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9/5/2004

Service, no smile

By Gregory M. Lamb
The Christian Science Monitor

In 19th-century England, craftsmen donned masks and rioted to force the destruction of textile machines that were stealing their jobs. The rebellion was crushed and the followers of Ludd — or Luddites — have come to be viewed as hapless rubes standing in the way of progress. But they had a point:

Automation causes unemployment.

The wave of automation now crashing onto the economy looks especially broad and powerful. Although its full impact is unclear, it could cause worker dislocation on a scale not seen since the Industrial Revolution, experts say. Eventually, technology creates more jobs than it takes away, they add. But in the short term, it’s affecting more sectors of the labor market than in past eras of rapid technological change.

Technology’s effect on job loss is “very significant,” says Sandra Polaski, an economist and senior associate at the Carnegie Endowment for International Peace in Washington. “It’s not just the same old thing that’s been going on forever ... (It’s) a very big pulse of new energy, of new ways of doing things.”

Take industrial robots. Over the past 10 years, companies have spent some $100 billion installing them. Nearly 1 million are now on the job. The investment has proven spectacularly effective. The productivity of these machines has risen about 7 percent a year for the past decade.

But the human cost has been immense. Automation has eliminated some 10 million jobs, mostly in manufacturing, over the same time period. And the traditional advice to workers — join the computer-based “knowledge economy,” or move to the service sector — looks suspect.

These havens aren’t safe anymore. “Smart systems,” computers that can do relatively routine tasks well, are beginning to gobble up jobs ranging from check-out clerks at Home Depot to airline ticket agents and hotel desk clerks — even to insurance underwriters and software customer support staff. “Machines are having greater success at things like writing software,” said Harvey Cohen, president of Strategy Analytics, a research and consulting firm in Boston. “And yet 10 years ago, the government was advising people that the future was in areas like software.”

Policymakers must focus on this shift and its impact on society, Cohen said. They have to figure out what steps are needed to mitigate its ill effects. In the long term, he argues, America in particular has more to fear from automation than the outsourcing of jobs overseas.

Cohen concedes that he can’t back up his claims with solid numbers — yet. “We just don’t have data yet on how (automation) will affect the job market over the next decade,” he said. But a look at the recent past suggests a not-too-rosy future.

When the seven “Baby Bells” emerged from the 1984 breakup of AT&T, the companies embarked on a crash course of modernization from analog to digital technology. Over the past two decades, they also shed about half of their jobs. Today’s phone companies use computer-controlled, highly automated systems that often diagnose and even repair themselves.

“One could argue that 300,000 to 400,000 jobs, some of the best the country has ever created, have disappeared from the telecommunications sector,” Cohen said. “And the benefit we got was lower phone bills.”

Similar trends are showing up in the service sector. “It’s not unlike the industrialization that took place in manufacturing a century or so ago,” said Uday Karmarkar, a professor of technology and management strategy at the University of California at Los Angeles. Businesses have found “you can shift many things to the customer. You can shift many things to a computer.”

With the advent of e-mail, the letter-delivery business is going to disappear, he predicts. FedEx and the U.S. Postal Service are “more and more in the small package business now. We’ll see kiosks replacing people, whether it’s at airline counters or anything else. We already have gasoline pumps that take credit cards. You’ll see some replacement in grocery stores. Travel agents. Tellers in banks. People who do accounting services.”

It’s already happening. Kinetics Inc., a maker of self-service kiosks, has delivered some 4,000 check-in stations to major airlines across the United States including Continental and Northwest since 1996. Airlines say as many as 70 percent of fliers now check in at unmanned kiosks. Not only can the machines quickly issue boarding passes (average time: about 1 minute), they’re constantly being upgraded to do more, meaning fewer times when customers need to seek out a live ticket agent.

High-value jobs are also being cut. For example, in recent years mergers and acquisitions, as well as the increasing reliability of computer systems, have led corporations to consolidate their computer systems. In the process, they’ve winnowed out some highly paid positions, said Andrew Efstathiou, business and IT services program manager at the Yankee Group, a research firm in Boston. “Three or four years ago, those people were extremely well paid. (Now) there are fewer jobs in that space, and they’re not quite as well paid as they used to be.”

Job-stealing technology has crept in elsewhere in the computer world. Already, an e-mail to AOL asking for help likely will be “read” and answered, at least at first, by an automated system, which is never offended by an angry customer, Cohen said. Even in a creative field like journalism, an automated system could follow set formulas and write routine articles, such as traffic reports and obituaries. “That would increase the productivity of the newspaper, but at the same time it subtly eliminates particularly the entry-level jobs,” he said.

If American workers feel anxious about automation, they’ve got plenty of company overseas. Today’s wave of new technology has twinned with another powerful development — the collapse of the cold-war socialist economic bloc — to create unprecedented pressure on jobs worldwide, said Polaski of the Carnegie Endowment. Automation has cut jobs just as millions of Chinese, Indian, and former East bloc workers have come into more direct competition with American workers, partly because of improved telecommunications. These factors have caused an “historically unprecedented skewing” of the relationship between employer and worker, she adds.

So far, though, automation doesn’t appear to have had a deep impact on job loss. For example, despite its airline kiosks and a tough travel economy, Continental said it has seen only a 4 percent decrease in ticket agents since 9/11.

For workers caught in the change, “It’s a painful process,” Professor Karmarkar said. New technology becomes irresistible to businesses because it boosts productivity: That’s bad for workers who lose jobs, but good for consumers who receive faster service and better products at lower prices.

And it’s perplexing for lawmakers. “There’s going to have to be a multifaceted approach to this problem,” he said, “and it’s not going to be easy to get a bead on it.”