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Tuesday, March 9, 2021

THE ECONOMIST: Economic (R)Evolution

Even as full employment and the difficulty of finding workers are challenging businesses across the country, researchers are describing scenarios in which a third of U.S. jobs could go away by 2030 due to automation and artificial intelligence (AI). Global consulting firm McKinsey & Co. estimates that between 39 million and 73 million U.S. jobs could be eliminated due to AI. For about half of those, there are likely to be similar occupations or different tasks that the displaced workers will take on, but millions of people will need retraining for very different jobs. The world is changing, and it’s changing fast.

Economic evolution is never easy. The invention of the wheel in Mesopotamia around 3500 BC paved the way for advances such as the wheelbarrow, leaving many laborers without work. That was actually the greatest technological disruption in human history (by far). During the 19th century, the Industrial Revolution led to the “Luddite” labor movement, where people who objected to automated equipment stormed factories and took sledgehammers to the machines.

In the 1940s, economist Joseph Schumpeter used the phrase “creative destruction” to describe the process through which new and improved ideas lead to the demise of older approaches. He called it the essential fact about capitalism, as markets provide incentives to develop and disseminate new ideas. More recently, the creation of Netflix brought the demise of video rental stores, and Amazon has drastically cut into the business of brick-and-mortar retailers.

Thus far, AI is actually creating jobs. Researchers at Capgemini surveyed about 1,000 organizations currently using AI; 80 percent indicated they have added jobs from technological advances. AI is being used to generate sales leads, improve customer service and boost productivity.

In 1999, the Department of Labor predicted that 65 percent of the jobs children entering school at that time would be doing did not yet exist. A 2017 study by Dell Technologies and the independent Institute for the Future explored emerging technologies shaping the future of the human experience. A key finding is that about 85 percent of the jobs that will exist in 2030 haven’t been invented yet. It’s shocking and may not materialize, but it is not unreasonable.

While some view the future with fear and envision rampant unemployment and dismal prospects, history suggests an alternate perspective. Solving the world’s big problems will require all of our ingenuity, including new machines that can learn to help. An individual invention can be labor-saving (or “job killing” in modern parlance) for a time, but on balance progress invariably leads to more, but at times very different, workers. One need look no further than the wheel to see this phenomenon. Love AI or hate it, but it’s coming, and those individuals, companies and societies that best adapt will flourish.

M. Ray Perryman is president and chief executive officer of The Perryman Group (www.perrymangroup.com). He also is Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

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Ray Perrymanhttp://www.perrymangroup.com
Dr. Ray Perryman is President and CEO of The Perryman Group, an economic research and analysis firm based in Waco, Texas. His firm has served the needs of more than 2,500 clients, including two-thirds of the Global 25, over half of the Fortune 100, the 12 largest technology firms in the world, 10 US Cabinet Departments, the 9 largest firms in the US, the 6 largest energy companies operating in the US, and the 5 largest US banking institutions.

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