Five years after the start of the Great
Recession, the toll is terrifyingly clear: Millions of middle-class
jobs have been lost in developed countries the world over.
And the situation is even worse than it appears.
Most of the jobs will never return, and millions more are likely to
vanish as well, say experts who study the labor market. What's more,
these jobs aren't just being lost to China and other developing
countries, and they aren't just factory work. Increasingly, jobs are
disappearing in the service sector, home to two-thirds of all workers.
They're being obliterated by technology.
Year after year, the software that runs computers and an array of
other machines and devices becomes more sophisticated and powerful and
capable of doing more efficiently tasks that humans have always done.
For decades, science fiction warned of a future when we would be
architects of our own obsolescence, replaced by our machines; an
Associated Press analysis finds that the future has arrived.
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EDITOR'S NOTE: First in a three-part series on the loss of
middle-class jobs in the wake of the Great Recession, and the role of
technology.
___
"The jobs that are going away aren't coming back," says Andrew
McAfee, principal research scientist at the Center for Digital Business
at the Massachusetts Institute of Technology and co-author of "Race
Against the Machine." ''I have never seen a period where computers
demonstrated as many skills and abilities as they have over the past
seven years."
The global economy is being reshaped by machines that generate and
analyze vast amounts of data; by devices such as smartphones and tablet
computers that let people work just about anywhere, even when they're on
the move; by smarter, nimbler robots; and by services that let
businesses rent computing power when they need it, instead of installing
expensive equipment and hiring IT staffs to run it. Whole employment
categories, from secretaries to travel agents, are starting to
disappear.
"There's no sector of the economy that's going to get a pass," says
Martin Ford, who runs a software company and wrote "The Lights in the
Tunnel," a book predicting widespread job losses. "It's everywhere."
The numbers startle even labor economists. In the United States, half
the 7.5 million jobs lost during the Great Recession were in industries
that pay middle-class wages, ranging from $38,000 to $68,000. But only 2
percent of the 3.5 million jobs gained since the recession ended in
June 2009 are in midpay industries. Nearly 70 percent are in low-pay
industries, 29 percent in industries that pay well.
In the 17 European countries that use the euro as their currency, the
numbers are even worse. Almost 4.3 million low-pay jobs have been
gained since mid-2009, but the loss of midpay jobs has never stopped. A
total of 7.6 million disappeared from January 2008 through last June.
Experts warn that this "hollowing out" of the middle-class workforce
is far from over. They predict the loss of millions more jobs as
technology becomes even more sophisticated and reaches deeper into our
lives. Maarten Goos, an economist at the University of Leuven in
Belgium, says Europe could double its middle-class job losses.
Some occupations are beneficiaries of the march of technology, such
as software engineers and app designers for smartphones and tablet
computers. Overall, though, technology is eliminating far more jobs than
it is creating.
To understand the impact technology is having on middle-class jobs in
developed countries, the AP analyzed employment data from 20 countries;
tracked changes in hiring by industry, pay and task; compared job
losses and gains during recessions and expansions over the past four
decades; and interviewed economists, technology experts, robot
manufacturers, software developers, entrepreneurs and people in the
labor force who ranged from CEOs to the unemployed.
The AP's key findings:
—For more than three decades, technology has reduced the number of
jobs in manufacturing. Robots and other machines controlled by computer
programs work faster and make fewer mistakes than humans. Now, that same
efficiency is being unleashed in the service economy, which employs
more than two-thirds of the workforce in developed countries. Technology
is eliminating jobs in office buildings, retail establishments and
other businesses consumers deal with every day.
—Technology is being adopted by every kind of organization that
employs people. It's replacing workers in large corporations and small
businesses, established companies and start-ups. It's being used by
schools, colleges and universities; hospitals and other medical
facilities; nonprofit organizations and the military.
—The most vulnerable workers are doing repetitive tasks that
programmers can write software for — an accountant checking a list of
numbers, an office manager filing forms, a paralegal reviewing documents
for key words to help in a case. As software becomes even more
sophisticated, victims are expected to include those who juggle tasks,
such as supervisors and managers — workers who thought they were
protected by a college degree.
