Zombie Robot Apocalypse Cancelled

Generali

http://www.ft.com/intl/cms/s/0/0b16754e-45c6-11e5-af2f-4d6e0e5eda22.html#axzz3jKVzkAC7

The number of jobs lost to more efficient machines is only part of the problem . . . In the past, new industries hired far more people than those they put out of business. But this is not true of many of today’s new industries.”

This sentiment, from Time magazine, dates from the early weeks of John Kennedy’s presidency. Yet it would slot nicely into many a contemporary political speech. Like any self-respecting remorseless killer robot from the future, our techno-anxiety just keeps coming back.

Arnold Schwarzenegger’s Terminator was science fiction — but so, too, is the idea that robots and software algorithms are guzzling jobs faster than they can be created. There is an astonishing mismatch between our fear of automation and the reality so far.

How can this be? The highways of Silicon Valley are sprinkled with self-driving cars. Visit the cinema, the supermarket or the bank and the most prominent staff you will see are the security guards, who are presumably there to prevent you stealing valuable machines.

Your computer once contented itself with correcting your spelling; now it will translate your prose into Mandarin. Given all this, surely the robots must have stolen a job or two by now?

Of course, the answer is that automation has been destroying particular jobs in particular industries for a long time, which is why most westerners who weave clothes or cultivate and harvest crops by hand do so for fun. In the past that process made us richer.

The worry now is that, with computers making jobs redundant faster than we can generate new ones, the result is widespread unemployment, leaving a privileged class of robot-owning rentiers and highly paid workers with robot-compatible skills.

This idea is superficially plausible: we are surrounded by cheap, powerful computers; many people have lost their jobs in the past decade; and inequality has risen in the past 30 years.

But the theory can be put to a very simple test: how fast is productivity growing? The usual measure of productivity is output per hour worked — by a human. Robots can produce economic output without any hours of human labour at all, so a sudden onslaught of robot workers should cause a sudden acceleration in productivity.

Instead, productivity has been disappointing. In the US, labour productivity growth averaged an impressive 2.8 per cent per year from 1948 to 1973. The result was mass affluence rather than mass joblessness. Productivity then slumped for a generation and perked up in the late 1990s but has now sagged again. The picture is little better in the UK, where labour productivity is notoriously low compared with the other G7 leading economies, and it has been falling further behind since 2007.

Taking a 40-year perspective, the impact of this long productivity malaise on typical workers in rich countries is greater than that of the rise in inequality, or of the financial crisis of 2008. In an age peppered with economic disappointments, the worst has been the stubborn failure of the robots to take our jobs. Then why is so much commentary dedicated to the opposite view? Some of this is a simple error: it has been a tough decade, economically speaking, and it is easy to blame robots for woes that should be laid at the door of others, such as bankers, austerity enthusiasts and eurozone politicians.

It is also true that robotics is making impressive strides. Gill Pratt, a robotics expert, recently described a “Cambrian explosion” for robotics in the Journal of Economic Perspectives. While robots have done little to cause mass unemployment in the recent past, that may change in future.

Automation has also undoubtedly changed the shape of the job market — economist David Autor, writing in the same journal, documents a rise in demand for low-skilled jobs and highly skilled jobs, and a hollowing out of jobs in the middle. There are signs that the hollow is moving further and further up the spectrum of skills. The robots may not be taking our jobs, but they are certainly shuffling them around.

Yet Mr Autor also points to striking statistic: private investment in computers and software in the US has been falling almost continuously for 15 years. That is hard to square with the story of a robotic job-ocalypse. Surely we should expect to see a surge in IT investment as all those machines are installed?

Instead, in the wake of the great recession, managers have noted an ample supply of cheap human labour and have done without the machines for now. Perhaps there is some vast underground dormitory somewhere, all steel and sparks and dormant androids. In a corner, a chromium-plated robo-hack is tapping away at a column lamenting the fact that the humans have taken all the robots’ jobs.

kabayiri

It's an interesting article Gen, thanks.

I think it is a mammoth task to distill all that has been happening in to a few root causes.

The availability of a vast pool of relatively cheap labour in places like India and China has certainly suppressed the perceived need to automate to stay competitive.

What happens when Labour costs rise in these places?

Generali

kabayiri wrote: »

It's an interesting article Gen, thanks.

I think it is a mammoth task to distill all that has been happening in to a few root causes.

The availability of a vast pool of relatively cheap labour in places like India and China has certainly suppressed the perceived need to automate to stay competitive.

What happens when Labour costs rise in these places?

