I am thrilled to now be writing a bi-weekly column for the Globe and Mail, Canada’s national newspaper. See my first here – it is a look at how the gig economy is in force but our social policies are woefully out of step with it.
I am thrilled to now be writing a bi-weekly column for the Globe and Mail, Canada’s national newspaper. See my first here – it is a look at how the gig economy is in force but our social policies are woefully out of step with it.
Is there a better way to see the future of work than to follow the drama that is Uber? The ride-hailing service burst on to the scene in San Francisco just about six years ago and nothing has been the same ever since. From how to manage a gig workforce through to how technology is destroying some jobs and creating others (more on that in a minute) Uber is the maybe-not-that-reluctant poster child for the story of workforce change, the latest instalment of which takes place in London, England.
For those who have managed to miss it, last week London decided to revoke Uber’s license to operate in the city. As always, when it comes to Uber, emotions run high and the London decision apparently brought out the strongest of those. Some (led by traditional London cabbies) are jubilant at the decision, effectively calling Uber a not-fair upstart staffed by criminals. Others called the decision everything from Luddite-like to racist. Customers of the ride-hailing service are not thrilled.
There are lots of pieces to the drama, but for me one of the key parts is this: the jobs of London cabbies used to be protected by the fact that that they had a knowledge base that could not be easily replicated and now they are not. In fact, the test they take to be allowed to drive a cab is called ‘The Knowledge’, and it requires memorizing something like 25,000 London streets. Not surprisingly, preparing to take the test can take years and those who pass it are understandably proud to have done it. As a system it all worked fine until GPS technology and Uber came on the scene.
With the advent of GPS, it is as if robots have replaced the taxi drivers. That is, rather than being required to know every street by heart, every Uber driver checks directions by putting the street address into GPS, and every passenger can do the same on their phone anyway. There may be other ways in which taxi drivers have it over Uber drivers, but the argument that cab drivers can get you where you want to go better has effectively been destroyed. Technology has de-skilled the function of the cabbies, meaning that if the world operated in a true free-market sense, the taxi drivers would see their wages drop and their jobs disappear. As Uber has expanded, London taxi drivers have undoubtedly seen their incomes affected, but the majority have struggled on partly in the hopes that Uber would just go away.
And yes, regulation does exist and markets are not exactly free. That is why someone gets to decide whether Uber can operate at all, which in effect means deciding the relative fortunes of Uber drivers vs. cabbies. With the London decision, the cabbies have managed a win for now but they have to know it is a temporary one. Uber (as well as competitors such as Lyft) is rolling in in more and more cities, and is proving to be a hit with those who prefer to pay less rather than more for a ride and to hail it more conveniently to boot. For sure, there may be regulations needed to ensure that Uber drivers are thoroughly checked, but there is little to suggest that the majority would be better off if Uber did not exist at all, no matter what London has decided for the moment.
And so the impasse continues and right at the moment cab drivers and Uber drivers seem to hate each other, in London and in many other cities as well. Then again, they should maybe think about banding together to map out their joint futures. After all, Uber all has never made a secret of the fact that they want to have driverless cars ferrying passengers sooner rather than later. As they get closer to that reality, neither ‘knowledge’ nor ‘GPS’ may be enough to keep any kind of drivers in cabs.
As driver jobs are eliminated, others will be created although job functions will likely come and go over the years ahead. Rather than thinking just about specific knowledge, perhaps what workers need to develop are skills in things like ‘flexibility’ and ‘adaptability’. They may sound like buzz-words, but if Uber has taught us anything it is that the work world is turning on a dime and it might be best to be ready for the next instalment of the drama.
North America is aging, and a lot of the rest of the world is aging as well. It is something to think about as we consider where we are going to get the labor we need to grow our economies in the years ahead. That is, for decades we in North America have been able to attract the cream of the crop in terms of workers if we so chose. The opportunities were here and a surplus of workers was elsewhere. So what will happen when that surplus dries up, and more and more countries are scrambling for young workers?
