An Employment Revolution: A War Between Immigration and Robots

We are at a dawn of an intellectual revolution, like Mankind has never seen. And I am calling this the second (employment) wave. The first wave of my generation was the wholesale shift of labor from North America and Europe to much lower wage Asian economies. This was simply a shift in ‘trade’ dynamics, brought about by trade liberalization and globalization. But the work itself, was fundamentally the same. Low wage jobs simply shifted from one region to another. This sort of dynamics has been in human existence for hundreds of years, where jobs have relocated for economic or political expediency. The shift to lower cost production centers, has often resulted in lower retail cost of goods (i.e. higher living standards) and also higher wages for displaced workers as the higher wage countries adopt more knowledge intensive jobs (in design, marketing etc.) and also begin to sell (more knowledge) intensive products to low wage (developing) countries (like power plants, and airplanes to support their new economies) and thus create a net positive economic outcome overall.

But, what is different now, is that machines (not low wage nations) are destined to take over something like 80 million American jobs over the next 10 to 20 years. This is the “second wave”. No, this is not my prediction, this is according to a recent banking industry think tank report. And it’s been confirmed by many other analysts. A recent CNN Money reports that 50% of the workforce in the U.S. is projected to disappear. A report published by Yahoo says that the jobs at risk of being replaced by robots include loan officers, receptionists, paralegals, salespeople, drivers, security guards, fast food cooks, bartenders.

If it all seems farfetched and distant, think again. There are many ‘real’ observations and data points to point to. Let’s consider the case for ‘drivers’. The google autonomous car is a reality. It’s on the streets. But consider UBER’s recent tests in Chicago with a driverless ‘cab’. Or even more interestingly the first driverless truck expedition across America by a bunch of freight trucks. Wow! Imagine, no drivers!! Then think about the 3.5 Million truck drivers we have on the roads today; or the 300,000 plus licensed taxi drivers in North America!

Bang! It won’t take long for there to be 4 Million ‘drivers’ looking for other work.

“These machines are different,” the banking industry’s chief economist Andy Haldane said. “Unlike in the past, they have the potential to substitute for human brains as well as hands.”

Unlike during the Industrial Revolution, where manual laborers were forced to improve their skills and adapt to more sophisticated jobs, robots will simply replace humans this time around. “The smarter machines become, the greater the likelihood that the space remaining for uniquely-human skills could shrink further”.

Consider the case of employers in the agricultural and food processing industries in America, replacing low grade jobs typically filled with migrants with machines. Mechanization has already transformed California’s tomato industry, where typically Mexican farm laborers have been replaced and the ‘Bracero’ programhas ended.Very few new jobs were created to maintain the new machines. And the immigrants have simply remained in Mexico!

Just as ATMs replaced bank clerks, so too new checkout machines will hugely reduce the need for retail clerks. The need for human labor in construction, meatpacking, and food preparation seems certain to contract.We’re on the cusp of a revolution in the application of Artificial Intelligence to ‘everything’. In the agricultural sector alone it could eventually lead to millions of migrants and immigrants being replaced by machines.

So what does all this have to do with an As*hole in the Whitehouse?

Well, there are roughly 11 Million illegal immigrants in the U.S. doing essentially menial jobs.  In addition, the U.S. government has actually formally approved something close to 10 million guest workers in the past decade or so. And in addition, over 13 Million LEGAL immigrants have come in to the U.S. during this same timeframe.

If you look at U.S. demographic trends, four million Americans turn 18 each year, so the current inflow of guest workers and immigrants has boosted new labor supply by roughly 25 percent per year.

At the same time, we have native-born, working-age Americans who have falling out of the labor market at a very fast rate. Something like 15 million Americans are essentially out of the job market since 2000. By late 2012, roughly 50 million native-born working-age Americans weren’t working, up from roughly 36 million in 2000, according to the March report.

