Amazon Go Doesn't Have To Be The End Of The American Dream

Posted on December 20, 2016

Two weeks ago today, online retailer Amazon announced Amazon Go, a brick-and-mortar
grocery store concept without checkout lines. Shoppers simply scan their smartphones when
they enter the store, and the company’s detection technology tracks items that have been
removed from the shelves, charging a customer’s account when they leave.

A pedestrian passes in front of the new Amazon Go grocery store in Seattle, Washington. Photographer: David Ryder/Bloomberg

It’s the most recent signal amid the increasing noise about artificial intelligence and its impact on work. Other announcements include:

• Fast food chains such as McDonald’s, Hardee’s, and Carl’s Jr. disclosing their plans to eliminate cashiers in their stores

• Wal-Mart trying out drones in its warehouses to check its inventory

• experimenting with drone delivery to consumers

• Alphabet’s subsidiary Waymo providing a glimpse of its self-driving minivans

• Billionaire Vinod Khosla asserting that 80% of jobs in an IT department could be replaced by AI-type systems

• IBM’s Watson recommending treatment plans that matched actual suggestions from oncologists in 90% of cases

One thing is clear: the automation onslaught is already underway.

An Argument Against The Hysteria

Technology columnist Christopher Mims argued last week that fears over artificial intelligence are overblown. “A long trail of empirical evidence shows that the increased productivity brought about by automation and invention ultimately leads to more wealth, cheaper goods, increased consumer spending power and ultimately, more jobs,” he writes in the Wall Street Journal.

Last year The Hamilton Project, an economic policy initiative at the Brookings Institution, published a paper entitled, “The Future of Work in the Machine Age,” in which the authors put a finer point on Mims’ argument:

There is a consensus that, historically, technological progress has created winners and losers, but over the long run, new technology has tended to create more jobs than it has destroyed, while increasing society’s productivity and wealth. For example, between 1900 and 2000, the proportion of the U.S. workforce in agriculture fell from 41 percent to 2 percent, yet agricultural output rose dramatically and there was no long-term increase in the unemployment rate, even as a greater proportion of the population participated in the labor force (Autor 2014b). The children and grandchildren of the workers who might have tilled farmland in 1900 are now computer programmers, radiology technicians, and pilots—jobs created by technologies that were unknown in 1900. And nearly everyone is economically better off.

The coming technological developments will transform the economy in groundbreaking, unimaginable ways, at an arguably unprecedented speed and magnitude. Optimists maintain that robotics and machine learning are likely to substitute specific tasks that free workers to focus on new ones in the same occupation. But pure substitution will happen too, and the World Economic Forum projects a net loss of five million jobs between 2015-2020 despite the cushion of upskilling, redeployment, and productivity enhancement.

Simply put, this economic revolution may not unfold like prior ones.

Even if the results are, over the long run, good for everyone, something must be done about worker displacement in the interim.

We need a plan for transitioning people from one job to another.

Time For A New Educational Movement

Mims writes that when farm automation threatened the U.S. agricultural economy, the country adapted to the changing circumstances:

In response, they created the “high school movement,” which required everyone to stay in school until age 16. It was hugely expensive, both because of the new schools and teachers, but also because these young people could no longer work on the farm. But it better prepared workers for 20th century factory jobs and fueled the explosion in college attendance after World War II.”

Broad-based education was key to reducing the dislocation from technological innovation.

Is it possible, then, to spark a new educational movement to address the unique challenges of the fourth industrial revolution?

Despite high unemployment during the Obama administration, many jobs have remained open for significant periods of time. In 2011, with the U.S. unemployment rate at 9%, a survey of 2,000 U.S. companies found that 600 had positions open for more than six months that they could not fill. A skills gap has persistently plagued the economy, and this phenomenon will worsen in the wake of further disruption.

“More than half of all jobs (54%) in the US today are middle-skill jobs that require more than a high school diploma, but not a four-year degree,” the National Skills Coalition reports. “Yet only 44% of workers are trained to the middle-skill level.”

The supply of skilled workers has not been keeping up with demand. In April, U.S. Chamber of Commerce President and CEO Thomas J. Donohue penned an op-ed in which he acknowledged the role employers must play in bridging this gap and filling the 5.6 million jobs. The fields most affected by the gap are advanced manufacturing, health care, engineering, and computer science.

Education, in all its guises, is not a panacea. Some people won’t be suited for these future jobs, no matter the amount of education they receive. We need to be honest with ourselves that structural unemployment and sustained under-employment are possible outcomes.

Nevertheless, the choices we make today about how to educate the population, including workers whose skills are becoming obsolete, will determine the degree to which our country flourishes and prosperity is shared in the new economy.

The Economic Resiliency Of College Towns

Recent history shows that education can offset losses in a dynamic economy. The trend of offshoring to China spurred the manufacturing downturn of the 1990s, decimating blue collar jobs. Yet some areas have been surprisingly resilient, and many are home to a major university, the Wall Street Journal reports.

Auburn University, in addition to providing employment and training to the local workforce, has attracted new businesses. In 2014 GE selected its new Auburn plant to be the first to use 3-D printing to make products at scale, believing the university could supply an educated workforce and collaborate on research projects.

In another example, after Mattel moved its production from Kentucky to Mexico in 2002, the affected county’s unemployment rate reached 9.3%. Soon thereafter, Pella, a custom window maker, moved into the empty plant and cozied up to nearby Murray State, counting on the university for graduates, influence over public schools, and help with software and manufacturing issues. Since then the county’s unemployment rate has dropped to below 4%.

College towns are remarkably responsive to industry ebbs and flows, but it’s simplistic to say that the presence of a university is sufficient to produce economic revival. Merced, CA and Binghamton, NY — both home to universities — are still struggling to recover from the downturn.

And automation is expected to cut deeper into the economy than globalization did.