This article from the World Economic Forum (WEF) details the aging trends in Asia very clearly. The region has for years benefitted from a ‘demographic dividend’ where a a young, growing work force (aged 15-64) has helped drive growth. Now, as is the case so many places, fertility rates are falling and people are living longer. Already one-third of the population in Singapore and South Korea is over 50, and in Japan the ratio is closer to half. No surprise then that workforce growth is slowing. The most dramatic example of labor force contraction could well be in China, where the WEF figures there could be a decline of 170 million people in its working-age population over the next three decades.
If left unchecked, all other things being equal a declining labor force means strained public finances as well as lower economic growth. That is why the WEF suggests that the countries experiencing the decline in labor force growth look to the ones with younger populations as sources of labor. India, Indonesia and the Philippines fall into this category.
It could mean a shift for North America. Right now, there is no shortage of willing workers, at all skill levels, who want to be in Canada or the United States. The competition of those workers, particularly those in the highest skill categories could heat up in the years ahead if would-be workers have the choice of staying at home or heading to a nearby Asian country rather than going further afield. That could be a big deal, given that North America is also aging rapidly.
Does that mean that North America is headed for labor shortages? Probably not. What the article does not mention is something else the WEF has discussed at great length, which is the fact that we are in the midst of a ‘Fourth Industrial Revolution’ by which automation has the potential to replicate many job tasks. Right now we are still figuring out the costs and practicalities of using robots or other technology to get things done. If workers are in short supply, the incentive to figure it out faster will be ever higher.
There are a lot of things robots can do, but they cannot make societies any younger.
Canada and the U.S. are aging – there is little debate about that. What exactly that will mean for the labor force and the economy is a bit more up for grabs, but to get an idea of how it may all play out we have the examples of those areas that have already gotten old ahead of us. One such area is East Germany, a town from which is profiled in this article from The Economist.
East Germany, if it was an actual separate country from West Germany, would apparently be the oldest country in the world. That is, at present Germany and Japan each have a median age of close to 47, but East Germany is indisputably older still. Following the installation of the Berlin Wall in 1989, young people headed for the west, leaving a smaller population to have families. The Economist quotes an official from a German think tank who puts what is going on rather succinctly: ‘kids not born in the ‘90s, also didn’t have kids in the 2010s. It’s the echo of the echo’. With deaths far out-pacing births, Germany as a whole is headed to having 40 percent of its population aged over 60 by 2050, with East Germany getting there first.
In the town profiled in the article, one apartment building in five is empty, and where two-thirds of kindergartens and over half of all schools have closed since 1990. There is a dearth of workers, particularly young workers, in the area. Not surprisingly, the biggest shortage is of those who are available to work in health care. particularly as it relates to the old. Immigration has filled some gaps, although refugees are not necessarily taking the available jobs, and tend to leave anyway. As one inventive solution, a local training school is arranging to have young people study German in Vietnam and then head into apprenticeship positions in the area. Were it not for measures such as that, small towns would potentially shrink even further and possibly be abandoned all together.
Are there lessons for North America here? Certainly there is a potential warning of how things might play out if more workers are not found. In Canada’s Atlantic provinces, for example, aging is happening more quickly than it is elsewhere, especially in non-metropolitan areas. That is already straining government budgets which are facing the reality of fewer tax-paying workers and stronger draws on health care services. In Canada and in many countries things may well get worse. After all, it is an old equation: you grow an economy through population growth, and through productivity. If population growth is not there, all things being equal that means you grow less quickly. If East Germany does end up short of 5 to 7 million workers by 2030, as some experts predict, then economic growth is certainly going to suffer.
Or is it? To me, the wildcard in all of this is the impact of technology, something that is not really mentioned in the article. After all, apprentice humans will not be needed if ready-out-of-the-box robots actually replace the need for many job functions. That is a concept that is not as far in the future that many of us may like to consider. According to one study from the University of Oxford, about half of all jobs are vulnerable to being replaced by automation. Analyses from the Bank of England and the World Economic Federation (WEF) have reached similar conclusions. No one knows exactly the final figure or the pace of how it will happen in different countries, but it is certain that some job functions will not be needed in future, although in previous industrial revolutions (this one, according to the WEF is the fourth) other jobs have sprung up to replace them. Regardless, the absolute shortages of workers in East Germany or in North America may turn out to be less severe than sometimes predicted. That may not help individual workers keep up their standard of living, but it will keep industries running and promote overall growth.
