How automation might further economic divides

Ben Le Fort
Jul 17 · 3 min read
Photo by Colton Duke on Unsplash

There has been no shortage of discussion of the economic impact of the oncoming wave of automation that is expected to take place over the next several decades. At a national level, some estimates have the total number of jobs lost in the U.S due to automation between 40 and 75 million.

In smaller countries that have a homogenous economy, it’s a little easier to digest national-level numbers like jobs and employment. The U.S, on the other hand, is a massive country with distinct regional cultures and economies. Living and working in Kentucky is vastly different than living and working in California.

In some ways, the U.S is more comparable to the European Union than any individual country. A changing economic force like automation will have different implications for workers in Kentucky and California just as it will have different implications for workers in Germany and Italy.

To better full the impact automation will have on the U.S economy you need to look at the various regional impacts. That is exactly what a new study from the McKinsey Global Institute aims to do. They analyzed the local economies of over 315 cities and more than 3,000 counties in the U.S and predicted the impact automation will have on various

The U.S economy has significant regional imbalances

The report found that there were three types of cities/towns in the U.S.

1. 25 “megacities” that are home to over 96 million people. These megacities are capturing an outsized portion of economic growth and are where most of the U.S job creation has taken place since the financial crisis.

2. The “mixed middle”. These are smaller cities and college towns home to 94 million people. These cities have seen modest economic growth and job creation.

3. 54 “trailing cities” comprised of 2,000 rural counties that are home to 78 million people. These trailing cities are characterized by an older population, higher unemployment, and lower educational attainment.

Automation will impact each type of city differently

As the report points out, urban and rural cities will be facing automation from much different starting points. The megacities where most STEM jobs and other growth industries are located are more equipped to not only survive automation but thrive. Meanwhile, in rural areas where educational attainment is low, there are more jobs that are likely to be replaced by a machine. The report forecasts the likelihood of further economic divide between urban and rural America.

  • 60% of new jobs created by 2030 will be in one of these 25 megacities
  • The mixed middle should expect modest economic growth and job creation
  • Rural counties could see a decade long run of flat or negative economic and job growth

An aging demographic

The report also found that workers over the age of 50 hold the highest share of jobs at risk to be replaced by automation. This does not bode well for a generation of Americans who are quickly aging and are woefully unprepared for retirement despite a strong economy and soaring stock market.

Many older workers who have not saved enough for retirement believe that they will be able to continue working well into their golden years. What will life look like for these people if they lose their job to automation and have no retirement nest egg to fall back on?

Government policy will be key

It will be key for all levels of government to confront this problem head-on with coordinated policies to embrace the efficiencies and benefits of automation while mitigating the undesirable impacts it could have.

Specifically, there will be a need for significant investment in training and education to bring the labor force (particularly in rural areas) up to the standards of the modern economy.

Rural economic development will also be more important than ever. It is critical that rural areas have access to broadband and energy infrastructure that will be necessary to attract businesses and create jobs. At the same time, financial support for workers transitioning within the changing economy will be important to maintain a reasonable standard of living.

The economy is in a state of constant change which brings opportunities and challenges, the question is will political and business leaders be able to rise up and meet these challenges and take advantage of the opportunities?

Impact Economics

Our Goal is to Make Economics Understandable and Relevent

Ben Le Fort

Written by

Sharing my journey to financial independence. For freelance inquiries reach me at benlefort1988@gmail.com

Impact Economics

Our Goal is to Make Economics Understandable and Relevent

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