Suraj K. Gupta is President & CEO of Rogue Insight Capital, an investment firm focused on supporting diversity, innovation and social impact
The job market is changing at a pace faster than ever before. Automation is increasing at incredible rates, and many manual and dangerous jobs for humans have been replaced by machinery. In fact, several years ago, the Institute for the Future projected that 85% of jobs that will be available in 2030 did not exist yet.
While technology leads to increased efficiency and efficacy, it also severely disrupts the job market. For years, the world has been grappling with the idea that increased automation could destroy millions of jobs in the future, particularly in the manufacturing sector. Many have used these points as rallying cries to discuss saving blue-collar jobs and retaining employees in their countries.
While the conversations around technologically-linked job destruction are well-founded, often they do not take into account many other sides of the equation. As President & CEO of my VC firm, Rogue Insight Capital, I see thousands of new companies every month that are disrupting entrenched industries and bringing about change. I believe this disruption can be a net positive for the economy and the job market if it is handled in the right way. For example, while technology can disrupt and destroy many jobs, it can also create a whole slew of new opportunities that range from new employment opportunities to entire new industries. Further, technology can often replace humans in work that is incredibly dangerous and potentially permanently harmful. So how do we handle this disruption?
Destruction Or Transformation?
We have all heard the argument that automation and outsourcing lead to the destruction of millions of jobs. Governments have long offered incentives for companies willing to create jobs locally and have considered penalizing companies that outsource work product to foreign countries. However, the issue facing all corporations is that they are competing in a global world, not just a local one. When competitors are based in countries with low wages and loose (and often dangerous) labor laws, it can be incredibly difficult for companies in developed countries to compete sustainably. They need to build advantages either on top lines (via innovation and better product differentiation) or on bottom lines (via cost reduction).
Many corporations have chosen to outsource labor-intensive jobs to countries with lower wages, and many have chosen to invest in automation and robotics that can replace human labor cheaply and efficiently. This machinery can operate 24 hours a day with very little variability in work product and can complete dangerous or repetitive tasks that could cause significant harm to human beings.
While this type of automation replaces human labor, many studies have shown that automation actually leads to a net increase in employment opportunities, not a decrease. The World Economic Forum predicted that 12 million more jobs will be created than destroyed by 2025 due to a “shift in the division of labour between humans and machines.” A Harvard Business Review article (paywall) explains that we often focus on job creation and destruction. However, we don’t typically focus on job transformation. Transformation is the crux of this issue.
Innovation And Retraining For New Opportunities
Throughout history, we have seen technological innovation that has transformed job markets. Often this transformation created new, safer job opportunities. When Ford Motors created the assembly line in 1913, car production time dropped from 12 hours to 93 minutes. Despite the trepidation that many jobs would be destroyed as a result, Ford instead began hiring workers for $5 a day, which was more than double the standard wages for factory workers at the time. The assembly line created many job opportunities, and though these jobs were difficult and highly repetitive, the innovation led to increases in hiring and wages and revolutionized global manufacturing.
In my opinion, automation will very likely create more jobs than it destroys going forward. But will those who are replaced by machinery have the adequate skill sets and training to take advantage of these new prospects? For example, a rural factory worker who loses their job may not be immediately positioned to take advantage of new opportunities that are created as a result of innovation. We need more investment and resources put into high levels of retraining and development in order to make a transition possible.
Regulation can force companies to retain a high level of expensive, domestic labor, but this is likely a short-sighted solution that will not position an industry or country to be sustainably competitive. What I think we need is more incentives for innovation and product differentiation and more skill retraining opportunities so that employees can more easily transition into new roles. If we create a system where people can stop completing menial, repetitive and dangerous tasks, and can instead be trained for new roles that could pay higher wages in a safer environment, we can ensure everyone is better off as a result. Automation can make our industries safer, more reliable and more competitive, but we need to provide adequate skills and resources to those who are displaced by this automation to progress as a society.
