Automation: COVID’s Economic Legacy
The pandemic has accelerated use of digital technologies that are replacing workers in many jobs
The issue of job automation has been a flashpoint for decades: As digital advancements –including AI and robotics — ramped up, so did labor concerns. However, the consensus was usually that human and machine labor can co-exist and complement one another. Now, COVID-19 has added upended the economy and there’s justification to worker fears about automation.
In 2018, MIT economist and professor David Autor was co-chair of MIT’s Work of the Future Task Force, launched to better understand the impact AI and automation on jobs. When the Task Force released an interim report in September of 2019, its overriding conclusion was that the likelihood that AI and automation would wipe out major workforce sectors in the near future was exaggerated.
However, even then it raised important reasons for concern, especially the rising polarization of employment and wage distribution over the past few decades, which has disproportionately benefited high-skilled professionals while reducing opportunities for mid- and low-skilled workers. The report emphasized that “at a time of historic income inequality, a critical challenge is not necessarily a lack of jobs, but the low quality of many jobs and the resulting lack of viable careers for many people, particularly workers without college degrees.”
The Covid-19 pandemic came a few months later, pretty much turning our world upside down.
In July of 2020, professor Autor along with Elisabeth Reynolds, executive director of the Work of the Future Task Force, published an article on The Nature of Work After the COVID Crisis. “Despite our concerns about the distributional consequences of advancing technologies, until the COVID crisis began, we were sanguine about the prospects for ongoing employment growth, even in the face of lackluster wage growth,” wrote Autor and Reynolds.
“The COVID crisis has upended our confidence in that prediction — not merely because COVID has generated mass unemployment in the short term, which it has, but also because the post-crisis trajectory now worries us.”
Reshaping Labor Markets
“The COVID crisis appears poised to reshape labor markets along at least four axes: telepresence, urban de-densification, employment concentration in large firms, and general automation,” the authors added. “Although these changes will have long-run efficiency benefits, they will exacerbate economic pain in the short and medium terms for the least economically secure workers in our economy, particularly those in the rapidly growing but never-highly-paid personal services sector.”
Similar concerns were expressed by the World Economic Forum (WEF) in The Future of Jobs Report 2020, published in October 2020. “The COVID-19 pandemic-induced lockdowns and related global recession of 2020 have created a highly uncertain outlook for the labour market. … The pace of technology adoption is expected to remain unabated and may accelerate in some areas. … As a new global recession brought on by the COVID-19 health pandemic impacts economies and labour markets, millions of workers have experienced changes which have profoundly transformed their lives within and beyond work, their well-being and their productivity. One of the defining features of these changes is their asymmetric nature — impacting already disadvantaged populations with greater ferocity and velocity.”
According to a recent NY Times article, these concerns are well justified. “Technological investments that were made in response to the crisis may contribute to a post-pandemic productivity boom, allowing for higher wages and faster growth.
But some economists say the latest wave of automation could eliminate jobs and erode bargaining power, particularly for the lowest-paid workers, in a lasting way.”
In Covid-19 and Implications for Automation, a recent paper cited in the NYT article, economists Alex Chernoff and Casey Warman wrote that, “While some sectors will recover quickly, for other sectors, COVID-19 will have long lasting effects. Specifically, COVID-19 and the threat of future pandemics has the potential to accelerate the process of automation, as employers substitute workers with computers and robots that are unaffected by pandemics.”
Chernoff and Warman used the U.S. Department of Labor O*Net database of occupations and skills to identify the geographical labor markets that are most at risk because of their high automation potential and high degree of risk to viral infection. They also examined the demographic groups that are most vulnerable to automation due to infection transmission risk. The viral transmission risk of an occupation was constructed using O*Net data on physical proximity, face-to-face discussion, and exposure to disease or infections, as well as how often the individuals work outdoors. Let me summarize their findings.
With few exceptions, there are few regions with both high automation potential and high viral transmission risk, and those few areas where automation potential and transmission risk are high are distributed across the U.S.
On the other hand, there is a concentration of risk among certain demographic groups.
In particular, females are about twice as likely as males to be in occupations that are at high risk of both COVID transmission and automation; younger workers are 4% more likely to be in such high risk occupations; and workers with low and medium-level education are 6% more likely than workers with high-level educational attainment.
“Females with low to mid-level wages and educational attainment face the highest joint risk from COVID-19 transmission and automation.”
In their 2020 paper, Chernoff and Warman identified those occupations that are at high, medium, and low risk of both automation potential and viral transmission.
· High-risk occupations: retail salespersons; secretaries and administrative assistants; cashiers; stock clerks and order fillers; and personal care aides.
· Medium-risk occupations: elementary and middle school teachers; registered nurses; first-line supervisors of retail sales workers; customer service representatives; and janitors and building cleaners.
· Low-risk occupations: driver/sales workers and truck drivers; accountants and auditors; post-secondary teachers; sales representatives, wholesale and manufacturing; and grounds maintenance workers.
“An increase in automation, especially in service industries, may prove to be an economic legacy of the pandemic,” notes the NYT article.
“Businesses from factories to fast-food outlets to hotels turned to technology last year to keep operations running amid social distancing requirements and contagion fears.” In addition, “the difficulty in hiring workers — at least at the wages that employers are used to paying — is providing new momentum for automation.”
Finally, the article cites a recent paper by MIT economists Daron Acemoglu and Pascual Restrepo, Automation and New Tasks, that argued that “it is not the brilliant automation technologies that threaten employment and wages, but so-so technologies that generate small productivity improvements.” Brilliant automation leads to increased productivity and new jobs, whereas the productivity impact of so-so automation isn’t enough to counteract the jobs displaced by technology. “Examples of so-so technologies include automated customer service, which has displaced human service representatives but is generally deemed to be low quality and thus unlikely to have generated large productivity gains.”
This blog first appeared October 30 here.