While immigration (legal or illegal) has helped stabilize the job market with so many Americans dropping out in the past decade or so, the future for America’s labor market looks completely different

In fact, there are growing signs that there will be a need to regulate immigration, and under some predictive scenarios, we might actually have to aggressively start deporting literally millions of immigrants to simply maintain labor market stability.

Soon enough, robots will be so cheap that businesses will have much less use for government-subsidized low-skill workers, or for the millions of new immigrants they’re now demanding.

Companies will have the option of just renting more robots — to assemble widgets on production lines, to milk cows in farms, pick fruit in fields, sell or assemble hamburgers — without the need to juggle workers’ schedules, to pay for health care, settle workplace arguments, pay for vacation time or worry about injuries on the job.

That pending collision of high immigration and cheap robots could leave the country with an even larger population of idle low-skill workers once robots can do the work at a cost below the minimum wage.

There is going to be a new public policy issue: the interplay of immigration and robots.“From self-driving taxis to garbage collectors to autonomous service systems, machines will start to exist in our social space the way that low-paid (often immigrant) human workers do now: visible but ignorable,” said JamaisCascio, a writer and futurist.

“The technology needed to create serious disruption in employment will take more time. … Self-driving cars will take a great deal more time than small innovations such as we see now,” said Stephan Adelson, president of a technology consulting company.

“By 2025, society will not allow free roving self-driving vehicles [because public opposition to] job loss will be one of the major contributing factors to the slow adoption,” William Schrader, the co-founder and CEO of PSINet Inc.

In the debate over “paths to citizenship” and “enforcement first,” we can lose sight of what “immigration reform” most fundamentally means to the future American labor market: a massive new influx of low-wage workers. While, many business leaders argue that the United States actually needs to attract more highly skilled immigrants.

In fact, the immigration reform that has been on the table for years in Washington, if implemented now, would almost certainly mean more poverty and intensified inequality even if all else held constant.

Almost certainly, though, all else will not hold constant. Technology is changing everything. If the next decade brings still heavier downward pressure on wages—and even higher returns to capital investment and to unique skills—then the U.S. government cannot be seen as an agent of immigration liberalization to an extent that exerts forces that cause even more extreme pro-poverty, pro-inequality effects. It’s simply not in anyone interests for that to happen.

At the same time, there is a chorus of new data that suggests there will be fundamental shifts in the labor market. Here are some interesting quotes:

“Anything and everything that can be automated to replace humans will be done. You can bet on it!” said Larry Gell, founder and director of the International Agency for Economic Development.

“Networked, automated, artificial intelligence applications and robotic devices will have displaced more jobs than they have created by 2025 … for both white and blue-collar jobs,” said Dave Kissoondoyal, CEO for KMP Global Ltd.

“We’re going to have to come to grips with a long-term unemployment process,” said Karl Fogel, a partner with Open Tech Strategies, “and the fact that — strictly from an economic point of view, not a moral point of view — there are more and more surplus humans.”

Which leaves one wondering: what will the next president be thinking or have to accomplish? What have the people behind him or her (the elite who pull the strings), said must be done?

Well, the answer is obvious isn’t it? We might have to have wholesale ‘deportation’ if the pace of capital investment for automation picks up. So far, we have actually had net migration outside the U.S. for the past few years, as the pace of Mexico’s economy picks up and more jobs become available there. But, big but, whoever occupies the Whitehouse, might need to be prepared to be an as*hole to deal with this reality.

The truth is deportations are never pleasant, and they leave scars on families. Homes are often broken up, and massive trauma can be caused on everyone involved. This process could be incredibly messy.

More likely than not, a responsible administration might take a combinatory approach, offering some immigrants a path to stay, others a path out; and yet others kept in limbo for some time, while uncertainties around technology adoption are dealt with. But the whole process will be incredibly messy.

Whoever occupies the Whitehouse needs to be prepared to look very bad! This interplay between immigration and robots won’t be pretty.

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