ANALYSIS

Implications of the Replacement of Blue-collar Jobs

How technological change will impact economics and politics

Sukhayl Niyazov
Sep 28 · 7 min read

Our world is on the verge of historically momentous changes. Technological advances will have all-encompassing implications for almost all human endeavors, from manufacturing and transportation to healthcare, education, and communication. Emerging technologies and their implementation will have a profound impact on the current political system, society, and job market. The advent of AI and robotics will both pose unprecedented challenges and offer an opportunity to reap tremendous economic and social benefits.

It has become conventional wisdom among economists to think that due to the advancement of AI and robotics blue-collar jobs will be mostly eliminated from the economy. Experts differ on the exact consequences of such a shift, and it is worth exploring both positive and negative sides of the current realignment to gain a better understanding of monumental shifts occurring in our society.

Even though in the short run lost jobs will be offset by the creation of new ones, over the longer term (20–30 years) technically it will be possible to automate most of the jobs.

Foremost, as a result of the elimination of blue-collar jobs, the economies of developed countries will achieve previously unimaginable levels of productivity, for AI algorithms and automated manufacturing are much better at performing tasks than humans.

Increased throughput will make goods and services cheaper, thereby leaving consumers with greater disposable income which they will then use to purchase more products, leading to the growth in consumption and demand, which will ultimately facilitate the creation of new jobs and economic growth.

According to PwC’s analysis, by 2030 gains from AI implementation will be around $15.7 trillion, with most gains stemming from enhanced productivity and consumption-side effects. Overall, AI will add up to 14% to American GDP by 2030. The research conducted by Accenture Research and Frontier Economics found that AI would boost US labor productivity by 35% and almost double growth rates from 2.6% to 4.6% by 2035.

In the short term, owing to the fact that American robots work as effectively as Chinese and because they do not demand higher wages, join labor unions, and take vacations as the Americans do, manufacturing will begin to return from cheap workforce countries to the West, thereby boosting exports, encouraging domestic investment and innovation, and ultimately returning the status of a manufacturing hub to the US and the U. In the end, this will diminish the US/UK trade deficit, eliminate the need to borrow money to cover it and solve one of the fundamental problems of their economy.

In addition, in spite of significant job losses in the long run, on a short-term horizon, new jobs will be created instead of eliminated blue-collar jobs. The study by the World Economic Forum expects that by 2022 AI could create around 133 million jobs and eliminate about 75 million, resulting in a net gain of 58 million.

In essence, it turns out that the loss of jobs by blue-collar workers will be more than offset by gains in more sophisticated and productive occupations like data scientists, software and data analysts, and AI specialists. We will get rid of tedious jobs and will instead focus on more creative and beneficial activities.

Applications of AI in fields previously dominated by humans will enable us to solve previously intractable problems such as climate change or make important discoveries in physics, biology, and chemistry that will then find their implementation in real life and potentially ameliorate the economic productivity and lead to further growth.

As a result of the replacement of humans by AI, we will enhance our predictive powers which will yield tremendous benefits to the American businesses, economy, and society in fields like weather forecasts, predictions of natural disasters, and many other fields.

Nevertheless, as with almost all things in our extremely complicated world, elimination of blue-collar jobs from the economy is not only expected to lead to positive economic reverberations, but also potentially disruptive repercussions that can shake the very foundations of the employment markets, economy, society, and even conventional capitalist system itself.

Even though studies show us that we will experience a net growth in the number of jobs, the devil is in the details.

Unlike technologies introduced by the Industrial Revolution (IR), which through deskilling (elimination of skilled labor by technologies operated by less skilled workers) increased the overall number of jobs, the most recent upheaval — introduction of information and communications technologies (ICT) has been defined by skill bias, and therefore in recent decades in the West more jobs that require high level of expertise have been created, like programmers and data scientists, while eliminating need for unskilled labor.

As a result of ICT, productivity has been steadily increasing in the US, but wages remained almost flat, and therefore in recent decades income inequality has been growing dramatically (according to EPI, from 1973 to 2017, productivity has grown 6.2x more than pay).

This means that the labor market is becoming less flexible. During the first and second industrial revolutions, job market adapted to the fluctuations in society and the economy, and therefore the overall number of jobs didn’t decrease. Nowadays, however, due to skill biases of both ICT and AI, blue-collar workers who will have been replaced by algorithms will unlikely be able to find new jobs because 1) it will be hard to turn former cashiers and taxi drivers into data scientists and programmers — they will simply do not possess necessary skills 2) people will be forced to reinvent themselves and find a new occupation each 10 -15 years due to the relentless paces of progress,– it is doubtful that they will endure psychological pressure stemming from such rapid changes.

Even though in the short run lost jobs will be offset by the creation of new ones, over the longer term (20–30 years) technically it will be possible to automate most of the jobs.

Kai-Fu Lee, a prominent expert on AI, in his book “AI Superpowers: China, Silicon Valley, and the New World Order” claimed that within 15 years it would be feasible to replace 40–50% of all the jobs in the US.

If the governments do not undertake radical actions, jobless people will experience severe economic damage and might organize violent anti-establishment protests. But even with UBI, for millions, the job loss will mean the loss of identity and purpose. Unemployed people tend to have higher rates of suicides and depressions. “Useless” class will become a source of potential civil unrest and societal instability, endangering the foundations of the economic, political and social system of the world.

However immense are the challenges posed by the advancement of AI and robotics within countries, it is global inequality that will pose the greatest threat to the global economic, social and political stability. In the past, owing to the availability of cheap labor countries like China and South Korea were able to invigorate dramatic economic growth that eventually turned them into technological powerhouses.

Photo by Alex Knight on Unsplash

Nowadays, however, revolutions in manufacturing will nullify this advantage, thereby depriving other poor countries of the opportunity to kick-start growth, while making their huge unemployed population a source of instability. Dictators will seek “splendid little wars” that will help them overcome domestic problems, thereby returning the era of instability and interstate competition.

For the USA and its allies this will mean a more active foreign policy, for Washington will endeavor to establish order and punish the violation of the law, as it did in 1990 when Iraq invaded Kuwait. Higher military expenditures will impose a significant burden on the economy and will hinder the effective resolution of domestic challenges.

Young people from these poor countries will then migrate into developed states like the US, Germany, Canada, and the UK. Already we are witnessing the formation of nationalist, anti-immigrant sentiments in developed countries, which culminated in the EU’s immigration crisis and D. Trump’s wall on the border with Mexico. Global inequality will conduce millions to migrate, generating a violent backlash and sowing instability in the US and Europe.

All in all, because of the advancement of AI and subsequent job losses, the world will be able to adapt to the changing composition of the labor market for about 5–7 years and will not witness a full-scale job disruption; also, it will considerably increase its productivity and rate of economic growth. However, with further advancements in AI and robotics technologies, market forces alone are unlikely to mitigate the implications of the new technological revolution, and therefore the authorities will have to implement reforms to prevent social instability.

Just as socialism emerged following the inability of the free market to satisfy the growing needs of the working class, it is highly likely that the disgruntled “useless” class will form a new movement with a new ideology that would completely redefine the balance of power within states.

After all, current economic, political and social system was formed in the age of steam engines and electricity; nowadays, in the age of AI and robotics, it needs to adapt to the realities of the 21st century in order to remain viable and able to overcome mounting challenges.


DataSeries

A network of data thought leaders, sharing lessons learned, in preparation for the future 🚀

Sukhayl Niyazov

Written by

I write about economics, politics, and AI.

DataSeries

A network of data thought leaders, sharing lessons learned, in preparation for the future 🚀

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade