. Instead, the tasks can be completed at a relatively fast pace with decisions being made in short periods of time almost instantaneously as circumstances change. This is the area of work that robots and AI are particularly adept in. However, low-skill labor typically involves large amounts of this type of repetitive work. But, in addition, even jobs that are considered “white-collar” incorporate tasks that can be deemed as repetitive, therefore being susceptible to replacement by a robot. As a result, this is precisely why “the automotive industry has adopted robots more than other sectors, and workers who are lower and middle income, perform manual labor, and live in the Rust Belt and Texas are among those most likely to have their work affected by robots.” Furthermore, jobs that involve data-heavy tasks are very vulnerable to displacement by automation. High-skill labor typically includes work with large datasets. This is why these data-intensive, white-collar jobs are at risk of replacement. In fact, the way AI algorithms are developed fit perfectly with the purpose of these tasks. AI models are trained to analyze points of data to recognize patterns, serving as the missing piece to the puzzle for data-intensive work. Across the board, jobs in varying fields will be impacted by automation. This includes low-skill occupations such as truck drivers, factory workers, and laundry folders as well as high-skill jobs like CEOs, financial advisors, insurance agents, and radiologists. Indeed, even AI & CS developers can be eventually replaced by the algorithms they develop. Although the timeframe of this displacement will be significantly longer, Mark Cuban concludes that “we are going through the process where software will automate software, automation will automate automation.”

When taking all factors into consideration, the future is bright for an economy with automation as a driving force. Due to the nature of AI technology, there are certain jobs requiring humans that simply can’t be replaced by automation. Humans have the unique and irreplaceable ability to experience emotion and empathy. Just like how “people go to Starbucks because they enjoy the experience," people buy certain goods or services due to its emotional and human value to that person. With the current trajectory of automation, AI cannot simply “copy” or imitate these human characteristics. As a result, jobs that rely on the more humane aspects of work are safe from automation. Many of these protected jobs have an emphasis on the service sector. For instance, human waiters contribute to the restaurant dining experience. There’s a reason why people often choose to eat in restaurants instead of just ordering take-out. The human connection or interactions that consumers have with their waiter can be a contributing factor to their decision to eat at a restaurant. The situation is the same with caregivers providing care for elderly people, teachers serving as a source of guidance and psychological support for students, and nurses providing an opportunity for patients to have a deep relationship on an emotional level with another person. Overall, the value of certain aspects of human labor may actually rise as automation becomes more prominent. In fact, some of the fastest-growing occupations are mostly service-oriented, providing more options for displaced workers to explore when looking for job security.

Automation is bringing a new era of opportunity evolving the economy to have different priorities from the ones that it had before. Most importantly, AI will increase the demand for high-skill labor in the technology industry, especially in the coming years. Jobs like software developers, AI researchers, and more will be in higher demand, as the need for advanced technologies increases. Furthermore, “the right level of detail at which to analyze the potential impact of automation is that of individual activities rather than entire occupations.” This is exactly why the most likely future scenario is one where humans work in conjunction with robots, technology, and AI. For example, in the education sector, AI technology can assist teachers in data-intensive tasks such as identifying struggling students and designing curriculum as well as instruction material that make learning easier for students having trouble paying attention. It’s quite simple: redundant tasks would be automated while more productive work would be designated for humans to complete due to their intellectual and physical abilities exclusive only to them. Moreover, industrial revolutions have occurred in the past where the level of technological development has been comparable given the context of their respective time periods. Although many jobs were automated, these advances still resulted in job growth skyrocketing. Overall, new jobs will be created due to the increased demand for goods and services in regards to other aspects of life that are often neglected today. Automation will create more time for these areas, increasing opportunities for jobs like Chief Trust Officers, Personal Memory Curators, and Fitness Commitment Counselors. On net, automation will create 58 million jobs around the world when taking into account the 75 million jobs that will be lost as well.

Despite the dystopian scenarios often depicted on the movie screen, the fact of the matter is that automation and the increasing prevalence of AI should be seen as an opportunity and tool for the prosperity of humans. There’s too much confusion, too many misconceptions, and a simple lack of awareness regarding the truth about automation in the future. Whether you're wealthy, working a blue-collar job, or being affected by automation firsthand, the truth is that everyone is in this together to face the issue of automation with real solutions that spark change. By looking at individual circumstances and the context of certain people, retraining programs, widespread action within businesses, and government policy can offer more opportunities for displaced workers to be employed. However, despite the rapidly changing situations that people will have to face, the economic benefits to the wellbeing of society due to automation are enormous. Overall, more people will benefit from automation than those that will not. This paper explores the truth behind this topic and goes into the specifics of what humans can expect to see in the future within the context of our economy in an informative and educational manner. With this information, people can take action to ensure that the benefits of automation outweigh the harms.

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