Imagine that you have a time machine and you are able to travel back in time to the year 1950:
- If you walk into a restaurant, hotel or store in 1950, it would be nearly identical to a restaurant, hotel or store today. People do everything in both cases — people stock the shelves, prepare the food, serve the food, help customers, man the cash registers and sweep the floors in 2003 just like they did in 1950.
- It’s the same on any construction site. In 1950, guys with circular saws and hammers built houses. Today it is guys with circular saws and nail guns. No big difference.
- An airport in 1950 and an airport today are nearly identical. People take your tickets, handle the baggage, maintain the planes and pilot them in both cases.
- Coney island in 1950 looks like any amusement park today, with people operating the rides, selling the concessions and keeping the park clean.
Industries like these are, by and large, completely untouched by automation today. These people-powered industries represent at least half of the jobs in the American job pool.
Now imagine the near-term future. In just a decade or two we begin to approach a point where CPU power rivals that of the human brain. This CPU power drives the creation of robots that take over all of these jobs. The unemployment rate in the United States skyrockets as cheap robots push expensive humans out of half the jobs that we see in our economy today. The automated checkout lines and kiosks that are popping up in places like Home Depot and McDonald’s are the first messengers of this robotic takeover.
When the robots start arriving in massive numbers to take half the jobs in America, the effects will be profound. At this moment in history, we are standing right on the edge of the transformation to a robotic nation. It is fascinating to stand on this edge and think about what the robots will mean to us as citizens of the United States.
|The Pace of Change|
It is hard to believe but true that the World Wide Web did not exist 10 years ago. On November 11, 1993, version 1.0 of Mosaic, the first Web Browser, became available on the Internet. The Web was born on the day that Mosaic appeared. Think about everything that has changed in those 10 years. No normal person had an Internet connection in 1993. Today, more than 60 percent of U.S. households have an Internet connection. No one shopped on the Web, bought tickets on the Web, read the news on the Web, hooked up with dates on the Web, blogged on the Web, participated in auctions on the Web, looked up movie trailers or reviews on the Web, traded or purchased music on the Web, used Instant Messaging on the Web, etc. in 1993. Today these activities are taken completely for granted. A tiny handful of people used email in 1993. Today email is essential for both business and personal communication, with trillions of messages sent every year. And The entire Internet Bubble came and went on the stock market since 1993. Hundreds of billions of dollars were invested and lost in new Internet companies. All in 10 years.
That pace of change seems fast, and it is, but it is not unusual in America. Even 100 years ago things could change very quickly. The first Model T Ford, for example, was sold in the 1909 model year, and in that first year only 10,000 were manufactured. By 1912 there were 3,500 Ford dealers selling 300,000 cars per year. Just a few years later, Ford was selling 2 million cars per year and there were over 100 companies competing with Ford. Even a century ago, a popular idea could catch on and spread very quickly.
Robots will spread at the same remarkable rate throughout the job market.
Replacing all the Pilots
Robots in the workplace will be a very popular idea because they will eliminate labor costs. Pilots will be the first to go because pilots are incredibly expensive and their jobs are largely automated already.
Let’s say that, in 2015, one airline decides to completely automate the cockpit and eliminate its pilots. Since pilots are expensive, that airline will have a real price advantage over its competitors. That airline will also have far more scheduling flexibility because it will not have to worry about crew availability.
After that first airline makes the leap to the robotic cockpit, every airline will do the same thing. Competitive pressure will leave the other airlines with no choice. Southwest Airlines has shown us just how sensitive the airline industry is to lower prices.
The complete elimination of pilots from the airline industry will take just a few years. The 66,000 pilots in the Air Line Pilots Association will be out of work. These pilots are people who have spent thousands and thousands of hours training in their chosen profession. They have high salaries as well — up to $250,000 per year is not uncommon for a senior pilot flying commercial aircraft.
The economy could weather the loss of those 66,000 jobs. With an American workforce of over 100 million employees, 66,000 people is a drop in the bucket. We will all feel sorry for the pilots for a few minutes, but then we will get over it because ticket prices will go down. The pilots will all adapt by getting jobs at Wal-Mart or Target or McDonald’s. This sort of thing happens all the time in any capitalistic society.
