The impact of AI on jobs is larger than you think
Whether artificial intelligence will have a major adverse affect on jobs, or not, is a hot topic. While I don’t know if our circumstances are unique in Australia I do know that our economy is highly vulnerable to advances in AI (by AI here I mean everything on the continuum from data science on the left through to deep learning on the right).
The Australian-based experts I read in the press and on Linkedin are 90-percent plus of the view that this is (a) just another industrial revolution, (b) job losses will be made good by retraining for other jobs, and (c) the future for people who prepare their creative and empathy skills and use AI to assist their work is indeed bright.
The global impact of AI is substantial
In March this year, PWC released a report saying that 10 million UK jobs are at risk of being replaced by AI within 15 years. Prior to this in November 2016, the Bank of England said that AI posed a risk to almost half those employed in the UK and that a “third machine age” would hollow out the labour market, widening the gap between rich and poor. In a recent report the McKinsey Global Institute said that by 2025 AI will do the jobs of 140m knowledge and skilled workers globally.
Let’s not forget the truck drivers. In his speech at Harvard University recently, Mark Zuckerberg said that his generation will have to deal with “tens of millions” of jobs replaced by self-driving cars and trucks. In late May 2017, the International Transport Forum published a report warning that of the 6.4 million professional drivers that are projected to be needed in the US and Europe by 2030, that 4.4 million will be replaced by self-driving trucks. Proportionally Australia is predicted to have 100,000 truck drivers made redundant.
This is no industrial revolution redux, it is an Automation Armageddon.
Sometimes I wonder if people realise that if heavy dangerous trucks can be automated en-mass then cars would have been done long before, and of course, they’ll be powered by renewables. That means the end of the car insurance industry as we know it, the end of multiple streams of government revenue such as parking and speeding fines, the end of parking lots as assets, the end of the taxi and small parcel delivery industry, and hopefully the end of our monopoly toll road businesses! No need for train drivers, that’s an order of magnitude simpler than automating trucks.
The impact of AI in Australia
Australia has an economy dominated by monopolies, duopolies and oligopolies. This type of economy is a sitting duck for massive job destruction.
As far as the impact of AI goes, the bottom line is that lack of competition breeds huge complacency — and that’s the defining characteristic of the economy described above. While ideas and invention might seem to be bubbling along at a satisfying rate, actual innovation and new wealth creation is minimal, and most often crushed or simply worn down to exhaustion by the incumbents.
The oligopolies in banking, finance and insurance alone are stacked with tens of thousands of employees who spend their day fighting the incompatible systems and in many cases antiquated IT infrastructure.
I had a “business banker” at one of the majors show me her screen while she went through 10 minutes of cutting and pasting between systems in order to link my new credit card to my accounts. Tens of thousands of those jobs are gone, and they don’t need to be replaced with “creative and empathetic” new ones. They are simply not needed. They are a product of the complacency and lack of competition. Their disappearance will not promote competition or improve relative financial performance as all oligopolists will be forced down the same path.
Insurance companies are already dinosaurs and while we will still need insurance, we don’t need our current insurance companies.
Even our giant mining companies won’t be employing the workers they did in the last China boom. Those expensive on-site skilled jobs are gone forever, replaced by massive automation and AI from mining operations to plant operations to administration. Truck drivers need no longer apply.
How this will happen is clear — it will be advances in current procedural and AI learning systems, the and the biggest challenge is more the mess that they have to interface with in customer’s systems, than their ability to solve the inherent problems.
The timing is always a moot point — impact is always overestimated in the short term and underestimated in the long term. But the ITF says 2030 and McKinsey 2025 and those are scarily close dates for lethargic Australia. Because a core skill of oligopolies is in protecting their regulatory position, they can hold out for longer than firms in competitive markets. But when they fall they fall harder and with a greater cost to employees and taxpayers.
The impact will be shattering. The middle class will be hollowed out and the shock of going from “careers with benefits” to uberised zero-hour zero-benefits contracts will be beyond imagination. “AI resistant” jobs such as plumbers, aged-care and child-care workers will be the new elite, and at the top of the hierarchy of most desirable jobs in the nation will be the Federal public servants. The Baby Boomers will be nicely retired and Gen X will have held on to their seats long enough to do the same — becoming the most wealthy and the last such generation in Australia’s history.
There are no one-sentence solutions. Structural planning is required and topics such as Elon Musk’s “universal basic income” need to be modelled seriously.
Why are people complacent? It could be that current CEOs believe the platitudes, and they’ll have comfortably exited anyway. Or perhaps because the advances in AI as so profound and happening so quickly that those with economic influence are simply unaware.
Australia, as a home of the corporate oligopoly, suffers the associated elitism, complacency, lack of innovation and resistance to change which are characteristics of all oligopolies. This makes it especially vulnerable to the upcoming artificial intelligence revolution. Planning for major structural change is the key to mitigation, which will only happen if the extent of the impact is fully recognised.