—Thanks to technology, companies in the Standard & Poor's 500
stock index reported one-third more profit the past year than they
earned the year before the Great Recession. They've also expanded their
businesses, but total employment, at 21.1 million, has declined by a
half-million.
—Start-ups account for much of the job growth in developed economies,
but software is allowing entrepreneurs to launch businesses with a
third fewer employees than in the 1990s. There is less need for
administrative support and back-office jobs that handle accounting,
payroll and benefits.
—It's becoming a self-serve world. Instead of relying on someone else
in the workplace or our personal lives, we use technology to do tasks
ourselves. Some find this frustrating; others like the feeling of
control. Either way, this trend will only grow as software permeates our
lives.
—Technology is replacing workers in developed countries regardless of
their politics, policies and laws. Union rules and labor laws may slow
the dismissal of employees, but no country is attempting to prohibit
organizations from using technology that allows them to operate more
efficiently — and with fewer employees.
Some analysts reject the idea that technology has been a big job
killer. They note that the collapse of the housing market in the U.S.,
Ireland, Spain and other countries and the ensuing global recession
wiped out millions of middle-class construction and factory jobs. In
their view, governments could bring many of the jobs back if they would
put aside worries about their heavy debts and spend more. Others note
that jobs continue to be lost to China, India and other countries in the
developing world.
But to the extent technology has played a role, it raises the specter
of high unemployment even after economic growth accelerates. Some
economists say millions of middle-class workers must be retrained to do
other jobs if they hope to get work again. Others are more hopeful. They
note that technological change over the centuries eventually has
created more jobs than it destroyed, though the wait can be long and
painful.
A common refrain: The developed world may face years of high
middle-class unemployment, social discord, divisive politics, falling
living standards and dashed hopes.
___
In the U.S., the economic recovery that started in June 2009 has been called the third straight "jobless recovery."
But that's a misnomer. The jobs came back after the first two.
Most recessions since World War II were followed by a surge in new
jobs as consumers started spending again and companies hired to meet the
new demand. In the months after recessions ended in 1991 and 2001,
there was no familiar snap-back, but all the jobs had returned in less
than three years.
But 42 months after the Great Recession ended, the U.S. has gained
only 3.5 million, or 47 percent, of the 7.5 million jobs that were lost.
The 17 countries that use the euro had 3.5 million fewer jobs last June
than in December 2007.
This has truly been a jobless recovery, and the lack of midpay jobs is almost entirely to blame.
Fifty percent of the U.S. jobs lost were in midpay industries, but
Moody's Analytics, a research firm, says just 2 percent of the 3.5
million jobs gained are in that category. After the four previous
recessions, at least 30 percent of jobs created — and as many as 46
percent — were in midpay industries.
Other studies that group jobs differently show a similar drop in middle-class work.
Some of the most startling studies have focused on midskill, midpay
jobs that require tasks that follow well-defined procedures and are
repeated throughout the day. Think travel agents, salespeople in stores,
office assistants and back-office workers like benefits managers and
payroll clerks, as well as machine operators and other factory jobs. An
August 2012 paper by economists Henry Siu of the University of British
Columbia and Nir Jaimovich of Duke University found these kinds of jobs
comprise fewer than half of all jobs, yet accounted for nine of 10 of
all losses in the Great Recession. And they have kept disappearing in
the economic recovery.
Webb Wheel Products makes parts for truck brakes, which involves
plenty of repetitive work. Its newest employee is the Doosan V550M, and
it's a marvel. It can spin a 130-pound brake drum like a child's top,
smooth its metal surface, then drill holes — all without missing a beat.
And it doesn't take vacations or "complain about anything," says Dwayne
Ricketts, president of the Cullman, Ala., company.
Thanks to computerized machines, Webb Wheel hasn't added a factory
worker in three years, though it's making 300,000 more drums annually, a
25 percent increase.
