Bots Versus Bohemians: Resiliency of Labor Markets in Automated Cities

ABC Meeting Regional Science

Academy “Smart People in Smart

Cities” Banska Bistrica,Slovakia

August 28-30,2016

What impact is automation and related machine work having on employment and wages?

Are there regional variations in effects, and if so, why?

What does the future hold, especially as Machines become “smarter” and we get deeper into the Fourth Industrial Revolution?

Will the effects of the Fourth Industrial Revolution be different than those of prior revolutions?

Predicts mass job loss due to automation and smart systems

In fact, many economists are saying that within the next decade or so, more than 50% of jobs at risk of automation

“as mechanical muscles pushed horses out of the economy, mechanical minds will do the same to humans.”

Leontief (1952): “Labour will become less and less important…More and more workers will be replaced by machines. I do not see that new industries can employ everybody who wants a job”.

Job Loss (-)

Increase in productivity, increase in

income, increase in demand for goods and

services and increase in employment (+)

Rise of new occupations, increase in jobs

(+)

Short-Term versus Long-Term

Schwab, K (2016). “The Fourth Industrial Revolution”

Machines Humans

Manual Tasks that do

not require critical

dexterity

Judgment

Risky, dangerous

manual tasks

Insight

Routine Tasks Intuition

Pattern Recognition Retention and Use of

Tacit Knowledge

(Polanyi’s Paradox),

Self-Learning

Supervised Learning Social and Emotional

Intelligence

Creativity

Manual Dexterity

Intelligence

Artificial

Intelligence

(Weak AI)

Increase in high wage, high skill jobs

Increase in low wage, low-skill jobs

Decrease in medium wage, medium-skill

jobs

Vanishing Middle Class! And Wage

Inequality!

Source: Autor and Dorn (2013) “The Growth of Low-Skill Service Jobs

and the Polarization of the US Labor Market”, American Economic

Review, 103(5)

Source: Autor and Dorn (2013) “The Growth of Low-Skill Service Jobs

and the Polarization of the US Labor Market”, American Economic

Review, 103(5)

Source: Autor and Dorn (2013) “The Growth of Low-Skill Service Jobs

and the Polarization of the US Labor Market”, American Economic

Review, 103(5)

S

ou

rc

e:

Advanced Robots (Including Cloud Robotics) Drones 3d Printing Internet-of-Things Nanotechnology Artificial Intelligence (Including Machine

Learning) • Weak (Narrow) AI

• Strong AI/Artificial General Intelligence

• Superintelligence

High Risk,

Routine Tasks

and Operations

Changes in shares of automatable, non-automatable and semi-automatable occupations between 2010 and 2015 (nationally and by state - US)

Apply Frey and Osborne (2013) classification of detailed occupations (702 in total) by probability of automation • O*Net (US Department of Labor) and Machine Learning

• Automatable: 75% probability or more, Non-Automatable: 25% probability or less, Semi-Automatable is everything in between

• Excluding Farming and Education occupations

Automatable Non-

Automatable

Semi-

Automatable

Key Points: • Mix (Semi-Automatable) is where the action is: Rise of Occupations/Tasks that can be

automated, but still require “humans-in-the-loop” (specialized skills), Machines

outsourcing to Humans (Schintler)

• Rise of the “New Artisans” (Autor)

• Polarization of Middle Class (Katz)

Inconsistent with Wright

(2013). “Middle-Wage Jobs

that Have Survived, and the

States That are Fostering

Them”, EMSI

And Pew Study

HUMAN-MACHINE SYMBIOSIS

What does the future hold, as we move

deeper into the Fourth Industrial

Revolution and as Machines become

more “intelligent??

Microsoft’s AI Chatbox

Machines are

beginning to be

able to pass the

Turing Test

Capable of Judgment, Reasoning, Insight,

and retention and use of tacit knowledge

Updated Polanyi’s Paradox: A Machine

can know more than it can tell.

Resource Exhaustion: Iron runs out…paper

clip production goes Interstellar

Comparison of Game

Complexity

Chess: 10123

Go: 10360

Occupational and Class Structure is Changing

Decrease in Job Polarization – Upper and Lower Wages (Related Skills)

Increasing Polarization within the Middle Wage Class, Rise of occupations that require humans-in-the-loop

Regional Variations Implications for Investment in Human

Capital, resiliency of labor markets, etc