Well labour costs are rising in China and quite quickly AIUI. Lots of clothing that would have been made in China a decade ago is made in Bangladesh now for example. China has been following the Hong Kong development model of starting off making very low added value products and moving into making more added value stuff.

The only problem is they're trying to hang on to the low value added stuff too like making iron and steel. The Party hasn't grasped the fact that moving from being a middle income country to a rich one involves adding more value and value simply isn't added at that end of the manufacturing chain by employing people.

At that end of the chain it's done by producing alumin(i)um as the Icelandics do: with cheap power and huge amounts of automation, not lots of very cheap people getting killed on the job.

Mr Harford, a real favourite economist of mine, is great at this sort of thing and what is at the heart of his argument is 100% correct IMV: if the zombie robot apocalypse has started, why hasn't output per person employed risen? After all, once the zombie robot apocalypse is complete, human productivity will be approximately infinity: all output will be created by robots and we will consume their output (or be hiding in caves from their awesome weaponry).

kabayiri

Generali wrote: »

Well labour costs are rising in China and quite quickly AIUI. Lots of clothing that would have been made in China a decade ago is made in Bangladesh now for example. China has been following the Hong Kong development model of starting off making very low added value products and moving into making more added value stuff.
...

A company I worked for held back higher value work because of trust issues.

The Chinese subcontractors didn't appreciate IP rights like we do here (at the time). Using production machines which were direct clones of originals with protected patents seemed to be fair game to them.

Electronic components were routinely substituted with components with lower spec. This isn't that much of an issue with goods which are expected to have a short shelf life, but when you move to premium rated goods the consumer expects a long worry free life for the product.

From conversations with ex-colleagues it seems there is much more of a hybrid approach now; where finishing work is done back here in Europe, to supplement core Chinese manufacture.

I can't see how China can move all it's work force into higher value function. Then again, they have a habit of proving us wrong!

Generali

kabayiri wrote: »

I can't see how China can move all it's work force into higher value function. Then again, they have a habit of proving us wrong!

The most intelligent man I ever met (up to that time) reckoned that the most amazing thing about the US industrial revolution and China through the warlord period and into Communism was that China didn't have the largest economy in the world. This was, in his view, a temporary aberration waiting to be resolved.

I don't see why Chinese people couldn't move its workforce into higher value functions, Hong Kong did so there's nothing cultural or racial about it (when I was a kid, every crappy plastic toy came from HK or so it seemed).

Loughton_Monkey

Generali wrote: »

......I don't see why Chinese people couldn't move its workforce into higher value functions, Hong Kong did so there's nothing cultural or racial about it (when I was a kid, every crappy plastic toy came from HK or so it seemed).

It doesn't work like that!

Just because mid-value functions get computerised and automated doesn't mean you need to 'upskill' the people in the lost jobs. Take Asian department stores. Automated stock control, till functions, and warehousing puts lots out of work. But then they recruit 'spotty lads or attractive young girls' to valet park for you. Drive into a store car park, some of which consists of automated "turntables", and going down 3 levels is about a 700 yard drive. Every 50 yards is an attractive mini-skirted young lady wearing white gloves and a smile on their face, directing you to the next girl, the last of which will point to a space.

Closer to home, Sainsbury cut their skilled staff all the time, but others pop up, like the dozen little Somalian lads in the car park hand-washing your car for £7 a pop. Specialist shops in our High St close all the time, but are filled by low-wage kebab shops, or nail studios. In the textbooks, it will record the invention of automated car washes years ago. But they rip your paintwork to shreds, leaving a strong market for hand car washes.

So there's jobs for everyone, but in a very polarised way. That's the main reason productivity figures remain low. This is one major disadvantage to today's 'yoof'. [Yes! I'm not totally without empathy for them]. But getting a 'career' in which you can progress nicely up the ranks in your chosen firm or industry, because you can't get promoted from the post room to the Marketing department any more.

Rather ironic, these days. In my day 5% of us went to University, and good careers were, most of the time, available. Now it's 50%, we are educating people most of whom will end up (at best) in a call centre on £20K max for the rest of their lives.

kabayiri

Loughton_Monkey wrote: »

...
Rather ironic, these days. In my day 5% of us went to University, and good careers were, most of the time, available. Now it's 50%, we are educating people most of whom will end up (at best) in a call centre on £20K max for the rest of their lives.

£18K to £24K for Team leaders, so not quite as bad

I wouldn't like to be a Tier 1 operator in a call centre now; either here or in India.