"Everyone is waiting for the unemployment rate to drop, but I don't
know if it will much," Ricketts says. "Companies in the recession
learned to be more efficient, and they're not going to go back."
In Europe, companies couldn't go back even if they wanted to. The 17
countries that use the euro slipped into another recession 14 months
ago, in November 2011. The current unemployment rate is a record 11.8
percent.
European companies had been using technology to replace midpay workers for years, and now that has accelerated.
"The recessions have amplified the trend," says Goos, the Belgian
economist. "New jobs are being created, but not the middle-pay ones."
In Canada, a 2011 study by economists at the University of British
Columbia and York University in Toronto found a similar pattern of
middle-class losses, though they were working with older data. In the 15
years through 2006, the share of total jobs held by many midpay,
midskill occupations shrank. The share held by foremen fell 37 percent,
workers in administrative and senior clerical roles fell 18 percent and
those in sales and service fell 12 percent.
In Japan, a 2009 report from Hitotsubashi University in Tokyo
documented a "substantial" drop in midpay, midskill jobs in the five
years through 2005, and linked it to technology.
Developing economies have been spared the technological onslaught —
for now. Countries like Brazil and China are still growing middle-class
jobs because they're shifting from export-driven to consumer-based
economies. But even they are beginning to use more machines in
manufacturing. The cheap labor they relied on to make goods from apparel
to electronics is no longer so cheap as their living standards rise.
One example is Sunbird Engineering, a Hong Kong firm that makes
mirror frames for heavy trucks at a factory in southern China. Salaries
at its plant in Dongguan have nearly tripled from $80 a month in 2005 to
$225 today. "Automation is the obvious next step," CEO Bill Pike says.
Sunbird is installing robotic arms that drill screws into a mirror
assembly, work now done by hand. The machinery will allow the company to
eliminate two positions on a 13-person assembly line. Pike hopes that
additional automation will allow the company to reduce another five or
six jobs from the line.
"By automating, we can outlive the labor cost increases inevitable in
China," Pike says. "Those who automate in China will win the battle of
increased costs."
Foxconn Technology Group, which assembles iPhones at factories in
China, unveiled plans in 2011 to install one million robots over three
years.
A recent headline in the China Daily newspaper: "Chinese robot wars set to erupt."
___
Candidates for U.S. president last year never tired of telling
Americans how jobs were being shipped overseas. China, with its vast
army of cheaper labor and low-value currency, was easy to blame.
But most jobs cut in the U.S. and Europe weren't moved. No one got
them. They vanished. And the villain in this story — a clever software
engineer working in Silicon Valley or the high-tech hub around
Heidelberg, Germany — isn't so easy to hate.
"It doesn't have political appeal to say the reason we have a problem
is we're so successful in technology," says Joseph Stiglitz, a Nobel
Prize-winning economist at Columbia University. "There's no enemy
there."
Unless you count family and friends and the person staring at you in
the mirror. The uncomfortable truth is technology is killing jobs with
the help of ordinary consumers by enabling them to quickly do tasks that
workers used to do full time, for salaries.
Use a self-checkout lane at the supermarket or drugstore? A worker behind a cash register used to do that.
Buy clothes without visiting a store? You've taken work from a salesman.
Click "accept" in an email invitation to attend a meeting? You've pushed an office assistant closer to unemployment.
Book your vacation using an online program? You've helped lay off a
travel agent. Perhaps at American Express Co., which announced this
month that it plans to cut 5,400 jobs, mainly in its travel business, as
more of its customers shift to online portals to plan trips.
Software is picking out worrisome blots in medical scans, running
trains without conductors, driving cars without drivers, spotting
profits in stocks trades in milliseconds, analyzing Twitter traffic to
tell where to sell certain snacks, sifting through documents for
evidence in court cases, recording power usage beamed from digital
utility meters at millions of homes, and sorting returned library books.
Technology gives rise to "cheaper products and cool services," says
David Autor, an economist at MIT, one of the first to document tech's
role in cutting jobs. "But if you lose your job, that is slim
compensation."
