Future of work? – The real impact of AI & 4IR on employment


Mike Schüssler | Economist | Economists.co.za | mail me |

“How does Artificial Intelligence (AI) impact our world of work?” the editor asked. “Will the world see massive unemployment from the 4th Industrial Revolution (4IR) underpinned by AI, smart robots and all the new computing power and even smarter programming the world has today?”

I remember watching an expert from the International Labour Organization (ILO) decades ago explain the shift from agricultural employment to manufacturing and services in Europe and America and how fewer than 3% of Americans worked in agriculture in 2000 compared to nearly half two centuries ago. Yes there was pain and movement of people from rural to urban areas. The migration is still taking place on a large scale in many developing countries today

The service sector recently employed 49% of the world’s work engaged adults. The share is up, from less than 35% 27 years ago, and shows how automation in industrial jobs, such as manufacturing and mining, has declined. Workers have moved to services in the advanced countries, while workers in the developing countries moved from agriculture to industry and services.

Chart 1: The sectors where the world employed work

Old jobs are lost, but new jobs came along. The world does change and is probably changing even quicker but humans adapt and we change.

Change has been taking place for the best part of two centuries. It is probably increasing in speed and so far, the world has survived, and people have become more affluent. Yes because machines helped increase our productivity and new forms of work appeared, humans changed their jobs.

This increase in productivity has been great for the poor people of the world too. Remember today less than 10% of the world population lives in absolute poverty – down from 90% in 1820! (relative poverty remains, but not absolute, which is falling)

The charts below show the massive increase in world semi-conductor sales and robots operating. In Japan nearly 1,300 Robots work with every 10,000 automotive workers. Slightly fewer workers produce cars, but more workers sell and design cars today. Some do research on customers to find out what the customer wants.

The actual raw material going into a car today is less than 5% of the price and the cost of production is less than half the selling price too. Why? Because safety research, sales, marketing and design make up around half the costs. Transport, manufacturing, raw material combined do not make up half the car price either.

New services spring up all the time, such as in the form of shared economies, such as Uber making cabs more affordable, Airbnb make holidays more frequent and give average people a chance of becoming small hoteliers. The 4IR is not actually much of a manufacturing revolution, but a services revolution. When last where you in a bank? When last did you buy a Video in a store? We book seats on planes, busses and restaurants via apps.

Chart 2: Robots have increased fourfold in the last decade

Chart 3: Artificial brains production is ten times more today than 1990

Does this change cause unemployment and lower wages?

The World’s unemployment rate in 2019 was 5,4% and has remained between 5% and 6% for the last decade and a half.

So the robots have not taken jobs away nor have the intelligent brains and software the world produces – at least those are the facts we have so far. In the 1970’s the world unemployment rate was closer to 10%, so today fewer people are unemployed. Again no proof that technology such as AI has reduced the number of jobs.

Chart 4: The worlds unemployment rate

Source: the ILO World Economic and social outlook January 2020

While unemployment increased slightly to 5,5% in 2021, unemployment is not a major issue at present. More adults have only part time work today than before. It is here where perhaps much of the revolution in AI might be impacting on jobs.

Hours worked in a year have fallen for the best part of a century and living standards have increased. In 1965 the average American worker in the private sector worked 39 hours a week. The average worker today works less than 34 hours – a decline of 15%!

Immediately more part-time workers come to mind, but more part-time workers would imply less

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Read the full article by Mike Schüssler, Economist at Economists.co.za, as well as a host of other topical management articles written by professionals, consultants and academics in the February/March 2020 edition of BusinessBrief.

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