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Smart computers, skilled robots, redundant people

Grigory Milov
Vedomosti | May 28, 2013

By 2025 the economic impact of 12 existing new technologies will undermine the foundations of the labor market, say experts of the McKinsey Global Institute (MGI). The changes can affect nothing short of hundreds of millions of jobs.

According to the authors of Disruptive technologies: Advances that will transform life, business, and the global economy, the new MGI report, the long list of promising or, as MGI puts it, disruptive technologies, includes more than 100 candidates. The list was compiled based on results of the analysis of hundreds of science articles, venture transactions, and interviews with experts and opinion makers.

The final list includes only those technologies that have a great creative and, at the same time, destructive potential. They are developing rapidly and are capable of producing significant economic impact, going beyond the boundaries of traditional disciplines, creating new business opportunities, and hence changing the status quo.

Seven trillionaires

Twelve technologies made it to the final list. The annual economic potential of at least seven of them reaches or, in some cases, exceeds $1 trillion. The total amount stands at $14 trillion to $33 trillion per year.

The seven trillionaire technologies do not include any modern materials sciences, which, according to the MGI classification, are nanotechnology and new methods of oil and gas exploration and production. These disciplines were rated 10th and 11th respectively.

The biggest creative as well as destructive potential is in the area of various mobile Internet applications and new solutions to automate “knowledge work.”

By 2025, the number of Internet users will increase by 3.5 billion, with 2 billion gaining Internet access with the help of mobile devices, say the authors of the report. This means that many of those who did not participate in the global division of labor, and had little access to modern education, health, and public services, will have that access from that moment on. And the progress does not stop there.

According to the researchers’ estimates, remote monitoring of patients’ health will reduce the cost of treating chronic diseases by 10 to 20 percent. Labor productivity associated with transaction management can be increased by 50 percent in payment systems and by 6 to 15 percent in retail trade. Administrative costs can be reduced by 60 to 75 percent.

Help them fire you

By 2025, many of the tasks performed by a typical knowledge worker will become automatable. Computers have learned to process tons of unstructured information, interpret human speech, and understand the commands, actions, and even intentions of human beings. This will allow teachers, engineers, medical professionals, lawyers, financiers, administrators, and managers to partly delegate their duties to computing devices. However, in some cases, it can lead to complete replacement by computers. The content and scope of work of 110 million to 140 million knowledge workers around the world may change. The annual effect of automation ranges from $35,000 to $65,000 per worker, depending on the occupation. Yet the lion's share of the total economic impact, which could reach $6.7 trillion a year, will be captured by developed rather than developing countries. Not only do developed countries have more high-skilled jobs, explain the researchers, but also the average earnings the employees generate are up to $35,000 higher than in developing countries.

Those who will want to capture this potential are likely to face major technological, regulatory, and organizational barriers. Many managers will not take the risk of investing in technologies that have not been tested by time. Besides, workers may oppose these tools. Far from all lawyers or doctors are willing to trust artificial-intelligence systems, the researchers say. And last but not least, automation of white-collar jobs may require fundamental changes in the principles of labor organization. Before automating those processes, one has to describe them, and this task often has to be performed by the same people whose jobs may subsequently be at risk. The use of new technologies, as a rule, leads to layoffs and creates completely new roles and jobs, the authors wrote.

Improving labor productivity without innovation and retraining of employees can lead to lower wages and increased income inequality—as well as workplaces with fewer human beings and more machines, the researchers warn.

Blue and white collars alike

Automation of routine knowledge operations could result in making redundant those trades that can be taken over by artificial intelligence—for example, accountants, journalists, some medical specialists, and financiers, agrees Dmitry Peskov, who runs the “Young Professionals” department at the Agency for Strategic Initiatives (ASI).

In these (and similar) areas only two categories of specialists are likely to remain: most highly skilled and unskilled. The middle layer will be eliminated. But top professionals will have to learn to use artificial intelligence, while unqualified employees will have to accept the fact that their work will be paid for at a level lower than the cost of those systems.

In the case of blue-collar workers that issue is no less acute. By 2025, the average price of complex, high-precision robots used in production operations may fall below $75,000. Today prices are falling by more than 10 percent annually, and the number of these robots is growing even more rapidly—by 40 percent worldwide in 2011.

As a result, researchers estimate that by 2025, robots may jeopardize from 25 million to 40 million jobs in developed countries and from 15 million to 35 million in developing ones. Many of the blue-collar workers who will lose their jobs may need both retraining and material aid, the researchers wrote.

Majority of technologies on the MGI list may lead to a redistribution of jobs, that is, layoffs in some countries and companies and new jobs in others, says Pål Erik Sjåtil, a McKinsey director in Eastern Europe and the CIS. No analysis of possible changes at the level of individual countries was performed, he said.

Who would you believe?

The situation is exacerbated by the fact that, according to the authors of the report, more and more often, a consumer of modern technologies who has not yet turned 20 can give a more accurate technological forecast than a panel of recognized experts. Entrepreneurs and officials need to make considerable efforts to keep pace with the development of new technologies, agrees Mr. Sjåtil, yet the experience of using latest innovations is no substitute for the skills and expertise to create business models that can generate profit. As for the accuracy of the forecasts, Mr. Sjåtil believes that, in retrospect, the trends, ideas, and models related to e-commerce and mobile Internet that were discussed by McKinsey consultants in the early 2000s, on the whole, have been proved correct.

The introduction of new technologies coupled with a discrete increase in productivity leads to a sharp decline in employment, says Mr. Peskov of ASI. Therefore, an increase in the number of “redundant people” may prove to be a key issue both in the Russian and global labor markets. One possible strategy that could be used at the level of national regulation is using new technologies to create “interim stage” systems. Today, universities and institutes in Russia perform a social function, because we do not know what to do with our young people, and the government is ready to pay salaries to specialists whose skills are not required anywhere just to prevent a social explosion. But this problem can be solved with the help of the modern system of continuous education. Retraining programs may last several months, but can entitle one to a maintenance allowance and give one an opportunity to master a new, more in-demand profession, concludes Mr. Peskov. “If 100 years ago experts had analyzed the state of technology at the beginning of the 21st century, they might have come to the conclusion that in the future there would be no jobs at all. But we know that this is not the case,” said Vladimir Gimpelson, director of the Center for Labor Research of Higher School of Economics in Moscow. The introduction of new technologies gives rise to a lot of indirect effects. For example, someone has to develop and maintain the machines that can replace people. At the same time, it is relatively easy to automate routine work, but there is a lot of non-routine work. It will take robots a long, long time to learn to perform even ordinary plumbing work, says Mr. Gimpelson.

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