Then again, even if technology replaces the need for some workers, it will not make up for the fact that societies will be populated by old, and getting older, people. Whatever happens in terms of technology, the reality is that many schools will indeed need to be turned into care homes sooner rather than later. Even if robots are able to staff some of those homes, they will not change the fact our societies will have a different overall vibe.
Robots will not judge whether the vibe from an older society is better or worse than the one we have today, and perhaps no one else should either.
Robots, joined by Gig Workers, are now making Twinkies, and they are doing such a good job that their parent company is going public. That’s a powerful statement about today’s manufacturing and economy, never mind our nutritional preferences.
Twinkies, those flaky, cream-filled snack cakes that are apparently beloved by many, have been a business news story several times over the past few years. Hostess, the company that makes them, has been around since 1919. Over the decades, it became a huge company that not only employed many unionized workers to the extent that that eventually had 372 separate bargaining contracts at one time. As this story from the Wall Street Journal details, the company ran into financial troubles in 2004 and ended up in bankruptcy court, nearly closing operations. Although the company rallied, troubles with union contracts sent it back there in 2012. It might have been the end of the line for the Twinkie.
The Twinkie rose again when the brand, along with the rest of Hostess’ snack food line, was purchased the following year by two investment firms, Metropolous & Co and Apollo Global Management. The company threw a bunch of money behind rebranding the product, with a huge amount of success apparently. Hostess reported revenues of $650 million for the year ended on May 31st of 2016, and according to the company has a gross margin of 43 percent. Earlier this month it was announced that Hostess would go public, allowing those who believe in Twinkies to actually buy shares in the company.
Thing is, although Twinkies do have a retro appeal, the business model behind them these days is very different from what it used to be. When Apollo and Metropolous set out to remake the company, they not only created new products (bread, a frozen-fried twinkie that will soon be released) they also poured about $100 million into investment. The number of bakeries used in manufacturing has been pared back, and larger ovens apparently mean more efficiency.
In reading the Hostess success story, however, two things really caught my eye. The first is that robots now pack Twinkies into boxes. That’s right, robots. For the most part, technology replaces workers in quite subtle ways. Word processing software and voice mail in one way or another did replace many secretaries, but that happened over time and was more about people not being hired than it was about anyone being fired and their job function taken over by machines. In this case, however, robots are doing exactly what human workers once did and getting Twinkies into boxes. That says a lot about the nature of manufacturing these days.
The other thing that stands out to me is that Hostess is now being sued by truck drivers in twelve states, saying that they are being called ‘contingent workers’ when they are actually (and would rather be) employees. To me, that one is perhaps even a more important trend than the Twinkie-packing-robots. Increasingly, workers are being shifted into the ‘Gig Economy’, a place where they get assignments rather than jobs. For top-tier professionals that can be an awesome thing that allows them to charge top dollar and set their own hours. For the truck drivers and others like them, it clearly means fewer benefits, less job security and probably a significantly lower income. Whether or not the drivers win their suit, the move to a new class of ‘Involuntary Gig Workers’ is a genie that has left the bottle.
At the end of the day, Hostess now employs just 1,200 people in its Kansas City factory, as compared to 19,000 at its peak. That is actually 1,200 more than would have been employed had the brand not be saved, which is a good thing. The stock offering this Fall is likely to get a lot of interest and potentially could be a bonanza for investors, and the infusion of capital is likely to allow the company to expand, which is also an economic positive.
You cannot get away from it though: Hostess is but one example of a company that is using robots and Gig workers to move forward. In an efficiency sense that is great, but now is also the time to take note of the trends and ask what they will mean in a broader economic and social context.
Twinkies, it would seem, are an economic indicator and one that we would do well to follow.