The question is, will all the unemployed pilots be able to get jobs at Wal-Mart or Target or McDonald’s? The answer to that question is where things get uncomfortable.
Robots in Retailers
In 2015, at about the same time that the airlines are laying off all of their pilots, Wal-Mart or Target or some other large retailer will be introducing a totally automated inventory management system. Every shelf will be fitted with RFID tags and bar codes, allowing a mobile pick-and-place robot to find the exact shelf location of every product in the store. Every individual product in the warehouse will also be fitted with an RFID tag and bar code, so the robot will be able to pick up and identify every product that it needs to shelve. A relatively simple computer vision system will allow the robot to stack items on the shelves. These inventory management robots will operate 24-hours-a-day shuttling merchandise from the back of the store onto the shelves as items are sold. The robots will also constantly straighten the shelves and re-shelve merchandise. All of the technology needed to do this is nearly in place today.
For a taste of just how good robotic voice recognition has gotten, call (800) 555-1212 and ask for the listing for American Airlines or Delta Airlines. A robotic system will give you the number. Then call American or Delta and navigate their voice-operating arrival and departure systems. In 10 years, these systems will be flawless and they will understand multiple languages with ease. By 2015, big box retailers will deploy voice-recognizing robots and kiosks throughout the store to help customers find the items they need.
By 2015, every big box retailer will be using automated checkout lines. Robotic help systems will guide shoppers in the stores. The automated inventory management robots will allow the first retailer to lay off a huge percentage of its employees. Competitive pressure will force Wal-mart, K-Mart, Target, Home Depot, Lowes, BJ’s, Sam’s Club, Toys R Us, Sears, J.C. Penny’s, Barnes and Noble, Borders, Best Buy, Circuit City, Office Max, Staples, Office Depot, Kroger’s, Winn-Dixie, Pet Depot and so on to adopt the same robotic inventory systems in their stores. The entire transition will happen in just five years or so. Any company that does not automate will be at such a pricing disadvantage that it will go out of business. Ten million unemployed workers dumped onto the job market over the course of five years will have a profound effect on the unemployment statistics in the United States.
The problem is that this same sort of thing will be happening in every sector of the economy at a very rapid pace, dumping millions more unemployed workers onto the job market at the same time. See Robotic Nation for details.
Creating New Jobs
People who read Robotic Nation had a variety of rationalizations to explain why the coming wave of intelligent robots will have no effect on employment in the U.S. Here are some of the most common rationalizations:
“We will never create robots that have vision, touch and hearing like humans do. There will never be robots working in McDonalds or Wal-Mart.” This is no different from a person in 1900 saying “humans will never fly”.
“People will not go to stores and restaurants staffed by robots. People need human interaction.” ATMs have replaced tellers for a majority of banking transactions, and automated gas pumps handle most gasoline purchases now. People love to use automated systems. It is also easy to imagine walking into a robotic restaurant where the robots, using facial recognition systems, actually greet you when you arrive, know exactly what you like and do not like, etc. The expreience in a robotic restaurant is likely to be much more personal and friendly than most restaurants are today.
“Robots won’t eliminate jobs, they will create more jobs. Backhoes and bulldozers replaced all the people who used to dig ditches, but then those ditch diggers got jobs building backhoes and were a lot better off.” This article explains why that won’t be the case — robots will be making the robots, not people.
“Unemployed workers will riot, destroying the robots and taking back their jobs.” Part of the robotic nation will be a pervasive and extremely sensitive robot security force that will remove the word “riot” from our vocabulary.
“We will move to a 20 hour work week and everyone will be employed.” If that’s going to happen, why doesn’t it happen today? We are moving in the opposite direction right now, with people in service sector jobs making so little money that they have to work two or three jobs. There is no economic reason for business owners to raise pay or shorten hours when tens of millions of people are unemployed. Supply and demand dictates that wages will fall, not rise.
“Unemployed people will start their own businesses in massive numbers.” Unemployed people generally do not have the capital to start businesses, but even if they did the odds are against them. According to Robert Kiyosaki in the bestselling Rich Dad, Poor Dad, “The odds are against success: Nine out of 10 companies fail in five years. Of those that survive the first five years, nine out of every ten of those eventually fail, as well.” That’s a 1% chance of long-term success. If your business does not succeed, you are unemployed again.
