Forbes.com | June 7, 2012
By Ayesha and Parag Khanna
Back in 2004, America’s leading humor magazine the Onion ran a story titled “American Robot’s Job Outsourced to Overseas Robot.” The lawnmower assembling 11-year old robot named QT2D-7 bitterly complained of not receiving any notice or severance. For about a decade, outsourcing has been the Democratic Party’s hatchet to attack free-trade Republicans. In the 2004 presidential election, then candidate John Edwards blamed outsourcing to India for the inequality of “two Americas.” In the present election, the Obama administration has just unleashed a $25 million ad campaign to make voters “think of call centers in India every time you hear Mr. Romney’s name.” By now it’s a well-worn axe.
Yet while politicians continue to live in the past, the Onion seems far more prescient: Today robots and automation are a greater source of job loss than outsourcing. Meanwhile, Congress has delivered none of the large-scale worker retraining programs they’ve promised for years.
Whether the cause of America’s anemic economic recovery is outsourcing, automation,Wall Street banks not lending, corporations not investing their piles of cash, the sluggish Euro-zone, or misguided Fed policy, America as a whole is not coping well with the economic consequences of the very technologies it has long led in inventing. Planning for the future will require both the government and everyday citizens to much more seriously forecast technological penetration and map their strategies accordingly.
America’s transition away from manufacturing was supposed to mean that we all move into a higher-value service economy – jobs which couldn’t be lost to outsourcing. Technology was considered only an asset to productivity, not a liability to employment. Yet the most recent Q1 data reveals that unemployment is steady at around 8.1% not because workers have found jobs, but because hundreds of thousands of people – 342,000 in April alone – have left the workforce altogether. Retirees and those returning to school provide at best a partial accounting. Automation is a major factor. Today America needs 5 million less workers to produce a greater value of goods and services than it did in December 2007 when the recession began.
About 750,000 jobs in IT, finance and business services are expected to be outsourced by 2016, and automation is having a similar cumulative toll, particularly at the lower end of the pay scale, where grocery check-out clerks have been replaced by electronic scanners, and over 250,000 postal workers have already lost their jobs due to automation of mail processing. As technology moves up the value chain, could Google’s driverless car make postal delivery drivers redundant as well? Coffee shop barista may seem like a steady job for part-timers, especially if you know how to trouble-shoot the WiFi router, but a Seattle company has just come out with a “Textspresso” machine that takes your order directly via SMS as you’re leaving the house, and even prints your phone number in edible ink on the froth of your latte.
The clever Onion article actually captures the double-whammy of the outsourcing of automation itself to Asia. This too is not far off. Take for example high-quality radiological scanning technologies, which threaten the jobs of both American and Indian medical professionals. Then there is artificial intelligence in the form of high-speed semantic search capability (pioneered by Blackstone Discovery in Silicon Valley) that can do the work of hundreds of para-legals in a fraction of the time and a small percentage of the cost.
So how do Americans plan ahead for an economic climate of weak government support, international labor competition, and technological substitution?
For one thing, they can compete on the quality of service. Ally Bank, which ranks at the top of CNN Money’s “Least Evil Banks” list, prides itself on having zero waiting time to speak to live human representatives, recently began running commercials chastising its competition for using automated customer service. There is still a large and almost insurmountable gap in the quality of service humans can deliver versus machines in many sectors.
More fundamentally, we can transition to an economy where we work more for ourselves, each other, and in teams. A logical consequence of the financial crisis but also one that could be construed as a silver lining is the rapidly growing rate of self-incorporation. Over one-third of Americans are now registered as self-employed, becoming small businesses in a P2P economy of professional services and retail, or sub-contractors in growing sectors such as healthcare and data collection and analysis. According to McKinsey, the past decade has witnessed a decline in jobs involving transactions and production, while 5 million jobs have been created in interactions that require collective problem-solving or skills matching.
These transactions also increasingly take place outside of the traditional hierarchical channels of the economy. For example, the usage of virtual currencies, online bartering marketplaces, and time banking brokers that match skills to needs and allow prices to be set mutually and in non-monetary units. The same is true of 3D manufacturing devices that allow small-scale producers to get back in the game of producing everything from household goods to complex mechanical proto-types at ever-lower cost. Rather than a black market, this is a blossoming and efficient digital marketplace for millions of citizens. Similarly, all 50 states now have registered community credit unions at the municipal, county, and larger levels, with assets and lending reaching tens of billions of dollars. Both are a threat to the traditional banks and lending institutions that common citizens feel have betrayed them.
Another strategy is not to avoid large corporations but to leverage them. As we spend more and more time online, we constantly give away information about our personal preferences and spending habits for free to vendors. Blogging pioneer Doc Searls has long argued that customers should shield their data and charge a price for it, turning the tables on marketing giants and their data-gathering web-crawlers. Even the two hours per day that most Americans claim they “waste” surfing the Internet should be profitable as websites offer rewards to visit and publicize them, or participate in virtual focus groups, amidst intense content competition. Our time should literally equal money – even while living at home with one’s parents as 85% of American college graduates are now doing.
The new dynamics of technological innovation also require shifts in our educational paradigms. Generic liberal arts education is scarcely affordable within four years, and no longer prepares graduates for a competitive and technological marketplace. Promises to invest more in community colleges have fallen flat, and are in any case misplaced. Germany remains the world’s top export powerhouse today due to its far-sighted and technically oriented vocational educational system that produces world-class engineers staffing Porsche, Audi, Volkswagen, Mercedes and BMW. Not bad for the “land of thinkers and poets.”
Only such a vocational system can translate – at large scale – the inventions of America’s PhDs into “robo-collar” jobs for the mainstream. Corporations facing growing skills gaps in their workforce already fund such in-house institutes, but should be incentivized to pool such financing more broadly. (Companies already pay ex-Stanford and Google engineer Sebastian Thrun’s online Udacity for access to students’ scores.) Growing sectors such as tourism, mineral extraction, social assistance for the elderly and children, and computer hardware design could all benefit from systematic skills-based vocational efforts. Construction is poised to return as a growth area in the U.S., but can be even more value-added if focused on environmentally efficient building retrofitting. The solar-power industry already employs over 100,000 people and growing.
All of these are trends the government should encourage rather than stifle. An economy restored to dynamism rather than dependence will mean more creativity and innovation, higher incomes and spending, and greater tax revenue for deficit reduction and investment. Unlike labor arbitrage, the technology playing field can still be a race to the top.
Parag and Ayesha Khanna are co-directors of the Hybrid Reality Institute. Their new book is Hybrid Reality: Thriving in the Emerging Human-Technology Civilization, just published by TED Books. Aaron Smith provided valuable research assistance for this article.