Where Did the Jobs Go?
I think we can all agree on one thing; what can be automated will be automated. In fact, we all benefit a great deal from automation across a variety of sectors. These include everything from business process automation, to inventory management automation, to safety automation. Automation creates efficiency and in many cases, can reduce the cost of goods and services. However, unless we are personally impacted, we generally don’t see the job loss that comes with automation. Since 2000, the U.S. has lost five (5) million factory jobs. A recent study by Ball State University discovered that 88% of those jobs were lost to robots (automation).
In 2009, there were approximately 150 million people in the U.S. Labor Force. By 2020, that number is estimated to be around 162 million. The EPA, in their Smart Location Database, categorize workers by High Wage ($3,333/month), Medium Wage $1,250-$3,333/month), and Low Wage (<$1,250/month). The following chart shows the percentage of the labor force by wage category for 2009 and 2020 (forecast):
In 2009, 24% of the labor force was categorized as low-wage. In 2020, the number is expected to double to 48%. Wait. Whaaaat? Let’s say that again. The percentage of all jobs that will be categorized as low wage, meaning monthly income less than $1,250 is expected to double in a 10 year period. Even scarier, 2020 is only three years away. That’s a big deal.
It gets worse. A study done in 2013 by Oxford University concluded that up to 47% of all U.S. jobs are at risk of being eliminated due to software, robotics. and artificial intelligence. Fortunately for you all, I already disclosed I am not terribly smart, so I won’t offer any economic policy solutions, although there are many being discussed. What I do know a little bit about is the pace and speed of technological innovation. It doesn’t have iterative effects, it has exponential effects. What’s that mean? As soon as the technology is ready, it gets deployed at scale.
This is probably a good time to remind you that I am long U.S.A. I fundamentally believe in this country’s ability to innovate and thus create new jobs that do not currently exist. Uber is a recent example of this. The number of people earning income by driving a car is substantially higher than before Uber existed. Also, I generally don’t buy into the world-is-ending technological unemployment argument. However, our job market is a part of a much bigger economic system that includes education and commerce. Generally speaking, our tiered education system roughly equates to income categories. As an example, in Kansas City, the correlation between Low Wage Workers and People with a High School Degree is 0.97.
So, what does all of this mean?
Effectively, we are starting to see technology and automation squeeze the income graph. The result of that squeeze likely means we will see an increase in the number of low income workers. Low income workers will be better educated (formally) than ever before in history, which makes those jobs even more competitive. Which likely forces the lower educated out of the workforce entirely or into part time employment. That means the labor force participation rate continues to drop. Which, in turn, means a small number of people earn more than they do today and a large number of people earn less. All of those statements have significant impacts on cities.
Why is it relevant to cities?
Cities are in many ways the result of concentrated employment opportunities. They reduce the friction of finding a job, getting to that job, and spending the money made at that job. In essence, cities are a big flywheel of working and spending. Everybody wins when the flywheel spins favorably. Flywheels depend upon a certain level of equilibrium to work properly.
It’s the job of cities to plan for the future. We must consider the future demand curve of our citizens. I do know that urban form will change if these trends continue. The planning must begin now in order to anticipate many of these changes.