When Ford started selling the Model T in 1909, the industrialized automotive industry was born. This new industry eventually created millions of new jobs.
Why won’t all the new companies that are making these robots create millions of new jobs in 2015? Why won’t these new jobs absorb all of the unemployed pilots and service-sector employees? Think about it:
- Will these millions of new robots create manufacturing jobs? Not in the United States. Robots will be assembling robots. Even if you assume that some people will be involved in assembling them, all of the assembly will take place in places like China, Mexico, Indonesia, Korea, etc. where manufacturing costs are far lower than they are in the U.S.
- Will these millions of new robots create programming and engineering jobs? Not in the United States. U.S. corporations are in the process of moving the bulk of all programming and engineering jobs to places like India, Russia, China, etc. where the programmers and engineers cost a tenth as much as they do in the U.S.
- Will the millions of new robots create jobs in sales? Not in the United States. Corporations ordering new robots will purchase their robots over the Web without any human intervention, in the same way that you can order a Segway from Amazon today.
- Will these millions of new robots create repair and servicing jobs? Not in the United States. When a robot needs repair, another robot will bundle it onto a pallet. A robotic forklift will place the pallet on a truck. The truck will drive to a repair facility. The facility will repair the robot with highly automated systems that require no human intervention or supervision. Human beings will not be repairing robots — robots will.
The rise of the robotic nation will not create new jobs for people — it will create jobs for robots.
In the past, automation has not had this effect. For example, before there were backhoes there were men with shovels. A backhoe replaced a hundred men with shovels. But new businesses and factories sprang up to manufacture the backhoes, and those companies hired people — many of them former ditch diggers. All of these new businesses and factories tended to employ many of the workers displaced by technology. It has never been a perfect system — for example, the book The Grapes of Wrath chronicles just how bad things can get when a large segment of workers in the economy gets displaced. But, ignoring short-term displacements like that, the economy has generally absorbed every unemployed worker in the new businesses that get created by advances in technology.
The unusual thing about the robotic revolution is that the robots will come and displace millions of workers throughout the economy, but the robot industry will create very few new jobs. Millions will be unemployed in America, but there will be nothing for them to do.
Conventional wisdom says that the economy will respond to all of these unemployed workers by creating new jobs for them. But look at our economy today. For the past 40 years, the economy has been generating millions of low-paying service sector jobs that create a large class of employees known as the working poor. 60% of the American workforce makes less than $14 per hour today [ref]. If the economy is going to be creating millions of high-paying, exciting, fulfilling jobs for all of these displaced workers, it would be doing it now. Why can’t all of the Wal-Mart/Target/McDonald’s/etc. employees who are going to get displaced in 2015 step into their new, exciting, higher-paying jobs right now, instead of waiting? It’s because the economy tends not create jobs like that in any sort of volume.
At this moment, instead of creating exciting new jobs, the economy is locked in a race to the bottom. This race is marked by a workplace that continuously creates lower-paying jobs instead of higher-paying ones.
The Race to the Bottom
The fast food industry provides a perfect demonstration of how the race to the bottom works. Almost every working American employed by the fast food industry is paid hourly, makes minimum wage or close to it, receives no benefits, no vacation time and no sick time. Employee hours are tracked so that no hourly employee works more than 40 hours a week, thereby avoiding overtime pay. Schedules can be extremely choppy, sometimes requiring employees to come in to work, go home and come back again during the same day. The pay of the nation’s 3.5 million fast food workers has been driven as close to zero as is legally allowed.
But that is not low enough. The fast food industry wants to drive worker pay even lower. The only way to do that is to eliminate the minimum wage. The book Fast Food Nation by Eric Schlosser describes the trend:
The fast food industry pays the minimum wage to a higher proportion of its workers than any other American industry. Consequently, a low minimum wage has long been a crucial part the fast food industry’s business plan. Between 1968 and 1990, the years when the fast food chains expanded at their fastest rate, the real value of the U.S. minimum wage fell by almost 40 percent. In the late 1990s, the real value of the U.S. minimum wage still remained about 27 percent lower than it was in the late 1960s. Nevertheless, the National Restaurant Association (NRA) has vehemently opposed any rise in the minimum wage at the federal, state or local level [minimum wage has been $5.15 since 1997]. About 60 large fast food companies — including Jack in the Box, Wendy’s, Chevy’s, and Red Lobster — have backed Congressional legislation that would essentially eliminate the federal minimum wage by allowing states to disregard it. Pete Meersman, the president of the Colorado Restaurant Association, advocates creating a federal guest worker program to import low-wage foodservice workers from overseas.
