Retail collapses, unemployment in the US and Canada hits all-time low
In my last semester at university, I had the chance to write about the role of automation in today’s world; it was a long paper… As perhaps most people, before researching the topic I was under the impression that “robots are taking our jobs” and “automation leads to unemployment”. After all, statements like those were quite often used in articles and social posts on the web. Hence, why not believe them ;)
But something interesting happened this week. The retail giant Sears announced its decision to liquidate all stores and shut down operations, leaving 12,000 employees out of a job. At the same time, Statistics Canada and US Bureau of Labor are publishing the lowest unemployment rates in decades, constantly adding jobs every month. Why is that happening?
Well, I thought it might be worth dusting off my old university paper and the knowledge that came with it in an attempt to dissect the Sears case. However, let’s start at the beginning.
Sears (and retail in general) got killed by Amazon
Not quite, in my opinion.
There has been a lot of chatter about Amazon killing the entire retail industry, but it is more like Sears’ business model got automated. Sears’ competitive advantage was physical store presence, a large distribution network and diversity of merchandise. With the world being digitally connected, none of those “advantages” are unique to Sears or matter to the customer anymore, especially given the type of products Sears offered.
Today, anyone (even an individual) can open an online store, create a beautiful merchandise browsing experience and ship to his/her customers instantly via a fulfillment center. No need for physical stores. No human interaction required at any point in the purchasing process.
Sears’ inability to understand the new consumer mindset is what caused their demise.
OK, Sears got automated and their employees laid-off, then Automation = Unemployment
Once again, not really…
The thing is, automation is not really job-oriented, but mostly task-driven. Think about it this way, what percentage of your job could be fully automated, where no human interaction is needed (given the current state of technology). Well, if you are a factory worker performing repetitive tasks on a daily basis, the percentage is probably high (>70%). But what about if you are a Senior Manager or CEO, the tasks you perform every day would involve creativity, people management and would not really follow a predictable pattern. Hence the percentage would be low (<10%) and your job security stronger. McKinsey did an awesome job breaking down automation potential across different industry segments (full report). Below is my favorite snippet.
In fact, according to Harvard economist James Bessen, the only occupation that has been completely eliminated by automation in the last 60 years is an elevator operator — 1950 US Census data was used for the research. A whole lot of occupations have gone through a big transformation, but most of them have been molded into a better version of the original via the use of technology. Not to mention the emergence of new occupations as a result of automation.
“If a job is completely automated, then automation necessarily reduces employment. But if a job is only partially automated, employment might actually increase.” — James Bessen
Nowadays, automation creates more jobs than it actually eliminates and the continuingly decreasing unemployment rate is an evidence for that. Think about it, job titles that did not exist 10 years ago are now employing hundreds of thousands of people — Uber Driver, AirBnB Host, Social Media Manager, Social Influencer, Data Scientist, Insights Manager and etc. And we are not talking only about low-skilled jobs, the change is happening across the board.
Of course, automation might have a negative effect on structural unemployment in the short-run, but it is the skill-set and job responsibilities each employee has that will determine how fast he/she will re-enter the labor force. This brings us to my last, but extremely important point: Education!
Alright, Automation does not necessarily ≠ Unemployment, but you still have 12,000 people out of their jobs
And that is the toughest of all…
We can talk all day about tasks and responsibilities, putting jobs in different categories and trying to figure out which one would be a victim of automation and how to prevent it, but some people are still going to lose their jobs. The question is, how can they be more prepared for the effects of any technological change?
Relevant education and effective learning are amongst the most vital components of a healthy labor market, and the government of each country should be responsible for providing those. This is the only way to move the global economy forward. There will always be industries affected by technology and automation, so we need a nimble educational system that adapts to what is going on in the world now. Not 10 or 20 years ago.
I will stop here, because education is a separate segment that I can write about endlessly (I might do a part 2, focused only on education). I hope this article was helpful in providing context behind the word automation and I hope you enjoyed reading! Feel free to connect on LinkedIn or drop a comment below, if you have any questions.
Homework: Watch Will automation take away all our jobs? | David Autor — the “High School Movement” is a great example of educating and preparing an entire population for a more productive technological future.
