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Technology-driven Worker Dislocation: A Persistent Challenge in Need of Solutions

Wednesday, February 7, 2018

by Carl E. Van Horn, Ph.D.

The potential impacts of robotics, artificial intelligence, and digital economy technologies on American workers raise alarming questions. Which occupations will survive? Which workers will be the winners and losers? Will jobs disappear? As we consider these questions, it is essential to recall lessons from previous cycles of technology-driven worker displacement throughout American history.

In the early 20th century, the mechanization of farming and assembly line production of automobiles and other durable goods eliminated and created job opportunities by the millions. Toward the end of the 20th century, robots began replacing assembly line workers and personal computers wiped out millions of jobs. Today, advanced software, smart phones, the Internet, and cognitive computing are disrupting retail, media, transportation, education, and health care industries.

With each wave of technology — from the steam engine to cloud computing — dire predictions about the scope and characteristics of workforce disruptions have often been exaggerated. Our crystal balls are cloudy because we cannot estimate the true extent of economic change, how workers and businesses will adapt, and the new opportunities and enterprises that will emerge. As the great baseball player and quipster Yogi Berra said, “The future ain’t what it used to be.” Recent predictions about the impact of artificial intelligence on worker dislocation range from the Organisation for Economic Co-operation and Development’s (OECD) estimate that nine percent of jobs will disappear in the next two decades to the analysis of Oxford University scholars who conclude that nearly half of current jobs will vanish.

Regardless of the pace of technological innovation and economic disruptions, unemployment rises during economic downturns. Growth rates, inflation, and the availability of capital create and destroy jobs and companies. The Great Recession, which wiped out trillions of dollars of economic wealth and tossed millions of workers out of their jobs, was brought about by irresponsible lending practices and financial schemes. The global trade, economic competition, mergers, and acquisitions that eliminate jobs are not driven by technology. Hence, the decline of the American-based steel industry was due in large measure to the failure of American companies to invest in new production methods. U.S. textile manufacturing plummeted because companies moved production to countries where workers are paid a small fraction of the wages earned by U.S. workers. It’s not technological innovation that typically motivates most mergers and acquisitions in telecommunications, banking, and health care, but rather the desire to maximize profits and grow market shares. Simple business innovations, such as Walmart’s decision to move checkout counters to the front of the store, eliminated legions of sale clerks long before direct delivery by Amazon entered the scene.

We do not know whether the current bundle of technological changes, including artificial intelligence, semi-autonomous vehicles, and the Internet of things will eliminate more net jobs than previous innovations. However, we know that workers with limited formal education or skills who are not retrained for new opportunities are at the greatest risk of losing jobs and remaining unemployed. Many technology-vulnerable jobs require limited independent judgment where workers rely more upon their strength and stamina rather than their intellect. We also know that enduring, negative impacts of economic disruptions, regardless of the cause, will be shouldered by older workers with long tenure in a firm or occupation. These individuals will suffer a double penalty. They will be stigmatized by employers for being unemployed and discriminated against because of their age.

U.S. policy makers have failed to respond to the disruptive impact of technological innovation on workers who must transition from job to job or from career to career. Congress set aside modest funds for workers dislocated by automation in the Manpower Demonstration and Training Act of 1962, but there have been no sustained, large-scale programs since. The United States consistently spends far less than other OECD countries on labor force readjustment programs. The lion’s share of government workforce program funding is distributed through an Unemployment Insurance system that provides temporary and partial income replacement rather than skill development, job coaching, and placement. In fiscal year 2016, state-administered Unemployment Insurance cash transfers amounted to nearly $35 billion, whereas combined federal spending on various dislocated worker retraining programs was just over $2 billion.

The federal Workforce Innovation and Opportunity programs and Wagner-Peyser employment service are chronically underfunded in relation to demand. As such, administrators concentrate their efforts on matching unemployed workers with job openings and short-term training programs. Also, as such, better-prepared job applicants are more likely to be served than the chronically, long-term unemployed job seekers. Post-secondary financial aid programs, such as Pell Grants, are principally designed to aid full-time students pursuing Associate’s or Bachelor’s degrees. Laid-off, mature workers who need to update their skills or obtain certificates through short-term training courses receive limited federally funded benefits.

Given persistent and widespread economic disruptions and worker dislocation, several significant policy and program changes must be instituted lest our nation repeat the mistakes of the past and leave millions of workers permanently unemployed or underemployed.

Reform Unemployment Insurance: Unemployed workers (whether eligible for Unemployment Insurance or not) and especially mature workers should be promptly connected to job search services as well as on-the job, or web-based, classroom training that prepares them for “in demand” jobs rather than waiting until after Unemployment Insurance benefits run out.

Increase Education and Training Opportunities for Prime Age Workers: Federal and state governments should allocate resources through vouchers or loans, or tax credits to employers and individuals in order to subsidize upskilling or reskilling so laid-off workers can acquire industry-recognized, portable credentials.

Provide Tax Incentives for Lifelong Learning: Individuals should be offered tax incentives to establish lifelong learning accounts that help them build up resources to be used when they need to update their skills or acquire new ones. Moreover, penalties should be eliminated for the early withdrawal of 401(k) funds when laid-off workers need to pay for education and training programs or support themselves during training.

Develop and Adopt Innovative Software Strategies to Aid Job Seekers: Robust job-matching software platforms and career coaching to help job seekers navigate the labor market and determine the credentials they need to gain employment should be deployed.

Close the Digital Divide: Access to broadband Internet must be expanded to communities and individuals via “lifeline” pricing as was common prior to the development of the Internet. Funding also should be provided to increase digital literacy programs for all Americans.

The steps outlined above will not prevent the inevitable upheavals brought about by rapid changes in the labor market caused by new technologies or other factors. However, these long-overdue measures will help job seekers transition from one job to the next or even from one career to another. In a complex, rapidly changing economy, many American workers will lose their jobs. We owe it to them — and to the health of our communities and society — to help them reconnect to new job opportunities as quickly as possible. No one who wants and needs to work should be left behind.

 

Topic: 
U.S. Labor Market & Industry
Product Type: 
Research Publications & Reports
Keywords: 
technology
worker dislocation