Authors: Jeremy Rifkin
What Carey is talking about is patently obvious. Whatever “marginal value” elite universities might exact on the long tail by providing free education to hundreds of millions of students is paltry compared to the loss of revenue to the brick-and-mortar system of higher education as a whole, when the marginal cost of teaching online is nearly zero and the courses are nearly free. Does any academic or social entrepreneur really believe that the traditional, centralized, brick-and-mortar education will survive as we know it in a world where the best education money can buy is made free online?
That is not to say that traditional colleges and universities will
vanish—only that their mission will radically change and their role will diminish with the onslaught of MOOCs. Currently, university administrators and faculties still hold fast to the hope that world-class online university courses will draw students to a more conventional revenue-generating education. They have yet to fully realize the fact that the near zero marginal cost of education in a global virtual Commons they themselves are creating will increasingly become the new teaching paradigm for higher education, while brick-and-mortar learning eventually will play an ever more circumscribed and narrow supplementary role.
Why then, are so many universities so anxious to push forward? First, in their defense, there is a great deal of idealism involved here. It has long been the dream of educators to bring the knowledge of the world to every human being. Not to do so, once we have the means, would be considered unethical to many academics. But second, they recognize that if they hold out, others will rush in—which they already are. Like their counterparts in so many other sectors where new technologies are making possible a near zero marginal cost society and nearly free goods and services, they realize that the logic of optimizing the welfare of the human race in collaborative, networked Commons is so compelling that it is impossible to shut it out or turn away. The traditional colleges and universities will increasingly have to accommodate the MOOCs approach to learning and find their place in an ascending Collaborative Commons.
Chapter Eight
The Last Worker Standing
T
he same IT and Internet technology that is taking communications, energy, manufacturing, and higher education to near zero marginal cost is doing so with human labor as well. Big Data, advanced analytics, algorithms, Artificial Intelligence (AI), and robotics are replacing human labor across the manufacturing industries, service industries, and knowledge-and-entertainment sectors, leading to the very real prospect of liberating hundreds of millions of people from work in the market economy in the first half of the twenty-first century.
The End of Work
In 1995, I published a book entitled
The End of Work
in which I made the argument that “more sophisticated software technologies are going to bring civilization ever closer to a near-workerless world.”
1
The Economist
ran a cover story on the end of work in which the editors suggested that we would have to see if my forecast will turn out to be prescient. In the interim years, the projections I had made back in 1995 of IT-generated automation leading to technology displacement in virtually every sector of the economy became a troubling reality, leaving millions of people unemployed and underemployed across every country in the world. If anything, my original forecast proved to be a bit too conservative.
In 2013, in the United States, 21.9 million adults are unemployed, underemployed, or discouraged and are no longer counted in the official statistics.
2
Worldwide, 25 percent of the adult workforce was either unemployed, underemployed, or discouraged and no longer looking for work in 2011.
3
The International Labor Organization reports that more than 202 million people will be without work in 2013.
4
While there are many reasons for the unemployment, economists are just now waking up to the fact that technology displacement is a primary culprit.
The Economist
, among others, revisited the issue of the end of work 16 years after I published the book, asking, “What happens . . . when machines are smart enough to become workers? In other words, when capital becomes labour.”
5
In an editorial
The Economist
noted that
this is what Jeremy Rifkin, a social critic, was driving at in his book
The End of Work
, published in 1995. . . . Mr. Rifkin argued prophetically that society was entering a new phase—one in which fewer and fewer workers would be needed to produce all the goods and services consumed. . . . The process has clearly begun.
6
It wasn’t that I was clairvoyant. The signs were everywhere, but in the growth years, most economists were so attached to conventional economic theory—that supply creates demand and that new technologies, while disruptive, reduce costs, stimulate consumption, spur more production, increase innovation, and open up opportunities for new kinds of jobs—that my message fell largely on deaf ears. Now, economists are taking notice.
