Digital Revolution Will Kill Jobs, Inflame Social Unrest, Says Gartner

dcblogs writes "Gartner says new technologies are decreasing jobs. In the industrial revolution — and revolutions since — there was an invigoration of jobs. For instance, assembly lines for cars led to a vast infrastructure that could support mass production giving rise to everything from car dealers to road building and utility expansion into new suburban areas. But the "digital industrial revolution" is not following the same path. "What we're seeing is a decline in the overall number of people required to do a job," said Daryl Plummer, a Gartner analyst at the research firm's Symposium ITxpo. Plummer points to a company like Kodak, which once employed 130,000, versus Instagram's 13. The analyst believes social unrest movements, similar to Occupy Wall Street, will emerge again by 2014 as the job creation problem deepens." Isn't "decline in the overall number of people required to do a job" precisely what assembly lines effect, even if some job categories as a result require fewer humans? We recently posted a contrary analysis arguing that the Luddites are wrong.

Comments

Wages as share of GDP dropping since 1972

[WillAdams]

Yet stock market valuations increase, concentrating wealth in a lucky few.

Why can't companies pay better wages?

Wal-Mart increasing their wages to $12/hr. would increase their average item price by 1.1% --- perhaps then their workers could occasionally afford to shop somewhere else, or eat out at somewhere other than McDonald's.

Re:Wages as share of GDP dropping since 1972

[JonnyCalcutta]

"The employee can decide if the pay is worth it."

Its lucky that the job market is infinitely flexible and everyone can pick and choose exactly what job they do, when they do it and how much they get paid for it.

Re:Wages as share of GDP dropping since 1972

[geoskd]

If a CEO gets the owner one million dollars per day, the owner can afford to pay that CEO $999,999 per day and still pocket $1 a day. It's not your business. The owner can decide if the CEO is worth it. The CEO can decide if the pay is worth it.

Employees are free to sell their labor elsewhere. They have the right to order their affairs and sell their time as they see fit, finding the most advantageous deal they can. The employer can decide if the labor provided is worth it. The employee can decide if the pay is worth it.

Uh oh. I see the problem. Where does the 3rd party fit in? Some other person, like a government bureaucrat, intellectual elitist who doesn't actually do work for money, or politician pandering for popular votes... where can that person inject their bullshit in this scenario. A problem indeed!

What happens when the majority of economic activity requires no workers at all? Then the owner gets a pile of profits, pays no workers at all, and only owners can afford anything because everyone else is unemployed and unemployable...

Capitalism is inherently flawed just like any other economic system. The underlying set of assumptions for capitalism has been reasonable so far, but it will not remain so. Capitalism will fail for the same reason that communism fell. Both systems make fundamental assumptions about the nature of economy, and both sets of assumptions are not always true.

Re:Wages as share of GDP dropping since 1972

[jellomizer]

Here is the problem I see it.
1. Automation has reduced the need for unskilled labor.
2. Lower Education K-12 is designed to produce people who is able to perform unskilled labor effectively
3. Higher Education is designed to produce people who will go into research, and education for education purposes.
4. Due to having an economic advantage of not being bombed to hell in WWII the US had little economic competition for 50 years, now these countries have been rebuilt with a more modern infrastructure. But we had a few generation who had a higher quality of life that is now unsustainable, and we don't have an infrastructure to make lower quality of life better. (Public Transportation, Safe Low income housing...) So the $10.00 an hour worker would have a living wage. They may not have a Car or an X-Box but a safe roof over their head and able to raise a family in safety.

We need to fix lower education, and raise up the prestige of Vocational Training. So we are not unskilled labor, or college grads with no practical skills. The job of tomorrow need people who can be versatile and think on their feet, and adapt quickly to changes. We need to teach these skills.

We need to redesign residential areas where the Rich and the Poor live together and we have an infrastructure to allow people to work.

Re:Wages as share of GDP dropping since 1972

[im_thatoneguy]

You need to either settle for what you're worth or endeavor (through school, training, etc) to make yourself worth more.

That's easy for someone like you or to say, who presumably make more than $60k per year. But the reason I make 6 figures isn't because I chose to make 6 figures, it's because I got lucky and happened to both have the interests and innate ability in said interests to command those kinds of wages.

