Is it Possible that Automation Will Actually Increase Hiring?

March 21, 2016

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Last week, we posted an analysis of Deloitte’s 2016 Human Capital Survey that focused on the rising role Contingent Workers are playing in the 21st-century economy. As a brief aside in that article, we mentioned a surprising fact from the survey related to the issue of workforce automation brought about by the rise of computers and machine learning: 20% of executives surveyed in the wide-ranging questionnaire said that they expect automation to increase, rather than decrease, rates of hiring.

That figure made us pause. Everywhere you look at analysts’ prognostications of the future of the workplace, the story is that automation and machine learning are beginning to threaten white collar, knowledge-based professions, just as automation has lowered the number of manufacturing jobs over the past few decades. We’ve written about the issue and how it might impact Supply Chain (our area of recruitment expertise) in particular. The emerging dominant narrative is that automation is threatening to make a huge variety of jobs obsolete, with countries proposing innovative solutions that would have seemed radical just a few years ago, such as a universal basic income.

But when a far-ranging survey (7000 responses from executives in 130 countries) by one of the world’s leading management consulting firms suggests that a healthy proportion of executives actually predict that workforce automation will increase hiring, we take notice. Maybe there’s another story here worth talking about.

We came across an interesting and well-argued Atlantic article that offers an alternative perspective to the idea that workforce automation will lead to widespread unemployment. Titled “The Automation Paradox,” it lays out an argument from first principles of economics that automation of white collar positions has often increased the number of jobs in those fields, rather than decreasing them. Boston University Economist James Bessen uses examples from the paralegal and financial services industry to show that increasing automation (automated document scanning and automatic teller machines) has actually helped grow the base of jobs for legal analysts and bank tellers.

Why is this the case?

To quote Bessen: “It might seem a sure thing that automating a task would reduce employment in an occupation. But that logic ignores some basic economics: automation reduces the cost of a product or service, and lower prices tend to attract more customers…so when demand increases enough in response to lower prices, employment goes up with automation, not down.” Because software lowered the cost of searching through legal documents, law firms have increased the amounts of documents they search as part of the discovery process. Because ATMs made it cheaper to operate bank branches, banks opened more offices. Bessen provides statistics showing that occupations relying on computers actually experienced increased job growth compared to the rest of the economy since 1990, which goes against the emerging conventional wisdom that computers threaten white collar workers just as factory automation threatened factory workers in the 20th century.

The story, of course, isn’t completely rosy. Bessen acknowledges that automation has drastically lowered job prospects for some positions, using the example of typists and telephone operators. Word processing software and computer phone lines have made these types of jobs increasingly irrelevant – but with an accompanying rise in other, non-computerized jobs, such as graphic design. Which is unfortunate for individuals who aren’t able to acquire new skills to keep up with increasingly-fast technological progress. But from a macroeconomic standpoint, it’s something of a wash, with automation creating new jobs – more creative, more analytical, more strategic jobs – at the cost of lower-skilled, lower-paid jobs.

As Bessen says, “the main effect of automation for the time being will not be to eliminate jobs, but to redefine them – changing the tasks and skills needed to perform them.”

That sounds a lot to us like Supply Chain. The function increasingly relies on big data to offer insights about where to find cost savings, efficiencies, and strategic opportunities. In fact, Supply Chain professionals have only become more relevant to business as a whole as computers and data analytics have become more sophisticated. What’s shifted is (especially at the sole contributor level) that the technical / analytical skills requirements for Supply Chain professionals have increased, and so has specialization in various analytical subdisciplines such as Supply and Demand Planning. The challenge, it seems, isn’t necessarily to cope with a dwindling pool of jobs, but to help skilled professionals adapt through training as technology causes technological skills requirements to evolve.

It’d be presumptuous of us to assume that we can predict automation’s overall effect on the workforce. It’s a question that some of the brightest minds in economics and future studies are still wrestling with, after all. But it’s worth offering an alternate perspective to the handwringing that’s common when discussing workplace automation. It’s interesting stuff.

What do you think? We’re curious to hear your thoughts about workplace automation and its impact on Supply Chain in particular. logo_icon

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