Hal Varian (Google Chief Economist) – Bots & Tots (Sep 2018)
Chapters
00:00:06 Bots and Cots: The Impact of Automation and Demographics on the Labor Market
Theoretical Model: Varian presents a theoretical model to examine the shift in demand and supply of human labor caused by automation and demographic changes.
Technological Advancements: Automation and robotic technologies are rapidly advancing, creating concerns about job displacement. Historical examples of similar concerns date back to the early 1800s.
Labor Shortage: In recent years, labor shortages have been observed, attributed to macroeconomic factors as well as long-term demographic effects.
Economic Resilience: The economy has demonstrated the ability to absorb significant shocks to the labor market.
Historical Examples: The baby boom generation’s entry into the labor market in the 1960s and 1970s was a major shock that the economy absorbed. The increased participation of women in the labor market was another significant shift that occurred simultaneously.
Jobs vs. Tasks: Focusing on tasks rather than entire jobs provides more useful insights into the labor market.
Automation Elimination: Only one detailed occupation, elevator operators, has been eliminated by automation since the 1950s.
Tasks Performed by Elevator Operators: Elevator operators performed various tasks, including safety monitoring, security monitoring, greeting, and providing directions and services.
Complexity of Jobs: Most jobs are more complex than commonly perceived, with groundskeepers performing a wide range of duties.
Automating Tasks: Automating all tasks within a job is necessary to replace the job with automation.
Ideal Environment for Automation: Standardized environments with repetitive tasks are ideal for automation, enabling robots to replace repetitive tasks in assembly line environments.
Autonomous Cars: Autonomous cars would be more prevalent if not for the complexity of dealing with other drivers and pedestrians.
Autonomous Tractors: Autonomous tractors are already in use because they operate in the same plot of land with a limited set of tasks, making it easier to program and replace human workers.
Robotic Housekeepers: A robotic housekeeper would require a long time to develop due to the complexity and variety of tasks involved in housekeeping.
Ideal Hotel Room for Robotic Hotel Keeper: A robotic hotel keeper would be more effective in a simplified hotel room, such as one with an air mattress on the floor.
Automated Orchards: Orchards have been automated using techniques such as espaliering trees to make apple picking easier for humans, which in turn enabled machine automation of the picking process.
00:09:45 Machines and Automation: The Limits of Human Replication
Technology and Human Labor: Hal Varian challenges the notion that humanoid robots will completely replace human labor, as depicted in science fiction movies. He argues that machines like washing machines, dryers, and dishwashers do not replicate the exact tasks performed by humans but rather achieve the same objectives through different means.
The Dishwasher Example: Varian presents an example of Larry Page’s desire for a robot to unload the dishwasher and place dishes in the cupboard. Varian suggests that creating a cupboard that automatically washes dishes is a more feasible task, as such cupboards already exist in the form of dishwashers.
Henry Ford and Interchangeable Parts: Varian discusses Henry Ford’s entry on mass production in the 1929 Encyclopedia Britannica, where Ford emphasized the absence of fitters in mass production. Fitters were individuals who filed down parts to ensure they fit during assembly, a practice that was incompatible with the speed of assembly lines. The push for interchangeable parts began in the 19th century and was viewed as a utopian ideal, as it was believed to be impossible to achieve truly interchangeable parts.
Automation at Tesla: Varian mentions Elon Musk’s statement that excessive automation at Tesla was a mistake, acknowledging that humans are underrated in their capabilities.
00:12:16 Assessing the Future Impact of Automation on Employment
Trust and Heterogeneity: Elon Musk highlights that humans are still important due to certain tasks that require diverse and complex skills that machines struggle to handle. In heterogeneous environments, today’s robots often find it challenging to adapt and perform effectively.
Job Displacement Estimates: Estimates of job loss due to automation vary widely, with no clear consensus. A range of estimates from worldwide and U.S. sources is presented.
Top Occupations and Automatability: The 10 largest occupations in the U.S. are examined, including retail salesperson, cashier, food prep, and registered nurse. These occupations comprise 21 percent of employment, and most are service jobs. The automatability of these jobs is considered, with tasks within some occupations potentially being automated.
Trust and Automation: Trust plays a significant role in the interaction between humans and automated systems. Humans’ ability to discern truthfulness and provide a trustworthy experience remains a crucial element in many service jobs.