The problem isn't that people are too lazy to make themselves worth more. The problem is that we don't need an entire population of Doctors, Developers and Stock Brokers. Some people due to their economic status as children didn't have the access or exposure to the necessary prequalifications for a high paying career. Some people are just too dumb. Some people are really good at things that don't pay very well. There are a lot of people out there who are really good at Basketball. I'm terrible at Basketball. But even the people who are really good at Basketball still probably aren't good enough to qualify for the minuscule job market for professional basketball players. And highschool PE teachers isn't a $60k a year job.

Meanwhile the total personal income for 2012 in the US was $13.4 Trillion. Total number of workers is about 154 million. If we had a purely distributed wealth economy where everyone got a cut of the pot we would each make:
13.4T/154M = ~$86,500 per year.

Let's say the educated employees deserve more. These are our upper middle class and the unskilled labor deserves less. Let's say an education should about double your wages.

40% now makes $116,500k+ or more.
60% now makes $66,500 or less

But let's split that off too. Let's say professional degrees and middle management deserve more.

Let's take another $20k from the HS dropouts and $10k from the college grads.

Now:
10% now make $196k.
30% now make $106k
50% now make $66k
10% now make $46k

That's about what America would look like if we didn't let the free market assign you wage, we just gave everyone who stuck out college a guaranteed salary and every doctor/lawyer/masters/phd a guaranteed salary.

$25k would be almost half of the "base income" in that hypothetical scenario.

But let's address other libertarian anarcho-capitalist concerns. Without big buck potential nobody would start the next Microsoft. Personally I think a $200,000 salary would make a lot of people really happy since 99.5% of the population would see a HUGE pay increase. The number of people making six figure salaries would increase. The number of people buying cars would increase. The number of people upgrading their ipad every year would dramatically increase.

With 40% of the population suddenly making $100k a year if you did start the next Microsoft we could say you get stock. But have to pay a 60% dividend tax. You would still easily be a millionaire (or even billionaire) and the increase in customer purchase power would probably offset the 60% tax on dividends (plus you still make $200k a year) which should be enough to live off of. And unlike the status quo where bill gates can afford to risk his livelihood to start a company knowing his wealthy father will bail him out--more people will take risks and reach out hoping to maybe do a little better.

Kodak vs Instagram? Really?

[Beardydog]

I agree with the general thrust of the article, but comparing Kodak to Instagram is straight-up retarded. Instagram is not replacing Kodak. It does not do what Kodak used to do with only 13 people. It does almost nothing, and does nothing worthwhile.

Hard to say.

[jythie]

This is a really difficult thing to predict, and either prediction could be true. With the industrial revolution there was a net increase in demand for jobs since the increased efficiency resulted in higher demand in general thus increased infrastructure requirements. Part of what made this possible was, even if you decrease the cost, manufacturing still required time, energy, materials, etc.

Something that makes tech a little different, esp when it comes to software, is the near zero cost of reproduction. If industrial revolution Ford got double the orders for cars it would not only require more assembly lines but part suppliers would need to ramp up as would production of raw materials. If Microsoft's demand for MSOffice doubles, they might need a bit more bandwidth but there is no real spiderweb of increased jobs. They just allow more downloads or print more copies.

Re:Hard to say.

[AvitarX]

It's a stupid premise and a fasle dichotomy IMO.

The industrial revolution DID cause unrest. Only an idiot would think that wasn't the case. A whole body of famous literature is about said unrest, that people I would suspect are aware of even if not history in general. The Labor movement was an expression of unrest, as was the communist revolution.

It didn't take long for it to improve things overall, and not many sane people want to go back to a pre-industrial world, but to pretend it didn't cause job loss and unrest before job gain and improvement is absurd. I think that's what both the Luddites and the Futurists get wrong, there will be pain, there will be suffering, then there will be benefit. Markets take time to adjust, and attempts to short-circuit that adjustment time have historically gone terribly wrong (e.g. great leap forward).

This has been going on for hundreds of years

[bmajik]

The groaning of the economically illiterate, that is.

