Three Steps to Addressing the Challenge of Automation

Automation is not a new topic. It has been making America’s manufacturing industry the most competitive and productive in the world but it is also played a large part in dropping the number of manufacturing jobs in the U.S. About 9% of the US workforce is in manufacturing and this total has dropped from over 30% in the 1950s.  However, recent advances in machine learning, robotics and artificial intelligence are driving major changes in the economic marketplace all of which impact a region’s economic development strategy.  According to SAS, machine learning is a method of data analysis that automates analytical model building and, using algorithms that iteratively learn from data, machine learning allows computers to find hidden insights without being explicitly programmed where to look.  Robotics involves machines directly substituting for humans with human activity.  Artificial intelligence involves a machine mimicking “cognitive” functions that humans associate with other human minds, such as problem solving.  Occupations with the highest chance of being automated involve work that involve highly predictable physical activities as well as collecting and analyzing data.  Thus, occupations are more likely to change than be automated away.  Advances in computer software and the development of artificial intelligence is giving computers the ability to learn while the cost and ability of robots is making them more and more common place in the manufacturing sector.

By 2035, 47% of U.S. jobs might be at risk due to advances in machine learning, automation, and artificial intelligence according to a recent White House report. McKinsey estimates that almost half the activities people are paid almost $16 T in wages to do in the global economy have the potential to be automated through existing technology.  This may impact 2,000 work activities across 800 occupations and 60 M U.S. jobs.  Again, McKinsey estimates less than 5 % of all occupations will be fully automate, but about 60 % of all occupations have at least 30 percent of constituent activities that could be automated.  More importantly, automation is expanding beyond manufacturing into the service sector which dominates the US economy.  Restaurants, like the retail banks use of ATMs reducing the need for bank tellers, will become less of a job source.  The most important fact a community needs to consider related to automation’s impact on its economy is the fact that both blue and white collar jobs will be impacted in a negative fashion. Jobs that regions should focus on involve occupations managing others, specialized expertise such as scientific, engineering, computer or professional services, unpredictable physical activity and a large amount of stakeholder or customer interaction.

Addressing this automation challenge will not be easy and regions should focus on a three step plan.

  1. Compare regional industry strengths to what occupations will exist in 20 years. Traditional economic development strategy uses an industry cluster analysis to understand the economic strength of a region by measuring the jobs a particular community has in targeted, growing industries.  Automation dictates that doing an industry cluster analysis alone is simply not enough to prepare for the job shift coming.  A region’s industry cluster analysis must be compared and analyzed with an eye toward which of these occupational strengths will be gone in the near future.  As an example, a regional insurance industry leader with thousands of back office insurance jobs may want to plan for new industry growth around this highly skilled workforce as many of these claims representatives and underwriter positions will be lost to artificial intelligence software.
  2. Focus on redevelopment. Automation and technology will change America’s land use patterns.  What the Millennials are doing for Downtown housing and mixed use development will continue to be driven by e-commerce and driverless cars changing the face of retail today and creating new Smart Community’s.  E-commerce purchases over trips to the mall will create Grayfield Malls and driverless cars and trucks will transform our roadways and eliminate millions of transportation related jobs.  Parking garages in urban centers will become 24 hour buildings with fleets of driverless cars moving in and out to pick up passengers.  Grayfield Malls are new opportunities for logistics and fulfillment centers.  New, Smart Communities will provide enhanced governmental and transportation services.  Today’s parking lot and parking garage will have new life and potentially new uses.  All these land use changes driven by demographics and technology are signals that redeveloping existing sites is a major new economic opportunity to build communities attractive to the young, highly educated Milennial workers and help launch a new generation of start-up companies that every community is searching for.
  3. Build a STEM Initiative. One thing that has not changed is the economic advantage for regions focusing on Science, Technology, