Throughout this past election, there was a lot of talk about the economically struggling Americans who have been left behind in the changing economy. The United States used to be the industrial powerhouse of the world in the post-World War II era. Over the past few decades, there is a different story. The U.S. has been in a period of deindustrialization. Manufacturing has moved around the world as globalization has taken over as a dominant force in the global economy. The U.S. has shifted from a manufacturing-based economy to a service-based economy. These jobs have left Americans economically depressed for years, creating a desire for change. Two people came forward promising radical change to bring back jobs — Donald Trump and Bernie Sanders. Both talked about globalization hurting the American worker and they promised to bring jobs back. However, the sad truth is, the jobs will never be back.
That sounds like a bold claim — U.S. manufacturing will never return and be the way it was. There are several reasons why. Companies go overseas to cut costs and increase profits. People act as if simply making it more expensive to do international business, through tariffs or closing international tax loopholes, will make companies bring back jobs. This thinking may have worked in the past, but we live in a new era. The computing revolution has changed the game.
Automation has played a huge part in the economy. Robotics has made it so companies can produce more products, have higher quality control and reduce labor costs. In auto manufacturing, the assembly line has changed from a line of workers putting a car together to a line of robots putting cars together. The economic incentives are clear. According to a study by The Boston Consulting Group, a robotic welder costs $133,000. This breaks down to roughly $8 an hour for operational costs.
Robotics will eventually be low enough in cost to outbid cheap international labor. At that point, companies have no reason to not automate the manufacturing process. These costs translate across industries. It won’t be just manufacturing. You can see these changes happening now.
The service industry is on a path to automation. Fast food restaurants are starting discussion about creating fully-automated restaurants. McDonald’s has started putting in self-serving kiosks. Stores are putting in self-checkouts. A lot of people argue that things like minimum wage are leading to these innovations. The problem is, no matter what the minimum wage is or will become, at some point, automation will be the cheaper option.
Transportation is also on the road to automation. Self-driving cars will put millions out of work. Companies like Uber are already releasing self-driving taxi services. Mercedes has released a concept of a driverless semi-truck. Millions of people work in this sector, even though automation will render them jobless. It makes sense though. Self-driving cars are safer, travel longer distances without breaks and do not require labor costs. Why wouldn’t companies automate?
Every industry will face these changes. People will make the case that professional jobs, like doctors or lawyers, that require high levels of education are safe. These are not safe. IBM’s Watson, the supercomputer that rose to prominence by winning “Jeopardy,” has a new job. His new job is to become the best doctor in the world. He has access to millions of pages of medical research. He knows every possible reaction of any drug in production. And he is already beating doctors. This past August, Watson, successfully diagnosed and suggested an effective treatment for a woman’s rare form of leukemia in ten minutes. To put this into perspective, this woman’s case had doctors stumped for months. Researchers at the University of Tokyo decided to put her genetic information into Watson’s programming, shaming the human doctors.
Automation is a real force that is changing the world more than many of us can understand. Our elected leaders need to start learning and understanding this issue so we can prepare for the eventual changes that will come in the next few decades. There is a way to embrace the automated economy and maintaining a high standard of living — basic income. To better prepare ourselves, we need to come to terms with this change.