A Future That Works: Automation, Employment and Productivity

Part 2 and 4

Philline Lugue
BM 126 - THX
October 29, 2020

Part 2: The Technical Potential For Automation

​Background
- Machines are replacing human labor in workplaces from factories, hospitals, fast food
chains, and so on.
- Example: University of Tokyo, IBM Watson made headlines in 2016 for diagnosing in a
60-year old woman a rare form of leukemia that had eluded her doctors for months
- Some studies estimate that close to 50 percent of US and European jobs could be
automated
- We consider work activities a more relevant and useful basis for the analysis of
occupations
- Every occupation consists a number of constituent activities that may have a different
technical potential for automation
- Example: Salesperson vs a Machine - when choosing a lipstick
Research and Data
- Gathered data from the US Bureau of Labor Statistics, and O*Net (Occupational
Information Network) ​a free online ​database​ that contains hundreds of occupational
definitions to help students, job seekers, businesses, and workforce development
professionals to understand today's world of work in the United States.
- US Economy and extended to 45 countries
- The proportion of occupations that can be fully automated by adapting currently
demonstrated technology is very small. (less than 5 percent in US)
- Automation will affect almost all occupations - examples: factory workers, clerks, dental
lab technicians, fashion designers, landscape gardeners

- In the US, 46 percent of time spent on work activities across occupations is technically
automatable based on currently demonstrated technologies
- On a global scale, the adaptation of currently demonstrated automation technologies
could affect 49 percent of working hours in the global economy.
- Consists of 1.1 Billion workers and $11.9 Trillion in wages
- The potential automation ranges from 40-55% with just four countries-- China, India,
Japan, and the US-- accounting for just over the half the total wages and workers
- 54 Million full-time workers and more than $1.9 trillion in wages are technically
automatable in the continent’s five largest economies alone- France, Germany, Italy,
Spain, and United Kingdom
Factors to Consider Upon Estimating The Technical Potential for Workplace Automation
1. Technical feasibility is not the same as the actual implementation of automation
2. Cost developing and deploying both hardware and software solutions for
automation
3. Cost of labor and related supply and demand dynamics
4. Benefits beyond labor substitution
5. Regulatory and Social Acceptance Issues (Ex: robot as a nurse)

A framework of 18 capabilities to understand the performance requirements of work

activities
5 areas:
- Sensory perception
- Cognitive capabilities
- Natural language
processing
- Social and emotional
capabilities
- Physical capabilities

Part 4: Factors Affecting the Pace and Extent of Automation

 1. Technical feasibility ​-Technology has been fundamentally shaping the economy in the
process. Technological advances require basic scientific research but in order for these
advances to be adopted, they require engineering solutions or applied research.
Example:
- Orville and Wilbur Wright pioneered flying an aircraft in 1903 but it took 11 more
years before the first commercial flight across Tampa Bay, in Florida took place.
- German engineers Nikolaus Otto, Gottlieb Daimler, and Wilhelm Maybach had a
similar lag patenting compressed charge for a four-cycle engine in the 1870s and
production of automobiles on a commercial scale were 15-20 years later
Case in point: ​solutions have to be engineered for specific use cases. Complex engineered
systems such as a powerplant and preventive healthcare for a congestive heart being the same
problems, create the software and models to prevent failure into these two systems require
distinct and considerable engineering efforts.
Technological advances today in automation are already in areas such as physical hardware,
robotics, artificial intelligences and software. The innovation we are seeing now are self-driving
cars and digital personal assistants such as Apple’s Siri, Amazon’s Alexa and Google Assistant
are still in development--and often imperfect.

2. Cost of developing and deploying both hardware and software solutions for
automation
- Developing and engineering automation technologies takes capital.
- Some even require substantial physical infrastructure such as tooling and
laboratories. Even virtual solutions that are based on software require real
investments in engineers to create solutions
Example:
- Amazon, Alphabet, Intel and Microsoft spend more than $10B apiece on
annual research and development.
 - Google acquired DeepMind Technologies in 2014 at an estimated price of
$500M, with 75 DeepMind employes, the cost was nearly $7M per
employee
- Acquires of cutting-edge AI startups cost around $5M - $10M
Deploying automation technologies incurs cost. Industrial robots from tens of thousands to
millions of dollars. Replacing an ordinary truck with a self-driving truck requires expenditure of
capital.
Deployment costs are lower for software based solutions especially when delivered remotely
through the cloud. But the cloud has a real physical instantiation as data centers and networks
in turn represent costs. Implementation services and enterprise software all in all cost a lot and
affect the business.
3. Labor Market dynamics
Labor supply is determined by demographics. It varies in terms of skills, which are affected by
both intrinsic talents of individual human beings, as well the training and education they
receive. Economists who study the impact of technological innovation on the workforce have
noted varying effects on workers at different levels depending on the time period
- 19th century - technological changes raised the productivity of lower-skill workers and
created new opportunities for them, replacing higher skilled artisans. This unskill biased
technological changes reduced the value of some high-skill workers even as it boosted
lower skill ones.
- Information technology and the internet, the productivity of higher skill workers
especially those with problem-solving skills increased. The phenomenon of skill-biased
technical change resulted to median income households receiving a lower share of total
wage share of GDP, in part because of demand for less-skilled workers has dropped.
- Analysis suggests that all workers at all skill levels have the potential to be affected at
least partially by automation based on currently demonstrated technologies.
- Demand is not static. New type of work activities are created even as new technologies
come on the market
- Example: Bank Tellers and ATMs. ​ATMs increased the demand for tellers for reasons:
1. ATMs reduced operating costs which resulted for banks to open more branches
2. ATMs cannot develop relationship with clients, human interaction became more of their
job than cash handling
- Relative costs of labor will affect the pace and extent of adoption. If workers are in
abundant supply and significantly less expensive than automation, then this is a decisive
argument against it.
Example: Food service - has high automation potential but wage rates for this activity
are among the lowest in the US
4. Economic benefits ​- Potential economic benefits from automation are not limited to
labor cost reductions. Performance gains include increase profit, increased throughput
and productivity, improved safety, and higher quality
Indirect benefits include wage growth, and automation’s potential to create business
and economic incentives that drive corporate decision making and unleash
entrepreneurial strategy.
5. Regulatory and Social Acceptance​ - Automation faces significant regulatory and social
barriers to implementation such as:
- Safety and liability issues
- AI used in military robots our autonomous vehicles may have to make
judgements to hard people creating moral controversy
- Technology makers can be sued if robots malfunction
- Privacy, especially in areas where personal data is highly sensitive such as health
care
- Social perspective: if many workers would lose their jobs because of automation,
there would be social and political pressures against automation. Humans may
not want to adopt new technologies due to fears of job security
- Personal preferences and discomfort with technology could prevent automation
in settings where human relationships are important (robots as caregivers or
nurses.)