00:14:29 Exploring Work and Education Trends in the Digital Age
Work Hours: There is no fixed standard for workweek duration. It’s variable and has changed over time (e.g., from 70 hours a century ago). Countries have varying workweek lengths, with the Netherlands standing out at 29 hours due to policies encouraging part-time work. The Netherlands’ approach encourages one partner to work full-time while the other works part-time.
More Jobs, Less Work: There’s potential for a shorter workweek without sacrificing productivity.
Education and Training: YouTube hosts numerous how-to videos, including many related to employable skills like welding, demonstrating a vast educational resource. Online education platforms, like Khan Academy, offer easily accessible learning opportunities.
Cognitive Assistance: Advances in technology, such as smartphones and computers, provide real-time assistance, making cognitive skills like spelling and change-making less essential for certain jobs.
00:17:37 Demographic Shifts and Labor Force Implications
Changing Labor Force Dynamics: Uber and taxi drivers exemplify the impact of technology on employment. While traditional occupations like taxi driving require specialized knowledge, technology simplifies job accessibility by automating tasks.
Labor Force Growth and Demographics: The decade of the 2020s has the lowest labor force growth since records began due to retiring baby boomers and saturated female participation. The U.S. labor force growth is half that of the population growth, indicating a shortage of workers to meet consumer demand. Without immigration, the U.S. and Canada would face a shrinking labor force.
Aging Population Effects: Participation rates are declining due to aging demographics, leading to a tight labor market for the next 15-25 years. Countries like Korea, Japan, China, Spain, Italy, and Germany face a rapidly aging population, increasing the dependency ratio.
Automation and Productivity: Automation (increasing productivity) is necessary to counter the effects of aging demographics on economic growth. The U.S. birth rate is at an all-time low, contributing to the aging population. Economic factors like childcare costs and economic concerns influence the decision to have children.
Impact of Demographics on Robotics: Countries with severe demographic problems, like South Korea, Japan, Germany, and Italy, have the highest robot penetration. China’s investment in robotics is driven by the need to increase productivity in the face of a shrinking labor force, caused by the one-child policy.
Automation vs. Demographics: In a simple economic model, the demographic effect on the labor force is 50% larger than the impact of automation. Worker shortages and rising wages are expected due to the supply-demand imbalance caused by demographics.
Healthcare Costs and Aging: As the population ages, healthcare costs increase, adding to the resource burden of demographic changes.
00:24:21 Petra Moser: Economic Impact of Demographic Shifts: Mechanization and Immigration
Changing Dependency Ratios: Speaker compares dependency ratios across countries, including US, Canada, Mexico, China, India, France, and Germany. Europe shows a particularly concerning trend with an aging population.
Hometown Case Study: Speaker’s hometown in Germany has seen a significant population decline and aging population. Traditional industries, such as agriculture and gemstone cutting, have been replaced by mechanization and globalized production.
Mechanization and Skill Displacement: Mechanization has eliminated highly skilled jobs in gemstone cutting, leading to job losses and migration from rural areas. Training programs in developing countries, such as Afghanistan, now teach simplified gemstone cutting techniques using machines.
Immigration and Melting Pot: The speaker’s hometown has experienced a significant influx of immigrants, primarily from foreign countries. These immigrants fill essential jobs left vacant by the departure of younger locals.
Impact of Natural Disasters: A recent flood in the speaker’s hometown has exacerbated labor shortages. Skilled workers are in high demand, but there is a lack of availability, leading to challenges in providing basic services like heating and running water.
Conclusion: The speaker emphasizes the urgent need to address demographic changes and the impact of technology on rural communities. These changes have resulted in labor shortages, a decline in traditional industries, and an influx of immigrants filling essential roles. The speaker highlights the importance of finding solutions to support aging populations and ensure access to basic services in rural regions.
00:29:49 Petra Moser: Economic History and Technological Change
YouTube Videos: The speaker expresses skepticism about YouTube videos, particularly those related to DIY projects, as they can be misleading and lead to unsuccessful outcomes.
Economic History and Mechanization: The speaker emphasizes that economic history can shed light on the relationship between demographics and technology. In the United States, a severe labor shortage during the 19th century spurred the development of mechanization as a solution.