I hereby sentence everyone to "Economics in One Lesson", by Henry Hazlitt.

New technology and new production efficiencies certainly displace people who were tied to the old technologies and methods. Most people don't think too highly of the folks behind Standard Oil, but an honest assessment would suggest that they did more to save whales than anyone at Greenpeace -- by making whale oil a less cost effective heating mechanism.

This naturally caused a huge job loss for the whaling industry -- which at the time was of course a great social woe.

Whalers, buggy whip manufacturers, and people whos jobs can be trivially replaced by robots are all going to be displaced when technology improves.

What bad economics (and policy makers) repeatedly do, and what is covered in Hazlitt's book, is they focus on what is seen and ignore what is unseen.

What is easy to see when a buggy whip manufacturer loses their job is that Bob lost a job.

What is harder to see is that nearly everyone else in the society is some fractional percent wealthier. The automobile saved people time, which is why it replaced the horse. People who spend less time unproductively can create additional wealth for the rest of society to benefit from.

I think most people agree that a world where we all have handheld supercomputers that can take photos is a better world than one where the instant camera is the only cost-effective consumer device for seeing a photograph within 1 hour of having shot it.

What this analysis fails to "See" is beyond the 13 jobs at instagram. It's easy to see the loss of jobs at Kodak or polaroid. But add up all of the jobs that are tangentially related to digital photography. Flickr? People working on DSLRs? People working on Photoshop? People who write a 99 cent appstore app that is a filter for your iphone's camera?

Cast a wide net to "see" what bad economists aren't seeing.

The thing about these luddite arguments that really shows they don't hold water is that if the old way was really better, we'd go back.

We, in aggregate, like the new way better -- which is why we aren't giving up our smartphones and rushing out to buy film cameras.

For once, I agree with Gartner

[ErichTheRed]

Gartner, Forrester, etc. are the bane of my existence in IT, because they promote magical thinking among executives, but this time they're right about something.

No one is prepared to deal with the dirty little secret of the information age -- that there are going to be huge swaths of the population who will be out of work, with no prospects for future employment. The last time around, it was low-skilled factory workers. Now it's the middle class's turn! And when half the country has no money and no work, they're going to get angry.

I don't think the current generation of office workers is really thinking about how much less of them will be needed once companies get around to squeezing every single nickel out of every single business process. It's already happening on a huge scale, even in the IT sector. Anything rules-based is basically fair game for automation. Think back a couple of decades -- how many millions of bookkeepers, accountants, secretaries, low-level report-consolidation managers, etc. did large companies employ and pay a decent middle class salary to? Each one of those went out and bought those large companies' products, bought houses, cars and vacations. Now that strong base of consumers is disappearing, or they need to finance their purchases through debt because their wages don't keep up. Large numbers of corporate jobs can still be summed up as "I look at reports from this location, perform a few calculations and summarize the resulting numbers for my management by emailing them a spreadsheet." No one can tell me that the accountants haven't noticed this...

The vast majority of people in the middle class, in my opinion, are averse to social welfare policies simply because they don't think anything bad is ever going to happen to them. Worse, they think that if they support the richest people and just try really hard, they'll eventually be rich themselves. This thinking is going to backfire hard on them when their nice safe job is automated or no longer needed. For example, the most vocal opinions of the new healthcare law in the US are typically middle class families who get their insurance coverage through work and have never had to worry about not having it. Try explaining to them that there are a significant number of working individuals who can't afford insurance and you get, "But...but...socialism!!" All I can say is the next few years will be very interesting. If you believe the Star Trek TNG writers, it's going to take a massive upheaval to get to a post-scarcity utopia.

Not this shit again

[Digital Vomit]

Gartner says new technologies are decreasing jobs. In the industrial revolution â" and revolutions since â" there was an invigoration of jobs.

So, the guy didn't learn from the Industrial Revolution (and revolutions since) that all the fear of 'no more jobs for anyone' ended up being unfounded?

New technologies don't decrease the number of available jobs; wealth sequestration among the super-rich does. With the Middle Class having less and less money to spend, the demand for products -- and the jobs required to create them -- goes down. We've been seeing this over the past thirty years, which just happens to coincide with the rise of the computing industry.