I've been in demos where routine questions are answered automatically over the phone by computer.

It's just a matter of time before the people get replaced. Perhaps some will end up working in a museum showing how it was in the good old days of the call centre.

cells

Generali wrote: »

Well labour costs are rising in China and quite quickly AIUI. Lots of clothing that would have been made in China a decade ago is made in Bangladesh now for example. China has been following the Hong Kong development model of starting off making very low added value products and moving into making more added value stuff.

The only problem is they're trying to hang on to the low value added stuff too like making iron and steel. The Party hasn't grasped the fact that moving from being a middle income country to a rich one involves adding more value and value simply isn't added at that end of the manufacturing chain by employing people.

At that end of the chain it's done by producing alumin(i)um as the Icelandics do: with cheap power and huge amounts of automation, not lots of very cheap people getting killed on the job.

Mr Harford, a real favourite economist of mine, is great at this sort of thing and what is at the heart of his argument is 100% correct IMV: if the zombie robot apocalypse has started, why hasn't output per person employed risen? After all, once the zombie robot apocalypse is complete, human productivity will be approximately infinity: all output will be created by robots and we will consume their output (or be hiding in caves from their awesome weaponry).

Increased productivity is tempered somewhat (and maybe even fully in some instances) by increased un-producitivty forced upon society by society (or stupid governments)

Some examples I can think of wothout checking

BP wantes to decommission a rig. They were going to take it into a deep ocean and sink it. Cheap quick efficient productive and all the scientists said it would be fine. After some protest they were not allowed and instead hadkto recycle it at great cost to them (and the gov as less profit is less tax received on profit). Pretty much all of waste disposal and treatment is imposed inefficency

house building. More productive eg power tools and machines but less productive in that regs now require deeper thicker foundations. Doible skin insulated walls. Etc.

house building 2. As we get richer we impose stupid stamp requirements.

Vehicles. Additional safety and regs

Energy. Regs plus green subsidy

etc etc

so for each step up in productivity there is usually a partial step down in regulation inforced productivity reduction

cells

kabayiri wrote: »

A company I worked for held back higher value work because of trust issues.

The Chinese subcontractors didn't appreciate IP rights like we do here (at the time). Using production machines which were direct clones of originals with protected patents seemed to be fair game to them.

Electronic components were routinely substituted with components with lower spec. This isn't that much of an issue with goods which are expected to have a short shelf life, but when you move to premium rated goods the consumer expects a long worry free life for the product.

From conversations with ex-colleagues it seems there is much more of a hybrid approach now; where finishing work is done back here in Europe, to supplement core Chinese manufacture.

I can't see how China can move all it's work force into higher value function. Then again, they have a habit of proving us wrong!

They don't need to move much of their workforce anywhere. A teacher or a nurse or a supermarlet worker or a taxi driver in China or in the UK is more or less the same

What china needs to do is improve its internal productivity and as it grows maintain a neutral or positive trade+current account balance and there is no reason that should be impossible

One of the most effective and easiest ways to improve a nation is to urbanise and china is still rapidly doing that. That alone will make them richer and richer for the next 20 years if not more

cells

For every three steps technology takes us forward to more riches and more leasure time there are two step backwards by the state and society

For example I believe the self drive car is going to be a huge leap in productivity and wealth. But when they are invented I believe the state will force them to be all electric which is one step backwards and they will be very-highly-taxed (to pay for say more healthcare for the old) which is the second step backwards.
So what appears like it will be a massive jump in wealth for working citizens through the fruits of technology and productivity only really ends up as a modest improvement to their lot

- - - -- - - - - - -

Also interestingly technology improvements keep inflation in check (eg cheaper TVs every year over the last 25 years). With lower inflation interest rates are kept lower. Lower interest rates in a quota (or population boom) nations result in asset price inflation which apears as as the rich getting richer (by by virtue of comparison the poor getting poorer).

cells

Also I wonder if poorer nations getting richer is a variable which is harming the view of the robots and their benefits

lets say I invented a machine and it can make you anything you want. A toy a ship a car anything. At first the machine works for me for nearly free....but as time goea on my machine asks for more and more things in return for making me what I command. So it asks for more electricity more water more oil each and every year for the same output. At some point it gets ridiculous and the machine asks for as much stuff in return for what I ask. So if I ask my machine to make me a car it says ok ill do it but I want a car in return....I think bloody hell I may aswell make the car myself. Clearly my machine is getting less and less productive im having to work harder to maintain and feed it its needs.

Oh my machine is called China