Really, it seemed like the universal basic income (UBI), was going to be the hot new thing in economic policy. It sounds like such a simple solution to economic woes, so uncomplicated, just so basic really. Give every citizen in a country some form of stipend so that at the very least everyone has enough to live on, goes the argument, and the issue of poverty would be solved. Why then, if it such an elegant solution to a bunch of thorny problems, have the Swiss so overwhelmingly rejected a plan to implement the UBI, and why it the backlash against it growing
But voted against it they have. On June 5th, 77 percent of Swiss voters said no way to a proposal to give every adult Swiss resident about $30,000 Swiss francs a year (a little over $30,000 U.S.), and every child about a quarter of that. Although the proposal (which was not put forth by a mainstream political party) did stipulate that the adoption of a UBI would go hand in hand with the elimination of all country’s welfare programs, it did not provide a lot of details on how much it would end up costing and whether would need to be raised to pay for the whole thing. Not surprisingly, the voters were wary and voted ‘no’.
The Swiss might have opted out of the UBI, but it is something we are going to be debating more and more in future. It is an idea that has its supporters from the political left (primarily because they think it might be a judgment-free way to pay people enough to end poverty) and even more from the political right (who believe that it is a way to lessen the size of government and treat everyone the same). Ultimately, however, the real support for a UBI may come from a wide swathe of people who are concerned by what technology may do to employment, or rather to unemployment.
We are at an exciting and scary time in terms of the global economy. Technology, which has more or less been our friend up to now, is now at a place where it threatens to out and out replace jobs, leaving a large portion of the population unemployed or underemployed. It is not a change we have seen before. When cars replaced the horse and buggy, buggy whip makers were able to find work in car plants. This time round, however, the elimination of jobs as a result of automation and robotics may well take a much broader toll, encompassing more and more jobs at all skill levels. A recent report by the Bank of England said as much, suggesting that as many as 15 million British jobs (close to half of current total employment) may disappear as a result of automation. If you believe that, and if you believe that it is a trend that might be replicated in other countries, then it is clear that a sea change is afoot. Looking ahead to ten or twenty years from now, perhaps we will not have a fully employed populace and the ‘sharing economy’ may indeed mean sharing the jobs. In that case, maybe it does make sense to move to a Universal Basic Income and have governments sort out the payment details.
The problem is, most of the details regarding a UBI are not well fleshed out anywhere. Paying a basic income to everyone in a country would come at a whopping bill that would have to be paid for somehow. Most likely that would come from taxes on those who were also working, which would erase any benefit that they got and act as a disincentive for many to work (opponents to the UBI in Switzerland made that case, suggesting it would lead to a flat out shortage of workers). I suppose another way of paying for the UBI would just be to print money to pay everyone although that would be an out and out disaster in terms of inflation.
In theory a UBI might work if it came in exchange for you every single other welfare program or government expenditure, but that also seems crazy. Close the libraries and let everyone buy their own books? Okay, maybe. What about erase every kind of disability payment and figure the basic income covers it? Or get rid of drug benefits or food stamps and assume that everyone will make the right choices when it comes to meeting their kids’ needs? Maybe not . And all of that is aside from the question of how to keep those that thinks a UBI sounds cool from heading to the region that provides it. If one U.S. state offered it, they would probably have a flood of people from other states moving in. If it was a whole country providing the UBI immigration rules might make it difficult for everyone who wanted to enter to do so, but it would provide a policy challenge just the same.
At the moment Finland, the Netherlands and Canada are planning tests of the UBI (in the case of the latter, the province of Ontario will be pilot testing a UBI in an unnamed region this fall) and the idea is gaining traction in Britain as well. The UBI may not ultimately be the magic solution to what is turning out to be a sea change in the economy, but if it is not it is certainly time to discuss some alternatives.
What do you think of we someone mentions jobs being replaced by technology? Maybe you flash on the automated checkout counters at your local grocery store, or you picture an assembly line powered by robots. What you probably do not figure on is one of those robots choosing stocks for you – but maybe you should. ‘Robo Advisors’ are now a thing, and more and more they will have a say in your portfolio.