In the period of the Great Recession, economists discovered that while millions of jobs were irreversibly lost, productivity was reaching new peaks and output was accelerating around the world, but with fewer workers at their stations. The U.S. manufacturing sector is a prime example. Even before the Great Recession, the mounting statistics were confounding economists. Between 1997 and 2005, manufacturing output increased by 60 percent in the United States while 3.9 million manufacturing jobs were eliminated during roughly the same period, between 2000 and 2008. The economists attribute the dichotomy to a dramatic 30 percent increase in productivity from 1993 to 2005 that allowed manufacturers to produce more output with fewer workers. Those productivity advances came about by “the application of new technologies such as robotics and the use of computing and software on the factory floor . . . [which] increased quality and cut prices, but also led to ongoing layoffs.”
7
By 2007 manufacturers were using more than six times as much equipment—computers and software—as they did 20 years earlier while doubling the amount of capital used per hour of employee work.
8
Between 2008 and 2012, while the Great Recession was bleeding workers, industry was piling on new software and innovations to boost productivity and keep profitable with smaller payrolls. The effect of these efforts is striking. Mark J. Perry, a University of Michigan economics professor and visiting scholar at the American Enterprise Institute, a conservative think tank based in Washington, D.C., ran the numbers. By the end of 2012, according to Perry, the U.S. economy had made a complete recovery from the 2007–2009 recession, with a gross domestic output of $13.6 trillion (in 2005 dollars). That was 2.2 percent higher, or $290
billion more real output, than in 2007, just before the recession, when the GDP was at $13.32 trillion. Perry observes that, while real output was 2.2 percent above the recession level in 2007, industry churned out the increase in goods and services with only 142.4 million workers in 2012—or 3.84 million fewer workers than in 2007. Perry’s conclusion: “The Great Recession stimulated huge productivity and efficiency gains as companies shed marginal workers and learned how to do ‘more with less (fewer workers).’”
9
Although Perry and others are just now discovering the disquieting relationship between increased productivity and fewer workers—again, economists always believed in the past that increased productivity drives growth in jobs—evidence of the disconnect was building for more than 50 years.
The first indications of the paradox surfaced at the very beginning of the IT revolution in the early 1960s, with the introduction of the computer on the factory floor. It was called computer numerical control technology. With numerical control, a computer program stores instructions on how a piece of metal should be rolled, lathed, welded, bolted, or painted. The computer program instructs a machine on how to produce a part and directs robots on the factory floor in shaping or assembling parts into products. Numerical control was quickly perceived as “probably the most significant new development in manufacturing technology since Henry Ford introduced the concept of the moving assembly line.”
10
Computer numerical control led to a dramatic boost in productivity and was the first leg in the long process of steadily replacing human labor with computerized technology, programmed and managed by small professional and technical work forces. The Chicago management consulting firm Cox and Cox sized up the significance of substituting the computer and IT for workers, announcing that with numerically controlled machine tools, a “management revolution is here. . . . The management of machines instead of the management of men.”
11
Alan Smith of Arthur D. Little was a bit more blunt and candid, declaring that computer-driven numerical control tools signaled management’s “emancipation from human workers.”
12
Fast forward 50 years. Today, near workerless factories run by computer programs are increasingly the norm, both in highly industrialized countries and developing nations. The steel industry is a typical example. Like the auto industry and other key Second Industrial Revolution manufacturing enterprises that were the staples of blue-collar employment, the steel industry is undergoing a revolution that is quickly eliminating workers on the factory floor. Computerized programs and robotics have allowed the steel industry to slash its workforces in recent decades. In the United States, between 1982 and 2002, steel production rose from 75 million tons to 120 million tons, while the number of steel workers declined from 289,000 to 74,000.
13
American and European politicians, and the general public, blame blue collar job losses on the relocation of manufacturing to cheap labor markets like China. The fact is that something more consequential has taken place. Between 1995 and 2002, 22 million manufacturing jobs were eliminated in the global economy while global production increased by more than 30 percent worldwide. The United States lost 11 percent of its manufacturing jobs to automation. Even China shed 16 million factory workers while increasing its productivity with IT and robotics, allowing it to produce more output, more cheaply, with fewer workers.
14
Manufacturers that have long relied on cheap labor in their Chinese production facilities are bringing production back home with advanced robotics that are cheaper and more efficient than their Chinese workforces. At Philips’s new electronic factory in the Netherlands, the 128 robot arms work at such a quick pace that they have to be put behind glass cases so that the handful of supervisors aren’t injured. Philips’s robotized Dutch factory produces the equivalent output of electronics products as its Chinese production facility with one-tenth of the number of workers.
