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Innovation11.20.14

The Re-Invention Economy

How will new technologies like 3D printing affect middle market businesses?

As automation and computerization expand, anxiety about jobs is at a fever pitch.

Some say computers will displace a vast array of human work. Many others argue it polarizes the labor market: in a widely cited paper, David Autor and David Dorn argue that automation has forced middle-class workers easily replaced by machines into low-skilled jobs such as cooking, cleaning and healthcare; high-skilled workers capable of abstract thinking unmatched by computers are also surviving. In another paper with Gordon Hanson, Autor and Dorn show how globalization — import penetration from China — has further hollowed out the middle, or blue-collar U.S. manufacturing jobs.

But as technology and globalization expand, the ends of the barbell economy are feared to be at risk. Is the gloom warranted?

Labor market angst is nothing new. The 1990s kick-started blue collar blues — fears that U.S. manufacturers would either offshore or be demolished by Chinese imports. In the 2000s rose white collar worries — that call centers, data processing, financial analysis, web design and hip surgeries would be outsourced from in India, placing a quarter of U.S. jobs at risk. While not unwarranted, these fears proved much overblown. A more forceful cause of job losses has been technology, as immortalized in Kodak moments, falls of giant corporations and workers unprepared for the digital era.

High-skilled knowledge workers and low-skilled service workers have seemed immune to the twin forces of technology and globalization. But now smart machines are doing what high-skilled do — aptly crafting sales presentations, choosing medical treatments and routinely making the millions of decisions needed to manage complex supply chains. Knowledge work can now be done from anywhere, and not only on the back of the cloud and Skype. Soon executives — as well as financial advisors, accountants, data analysts, coders, etc. — could appear as holographic 3D avatars projected onto venues around the planet right from their home offices. By 2025, hypersonic flights could take an executive from Shanghai to New York in two hours — a doable commute even twice a week.

At the lower end, jobs for greeters, telemarketers, retail workers, waiters, accountants, even carers of the elderly could be offered virtual assistants that work 24 hours a day, seven days a week — and never ask for a raise.

This leads one to believe that those not automated out will be outcompeted by globally footloose virtual and hypersonic workers. Yet five factors paint a much brighter future.

First, as Autor has recently pointed out, knowledge workers are still much less likely to get outsmarted by machines than to use machines to do their jobs better and faster. Excellence (and survival) at work is increasingly about demonstrable abilities to problem-solve, intuit, think creatively and exercise common sense, areas where computers — excelling at optimization, logic, statistics and so on — are still human pre-schooler equivalents. And it is unlikely that everyone would love to be hosted or cared by a virtual avatar if a real human is available for a moderate premium.

Second, smart technologies make the labor markets more adaptive. Predictive analytics will enable workers to anticipate better what jobs are on the rise. With advances in metrics and analytics of employees’ ever-important soft skills and attributes, labor markets can become much more differentiated, with artificial intelligence applications matching workers to jobs much faster globally. The web has already reduced joblessness — in a recent U.S. International Trade Commission study, U.S. unemployment rate was 0.3 percentage points lower in 2012 than it would have been at 2006 Internet usage level. Where the Web is newer, it has squashed unemployment even more — in Russia, by 2 percentage points; in China, by 2.5 points; in Brazil, by 1 point.

Third, makeovers will be easier. Hiring is increasingly for discrete tasks rather than occupations, such as crowdcasting, corporate-sponsored calls for problem-solving among a curated group of people. In a task-based labor market, terminal degrees weigh less than retooling in real time — continued education powered by massive online courses and digital on-the-job learning. Career moves can be less daunting than going from the factory floor to a computerized office — for example, coding, programming and web design are increasingly accessible even to lower-skilled workers.

Fourth, there will be more companies hiring. It is fashionable to argue that digital economy superstars will be skimpy employers. For example, at the same market valuation of $25 billion, the 1990s star multinational Dell employs 111,300 people, while the newer digital superstar Twitter employs just 2,700. But the math is too simple. Technologies from 3D printing to ecommerce and Big Data are making it much easier for small businesses — the backbone of U.S. jobs — to launch, scale and compete globally. If future companies staff fewer people, there will also be far more of them, each offering a differentiated product or service to a global customer base. New companies can also spawn entrepreneurial ecosystems around the planet, not unlike Apple has done for app developers or Uber for drivers.

Fifth, technology unlocks latent economic growth that spurs hiring. Digitization of products cuts the costs of moving goods across borders, a key driver of trade-led growth. Technology can overhaul healthcare and education, sectors with stagnant productivity making up a fifth of the U.S. economy. Strokes of the old-fashioned pen are needed, as well: cutting red tape and boosting regulatory certainty would recharge the U.S. and several major economies, such as France, India and Brazil.

The giant question mark in tomorrow’s economy is the adaptability of workers. Not everyone will thrive on the churn and change and self-reinvent. Existing tools, such as the Trade Adjustment Assistance that has helped retrain more than 230,000 workers impacted by trade over the past decade, are not made for the digital economy — where competition is ubiquitous and amorphous, not only about offshoring or import penetration.

Of course, governments can shut down the virtual highways where tomorrow’s commuters beeline — such as by making overseas nationals more complicated. A better answer would be a public-private partnership between the government and the resented “tech elite” companies such as Facebook to deploy corporate PR and social responsibility dollars to fuel the retooling and rehiring of digital era workers, in exchange for cuts in income and payroll taxes. With some imagination, technology and good policy can be job-creators also in the global digital economy.

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