Even the most commonplace technologies — take, say, email — are
making it tough for workers to get jobs, including ones with MBAs, like
Roshanne Redmond, a former project manager at a commercial real estate
developer.
"I used to get on the phone, talk to a secretary and coordinate calendars," Redmond says. "Now, things are done by computer."
Technology is used by companies to run leaner and smarter in good
times and bad, but never more than in bad. In a recession, sales fall
and companies cut jobs to save money. Then they turn to technology to do
tasks people used to do. And that's when it hits them: They realize
they don't have to re-hire the humans when business improves, or at
least not as many.
The Hackett Group, a consultant on back-office jobs, estimates 2
million of them in finance, human resources, information technology and
procurement have disappeared in the U.S. and Europe since the Great
Recession. It pins the blame for more than half of the losses on
technology. These are jobs that used to fill cubicles at almost every
company — clerks paying bills and ordering supplies, benefits managers
filing health-care forms and IT experts helping with computer crashes.
"The effect of (technology) on white-collar jobs is huge, but it's
not obvious," says MIT's McAfee. Companies "don't put out a press
release saying we're not hiring again because of machines."
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What hope is there for the future?
Historically, new companies and new industries have been the
incubator of new jobs. Start-up companies no more than five years old
are big sources of new jobs in developed economies. In the U.S., they
accounted for 99 percent of new private sector jobs in 2005, according
to a study by the University of Maryland's John Haltiwanger and two
other economists.
But even these companies are hiring fewer people. The average new
business employed 4.7 workers when it opened its doors in 2011, down
from 7.6 in the 1990s, according to a Labor Department study released
last March.
Technology is probably to blame, wrote the report's authors, Eleanor
Choi and James Spletzer. Entrepreneurs no longer need people to do
clerical and administrative tasks to help them get their businesses off
the ground.
In the old days — say, 10 years ago — "you'd need an assistant pretty
early to coordinate everything — or you'd pay a huge opportunity cost
for the entrepreneur or the president to set up a meeting," says Jeff
Connally, CEO of CMIT Solutions, a technology consultancy to small
businesses.
Now technology means "you can look at your calendar and everybody
else's calendar and — bing! — you've set up a meeting." So no assistant
gets hired.
Entrepreneur Andrew Schrage started the financial advice website
Money Crashers in 2009 with a partner and one freelance writer. The
bare-bones start-up was only possible, Schrage says, because of
technology that allowed the company to get online help with accounting
and payroll and other support functions without hiring staff.
"Had I not had access to cloud computing and outsourcing, I estimate
that I would have needed 5-10 employees to begin this venture," Schrage
says. "I doubt I would have been able to launch my business."
Technological innovations have been throwing people out of jobs for
centuries. But they eventually created more work, and greater wealth,
than they destroyed. Ford, the author and software engineer, thinks
there is reason to believe that this time will be different. He sees
virtually no end to the inroads of computers into the workplace.
Eventually, he says, software will threaten the livelihoods of doctors,
lawyers and other highly skilled professionals.
Many economists are encouraged by history and think the gains eventually will outweigh the losses. But even they have doubts.
"What's different this time is that digital technologies show up in
every corner of the economy," says McAfee, a self-described "digital
optimist." ''Your tablet (computer) is just two or three years old, and
it's already taken over our lives."
Peter Lindert, an economist at the University of California, Davis,
says the computer is more destructive than innovations in the Industrial
Revolution because the pace at which it is upending industries makes it
hard for people to adapt.
Occupations that provided middle-class lifestyles for generations can
disappear in a few years. Utility meter readers are just one example.
As power companies began installing so-called smart readers outside
homes, the number of meter readers in the U.S. plunged from 56,000 in
2001 to 36,000 in 2010, according to the Labor Department.
In 10 years? That number is expected to be zero.
Art
is indeed not the bread of life but the wine of life, 19th century German
writer Jean Paul once remarked. But what if you're so poor that you barely
have enough literal bread to eat, let alone art?
DNA 'perfect for digital storage'