Okay, it is not likely to be quite that cut-and-dried – financial advisors will not be asked to pick up their briefcases and march out of the office so that a fleet of robots can take their seats. And to be really accurate, Robo Advisors are not really robots who pick stocks. Instead, they refer to automated services that ask users a series of questions (‘what is your investment horizon?’, ‘what is your risk tolerance?’), then use an algorithm to come up with a plan that users can tweak as they would like. That done, they provide automated portfolio management services. Fees for use tend to be lower than going through an actual human advisor, which is of course a draw to many.
The best known name in the Robo Advisor game is probably Betterment, a digital investment startup out of New York that in March raised $100 million in venture financing, taking its total valuation to $700 million and making it more than a niche player. Even more significant is that the established names in finance – T. Rowe Price, Charles Schwab, Vanguard – have been making significant moves to broaden their use of computer-managed investment portfolios.
The job implications of using robo advisors are not readily apparent, and no one thinks that they will completely replace the role of humans in finance. After all, you cannot pick up the phone and scream at your Robo Advisor when the markets are down and have him or her reassure you that they have seen this before and that things will get better. In many cases, technology will likely be a tool that complements human advice, rather than replaces it. Still, the head of T. Rowe Price’s new dedicated ‘quantitative management’ arm, Sudhir Nanda, is being quoted as saying that many jobs in finance would be done more efficiently and cheaply by computers and that ‘humans aren’t going to be completely replaced, but that they will be mostly replaced’.
Up to now, we have mostly seen and worried about lower skill, lower education jobs being replaced by technology. The discussion over Robo Advisors brings an unsettling new trend to the fore, namely that jobs that have traditionally required more training may be at risk as well. We are still in the early days of the transition, but clearly we need to keep our eyes on the robots.
If you grew up watching The Jetsons, how can you be afraid of Robots? And really, given that it the show about the space age family has run in repeats forever (it was first broadcast in the early 1960s, and then some new episodes were made in the 1980s as well) most people in their mid-50s have probably seen the show. The family consisted of dad George, mom Jane, kids Jane and Elroy – and a very efficient robot named Rosie who was the family’s maid. Well, it took a while but Rosie or one of her descendants is apparently now working in a hotel – and not everyone is pleased about it.
Earlier this year, the Aloft Hotel in Curpertino, California (in the heart of Silicon Valley) announced that it would be trying out robots to answer some basic room service requests (‘I forgot my toothpaste can you please send some up?’). First out of the gate is one named Botlr who is already shuttling around with the Crest. He (or she?) will have a bunch of colleagues in a year or so. Botlr can’t knock on doors, but he can call your room to say he is outside, and if you get into an elevator with him he will be polite enough to let you exit first.
Some people are excited about being served by robots, and some are not. According to market research firm Software Advice, the younger you are the more likely it is that you will be excited about robot service. As the Washington Post reports, of those asked whether they would choose a hotel with a robot over one without, 77 percent were aged between 18 and 34. Of those who were not excited about the idea, 69.6 percent were aged over 45.
Whether you want to be served by a robot depends on a lot of things. You may, as the Post conjectures, like the idea because you want something cool to put on your Facebook page. You may not like the idea because you are worried about the employment prospects of those who could have been delivering the toothpaste. Or you may be biased and fearful about robots in general because if they are delivering toothpaste now, they may figure out how to do your job tomorrow.
Cute and novel as robots are right now, they are basically just another cool piece of technology, like instant tellers at the bank or scanners at the grocery store. They work cheap (or they will, once the technology is perfected), they are unlikely to unionize and unlikely to whine over their performance reviews. In short, the perfect employees, at least from the employer’s perspective.
Whether we see a Rosie in every hotel any time soon will depend partly on how quickly guests get used to them. Yes, you could have a person delivering the toothpaste, but you could also have a person selling snacks and soft drinks on every floor twenty-four hours a day. You do not see that though, because it is just not cost effective to do that. It is cost effective though to have a vending machine on every floor though – which when you think about it is a kind of stationary robot that everyone accepts without blinking an eye.