Bracero Program and Mechanization: The Bracero Program brought unskilled workers from Mexico to the United States, creating a labor surplus. When the program ended, states that were highly dependent on the program did not experience a wage increase as expected. Research suggests that the lack of wage increase may be due to increased mechanization in response to the labor shortage caused by the program’s termination.
Empirical Evidence: The speaker highlights the need for robust empirical evidence to disentangle the complex relationship between trade, migration, and technological change. Economic history offers a valuable framework for conducting such research, providing insights into the historical patterns and dynamics of these factors.
Abstract
The Future of Work: Automation, Demographics, and the Shifting Landscape of Labor
Abstract
This article explores the dynamic interplay between automation, demographics, and labor markets. Utilizing an inverted pyramid structure, it highlights the most critical points at the outset: the impact of automation and demographic shifts on labor demand and supply, the task-centric view of the labor market, and the varying implications of automating tasks across different sectors. Additionally, it discusses the influence of demographics on labor force growth and the potential of automation in mitigating demographic challenges. The article concludes by examining the broader social and economic implications of these trends.
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Introduction
In an ever-evolving world, the nature of work is undergoing profound transformations, driven by two primary forces: automation and demographic changes. These forces are reshaping the labor market, altering job roles, and redefining the balance between human and machine labor. This article delves into the multifaceted relationship between these elements, offering insights into the future of work.
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Automation and the Labor Market
Automation, led by advancements in robotics and artificial intelligence, has significantly impacted the labor market. Technological advancements in automation and robotics are rapidly evolving, creating apprehensions about job displacement, similar to concerns raised in the early 1800s. Hal Varian, a prominent economist, emphasizes that while automation may reduce the demand for human labor, it is crucial to consider its interaction with demographic trends. The automation of tasks, rather than entire jobs, is a key theme. For instance, while certain roles like elevator operators have persisted despite automation, the tasks they perform have evolved. The effectiveness of robots is most pronounced in standardized environments with repetitive tasks, as seen in industries like automobile manufacturing and agriculture. However, challenges arise in unpredictable or complex environments, such as autonomous vehicles navigating human behavior or robotic housekeepers handling diverse housekeeping tasks.
Elon Musk emphasizes the continued importance of humans in jobs that require diverse and complex skills, which machines currently struggle with. In heterogeneous environments, today’s robots often encounter difficulties adapting and performing effectively.
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Demographics and Labor Supply
Demographic shifts are equally critical in shaping the labor market. Demography, with its ability to forecast societal changes over decades, indicates significant transformations in labor supply. The United States, among other countries, is experiencing a slowdown in labor force growth due to aging populations and stagnating participation rates, particularly among women. These demographic changes have direct implications for the labor market, including potential worker shortages and increased dependence ratios. Automation is seen as a possible countermeasure to these demographic challenges, especially in countries with severe aging populations and shrinking labor forces.
The U.S. is currently experiencing its lowest labor force growth since records began, largely due to retiring baby boomers and saturated female participation. The labor force growth rate is half that of the population growth, indicating a potential shortage of workers to meet consumer demand. Without immigration, countries like the U.S. and Canada would face a shrinking labor force.
Comments by Petra Moser:
Changing Dependency Ratios:
Speaker compares dependency ratios across countries, including US, Canada, Mexico, China, India, France, and Germany. Europe shows a particularly concerning trend with an aging population.
Hometown Case Study:
Speaker’s hometown in Germany has seen a significant population decline and aging population. Traditional industries, such as agriculture and gemstone cutting, have been replaced by mechanization and globalized production.
Mechanization and Skill Displacement:
Mechanization has eliminated highly skilled jobs in gemstone cutting, leading to job losses and migration from rural areas.
* Training programs in developing countries, such as Afghanistan, now teach simplified gemstone cutting techniques using machines.
Immigration and Melting Pot:
The speaker’s hometown has experienced a significant influx of immigrants, primarily from foreign countries. These immigrants fill essential jobs left vacant by the departure of younger locals.
Impact of Natural Disasters:
A recent flood in the speaker’s hometown has exacerbated labor shortages. Skilled workers are in high demand, but there is a lack of availability, leading to challenges in providing basic services like heating and running water.
