Automation & Workforce Integration: An Anticipated and Overlooked Arrival

Written by Alejandro Sarmiento

In 2019 alone, 9,100 retail stores shut their doors forever, easily surpassing the previous year’s mark of 5,864 store closures and soaring above the former record of 7,000 stores set during the 2008 financial crisis. The retail apocalypse is in full swing, as retail, brick-and-mortar, and family-run businesses alike are in decline. Once bustling and vibrant shopping malls likewise sit destitute and abandoned; a relic of times past. The retail apocalypse is only one of the ways that automation and technological advancement will alter the fundamental nature of our markets and the composition of the workforce. This trend can be explained by a consumer migration towards e-commerce from local brick-and-mortar stores and mom and pop shops. 

Although the brunt force of technological advancement has fallen upon physical store locations as a result of growing e-commerce consumption, automation will further hamper labor markets as larger-scale, discontinuous innovations are integrated. Retail is not the only target of automation. Industries that require low-skilled labor –  transportation, food service, and production – will be privy to its effects as well. The McKinsey Global Institute found that automation would cost 800 million global workers their jobs by 2030, and this figure is expected to sit somewhere between 39 and 73 million jobs eliminated in the United States alone by this date. Much of the force of automation will be felt by lower skilled workers who might struggle to find other employment opportunities after their jobs have been eliminated. According to a report by PwC, a staggering 44% of workers with low education will find their jobs at risk by 2030, while 30% of all jobs will be at potential risk. Others are more optimistic; a study by the Manpower Group found that 76% of employers plan to upskill their businesses by 2020. According to the same study, production and manufacturing employers will observe the greatest addition of wanted skills and reduction of unwanted skills, lending itself to a net headcount increase of 7%, and positively offsetting jobs displaced. With 30% of current jobs at risk, employers seeking to up-skill businesses will exacerbate job loss as replacement jobs will require more training and costly education. This could spell unwanted uncertainty for the US economy, which has recently enjoyed below-average unemployment.

Automation has not often been discussed or debated in earnest, which has allowed it to creep upon markets unencumbered. Tesla and SpaceX CEO Elon Musk famously remarked that regulatory committees had failed to get ahead of automation and would thus suffer harsher consequences than necessary. However, Democratic presidential hopeful Andrew Yang has made automation and its impact and integration on the workforce a centerpiece of the election cycle. The issue underpins Yang’s flagship proposal, known as the Freedom Dividend. The Freedom Dividend would ensure the creation of a Universal Basic Income to which all Americans are entitled, at the price of $1,000/month per person. Yang proposes to fund the Freedom Dividend by combining some welfare programs and instituting a 10% Value Added Tax (VAT). According  to campaign spokesman S.Y. Lee, “Anyone would be free to keep their current benefits and the Freedom Dividend stacks on top of SSI, Medicare/Medicaid, as well as housing supplements.” According to Yang’s website, current welfare beneficiaries would be given the choice between retaining current benefits and receiving the freedom dividend. Yang’s fundamental philosophy is such that automation will allow the economy to save money and become more efficient, and therefore the people, the constituents, should be directly aided too, especially those for whom automation comes at a sharp cost. Yang’s proposal harkens back to the average American; the truck driver, the fast-food worker, and the salesperson, who rely on low-skilled labor opportunities to support their families. In the absence of such opportunities, the US labor market will struggle to adapt to a paradigm shift for which it is deeply and disastrously unprepared.