15
Anxious not to be left behind, many of China’s largest manufacturers are quickly replacing their cheap workers with even cheaper robots. Foxconn, the giant Chinese manufacturer that produces iPhones, plans to install one million robots in the next few years, eliminating a large portion of its workforce. Terry Gou, CEO of Foxconn, whose global workforce totals more than one million, joked that he would prefer one million robots. “As human beings are also animals, to manage one million animals gives me a headache.”
16
The robot workforce is climbing around the world. Robot sales grew by 43 percent in both the United States and the European Union in 2011, moving the manufacturing sector ever closer to near workerless production, or what the industry calls “lights-out” production.
17
China, India, Mexico, and other emerging nations are learning quickly that the cheapest workers in the world are not as cheap, efficient, and productive as the information technology, robotics, and artificial intelligence that replaces them.
Even manufacturing industries once deemed too complex to be automated are falling victim to computerization. The textile industry was the first industrialized sector. While steam-powered technology and, later, electrification and electric power tools increased productivity, much of the work in making the garments was done by hand. New information technologies, computerization, and robotics have begun to take over an increasing number of the processes that formerly required human labor. Computer-aided design (CAD) has reduced the time to design garments from weeks to minutes. Computerized drying and finishing systems have also replaced traditional hand labor. The computerization of storage, handling, packing, and shipping of garments has also greatly increased efficiency and productivity.
The making of the garment itself is being handled by fewer workers aided by computerized programs. Fifty years ago, a single textile worker operated five machines, each able to run a thread through the loom at 100 times per minute. Today, machines run at six times that speed and one operator supervises 100 looms—a 120-fold increase in output per worker.
18
And now, the Defense Advanced Research Projects Agency (DARPA), the same U.S. Department of Defense agency that invented the Internet, is turning its attention to automating the sewing process itself—long considered the holy grail of textile innovation. With an annual budget of $4 billion for military clothing, the Department of Defense is anxious to cut labor costs in producing uniforms to near zero direct labor and has awarded SoftWear Automation, Inc. a grant to fully automate the last remaining hand-manufactured part of making a garment by substituting computer-driven robots to undertake the delicate task. If successful, the new automated system will eliminate the nearly 50,000 workers employed by contractors to produce military garb and be able to do so at near zero marginal labor costs.
19
For many years automation was an expensive up-front cost and out of reach for all but the biggest manufacturing enterprises. In recent years, however, costs have declined dramatically, allowing small- and medium-sized manufacturers to reap handsome productivity gains while reducing payrolls. Webb Wheel Products is a U.S. company that makes parts for truck brakes. The company’s newest employee, a Doosan V550M robot, has churned out 300,000 more drums annually in just three years—a 25 percent increase in production—without having to add a single worker on the factory floor.
20
If the current rate of technology displacement in the manufacturing sector continues—and industry analysts expect it to only accelerate—
factory employment, which accounted for 163 million jobs in 2003, is likely to be just a few million by 2040, marking the end of mass factory labor in the world.
21
While some human labor is required to manufacture robots, create new software applications to manage production flows, and maintain and upgrade programs and systems, even that professional and technical labor is diminishing as intelligent technology is increasingly able to reprogram itself. Up-front costs aside, the marginal labor cost of automated production of additional units of a good is edging closer to zero with each passing day.
Logistics is another of the sectors that, like textiles, was able to automate much of its processes, but still relied heavily on human labor to pick up and deliver items. Delivering e-mail in seconds around the world, at near zero marginal labor costs, has eviscerated the postal services in every country. The U.S. Postal Service, which just ten years ago was the largest U.S. enterprise, with over 700,000 employees, has tumbled to less than 500,000 employees in 2013. And even though the USPS took pride in the automation of its sorting and handling systems, once praised as the
most advanced in the world, it is now facing near-extinction as more of its letter-carrying business is shifting over to e-mail.
22
Automation is replacing workers across the entire logistics industry. Amazon, which is as much a logistics company as a virtual retailer, is adding intelligent automated guided vehicles, automated robots, and automated storage systems in its warehouses, eliminating less efficient manual labor at every step of the logistical value chain with the goal of getting as close as possible to near zero marginal labor costs.