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The Interplay of Automation and Demographics
The interaction between automation and demographic changes is complex. While automation can address certain gaps created by demographic shifts, it also introduces new challenges. For instance, the potential full automation of roles like cashiers due to electronic payment systems highlights how technology can supplant certain job functions. However, demographic trends suggest a more significant impact on labor supply than automation on labor demand. This interplay has implications for the future, with potential worker shortages and the need for innovative solutions to address the challenges posed by an aging population. Labor shortages have been observed in recent years, attributed to both macroeconomic factors and long-term demographic effects. However, the economy has demonstrated resilience in absorbing significant shocks to the labor market, as seen with the entry of the baby boom generation into the labor market in the 1960s and 1970s, as well as the increased participation of women in the workforce during the same period.
Estimates of job loss due to automation vary widely, with no clear consensus. However, the 10 largest occupations in the U.S., which comprise 21 percent of employment and include service jobs like retail salesperson, cashier, food prep, and registered nurse, have varying levels of automatability. Some tasks within these occupations may be automated, while others require human interaction and judgment.
Social and Economic Implications
The convergence of these trends has profound social and economic implications. The changing nature of jobs and tasks, the potential for job losses in various sectors, and the impact on service roles are crucial considerations. Moreover, the role of technology in providing cognitive assistance and altering skill requirements, as seen with the widespread use of how-to videos and educational content, is reshaping the workforce. Economic factors influencing birth rates and labor force participation also play a pivotal role in determining the future of labor markets.
Trust plays a significant role in the interaction between humans and automated systems. Humans’ ability to discern truthfulness and provide a trustworthy experience remains a crucial element in many service jobs.
Economic History and Technological Change:
* The speaker expresses skepticism about YouTube videos, particularly those related to DIY projects, as they can be misleading and lead to unsuccessful outcomes.
* Economic history can shed light on the relationship between demographics and technology. In the United States, a severe labor shortage during the 19th century spurred the development of mechanization as a solution.
* The Bracero Program brought unskilled workers from Mexico to the United States, creating a labor surplus. When the program ended, states that were highly dependent on the program did not experience a wage increase as expected. Research suggests that the lack of wage increase may be due to increased mechanization in response to the labor shortage caused by the program’s termination.
* Empirical evidence is needed to disentangle the complex relationship between trade, migration, and technological change. Economic history offers a valuable framework for conducting such research, providing insights into the historical patterns and dynamics of these factors.
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Conclusion
In conclusion, the interplay between automation, demographics, and labor markets is reshaping the future of work in significant ways. The impact of these forces is not only limited to the labor market but also extends to broader societal and economic fields. Understanding this dynamic is crucial for policymakers, businesses, and individuals as they navigate the challenges and opportunities of the changing landscape of work. The need for continuous research and innovative solutions is paramount to address these ongoing transformations effectively.
Automation and demographic shifts, such as aging populations, are transforming the labor market, leading to profound implications for employment and the broader economy. Education and training are crucial for adapting to the changing job landscape, as technology reshapes industries and occupations....
Automation and demographic shifts are reshaping the labor market, requiring focus on education, training, and technological solutions to address challenges and ensure a prosperous future of work. Demographic changes and automation are significantly altering the labor market, emphasizing the importance of education, training, and technological advancements in navigating these dynamics....
Automation, aging populations, and declining birth rates are reshaping the labor market, leading to shifts in job roles, labor demand, and supply. Preparing the workforce through education, training, and technology adoption is crucial to navigate the evolving labor landscape....
Technological advancements in robotics and automation, coupled with demographic shifts, are reshaping the global labor market, leading to job transformations and economic implications. These changes necessitate adaptation in education, job training, and economic policy to address challenges and seize opportunities....
Technological advancements, particularly in automation, are reshaping the labor market, leading to shifts in job nature rather than widespread job displacement. Demographic trends, such as aging populations, influence the labor supply, necessitating increased productivity through automation....
Economic complexities challenge traditional policies, requiring innovative solutions and structural reforms to address slow recovery, debt, inequality, and technological impacts. Navigating these complexities requires prudent economic management, balancing immediate needs with long-term sustainability across interconnected global economies....
Singapore's economic growth is facing challenges due to a maturing economy and slowing productivity, while it also grapples with an aging population and a low fertility rate. To secure a prosperous and cohesive future, Singapore must prioritize productivity and skills development, address demographic shifts, and foster a strong sense of...