While the real value of the wages paid to restaurant workers has declined for the past three decades, the earnings of restaurant company executives have risen considerably. According to a 1997 survey in Nation’s Restaurant News, the average corporate executive bonus was $131,000, an increase of 20 percent over the previous year. [ref]
In this brief passage, you can see four different techniques that corporations use in their race to the bottom:
- They hunt in packs.
- They work closely with Congress to modify laws for their own benefit, even when those modifications adversely affect millions of employees.
- They use multiple angles of attack. They prevent minimum wage increases. They work on guest worker programs. And they work to eliminate the minimum wage.
- The upper echelon in these companies, while lowering the pay of everyone else, raise their own pay.
Robots completely change the equation, because robots make the minimum wage irrelevant. As robots become available, they will allow the fast food industry to dump all the minimum wage workers. The executives will make even more money, and who can blame them? We would all like to get bigger paychecks. The goal of a business owner is to make more and more money, not to create jobs or raise wages.
This is why robots will spread throughout the workforce with remarkable speed. The same sensitivity to labor costs will cause the high-speed replacement of employees in retail, construction, transportation, entertainment, etc., all at approximately the same time. Over the next decade or two, robots will begin releasing millions workers from their jobs. The bad news is that there will be nowhere else for these workers to go.
In the first part of the 20th century, productivity gains translated into higher pay and shorter hours for workers. In today’s economy it is just the opposite. Jobs at places like McDonald’s and Wal-Mart, as well as places like meat packing plants and factories, get fragmented into components that can be performed by any warm body. “Any warm body” means a minimum wage worker. This is what the race to the bottom is all about — the de-skilling of the workplace has been a fundamental theme of the American job market for the last century. It allows the easy replacement of low-skill workers (e.g. – turnover in the fast food industry is 300 to 400 percent), which means the lowest wages possible. So the U.S. economy is creating millions of minimum wage jobs, and minimum wage jobs are perfect for replacement by robots. The pace of that replacement will be startling to all of us.
Where Do We Want to Go?
Our society, as it is structured today, works like this — you must either own a profitable business, or work for someone who owns a business, in order to “make a living.” You have no choice. You must earn money in order to live your life. If you do not work and earn money, you are homeless.
Today, as in the past, the way that most people earn money is by getting a job. This makes jobs incredibly important to the American economy. That is why every U.S. President is focused on jobs and job creation. Right now we are standing right on the edge of an era where the number of jobs in our economy will be drastically reduced by robots. No Presidential speech or act of Congress is going to change that.
Massive unemployment in America is good for no one. Unemployed people will suffer tremendously, and so will businesses. The American economy depends on a healthy base of consumers spending their money. Massive unemployment causes a sharp downward spiral that hurts the entire economy and the entire nation.
The questions that we are raising here are profound. How do we prevent this downward spiral from happening? Are we smart enough to see the robotic revolution that is coming and plan for it prior to the crisis? Can we redesign the economy so that we enter the new era of robots smoothly? With robots doing most of the work, can we actually create a society that takes advantage of the leisure that robots can provide? Or will the tens of millions of people displaced by the robots end up being homeless and destitute, living in government welfare dormatories?
In other words: How do we want the robotic economy to work for the citizens of this nation? We should consciously think about that question. We should control our robotic future, rather than letting it happen randomly.
I believe that it is time to start rethinking our economy and understanding how we will allow people to live their lives in a robotic nation. Instead of “letting the robots happen to us” in a highly disruptive way, we should take this opportunity to think about how we want the U.S. economy to work for all of the citizens of the robotic nation. The time to be doing that thinking is now. The discussion starts in Robotic Freedom.