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Why Automation Hollows Out the Middle Ground

· Automation,Labor,Labor Market,Robots,Ai

Why Automation Hollows Out the Middle Ground

Automation is proliferating in all aspects of the economy, whether it is robots building cars or the artificial intelligence systems helping people check out groceries. At least for the next five to ten years, automation is expected to provide a net increase of jobs to the economy. According to a recent report from the World Economic Forum (WEF), machines and algorithms are expected to create 133 million new roles and displace 75 million jobs by 2022. But most importantly, automation will also cause a systemic shift in the types of jobs that people will have in the future.

Automation will accelerate the trend of polarization in the labor market, where job creation tends to be at the top and bottom ends of the pay scale, further dwindling the middle class. The disparity in the types of jobs that will be created in this age of automation can be partially explained by a phenomenon known as Moravec’s paradox. The paradox was discovered by AI and robotics researchers in the 1980s when they observed that while robots could solve difficult human tasks easily, these same robots found easy human tasks difficult. Hans Moravec famously said that it is “It is comparatively easy to make computers exhibit adult-level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility.” To put it another way, it is easy to build a computer that can win in checkers, but hard to build a computer that will clean up the pieces. Thus, the jobs that are at highest risk to be displaced by automation in the near future are skill-based, middle-income jobs.

Dhaval Joshi, a prominent economist at BCA Research, claims “that the jobs that AI can easily replace are those that require recently evolved skills like logic and algebra. They tend to be middle-income jobs. Conversely, the jobs that AI cannot easily replicate are those that rely on the deeply evolved skills like mobility and perception. They tend to be lower-income jobs.” The future job market will likely place less importance on workers with strong logic and analytical skills, and instead further emphasize soft skills such as communication and creativity. This trend of “hollowing out the middle ground” might help economists explain why even though unemployment was as low as 4.0% for much of 2018, real wage growth only increased by 1.1% for the year. But, this stagnation of real wage growth has not been a recent development.

Even though average worker productivity has increased by 74% since it’s peak in 1973, hourly compensation has only increased by 9.2%, which might be explained by machines' increasing productivity by displacing middle-income jobs in manufacturing and logistics. While automation is likely not the sole cause of stagnant wages, the elimination of middle-class jobs will likely exacerbate this issue instead of mitigating it. 

Artificial intelligence is still establishing itself as a major force in the American economy. In the near future, we can expect comfortable middle-class jobs to decline as computers continue to replace skill-based labor. Policymakers should focus on implementing retraining programs for those who lose their jobs. Without retraining programs, the labor market will likely struggle to adjust to rapidly changing market conditions and unemployment may increase as a result. In addition, education in the United States must prepare students to learn soft skills that cannot be easily replaced by computers. We need to train our children for the future, so that they can develop with the robots, not behind them.

Written by Kevin Ma & Edited by Alexander Fleiss

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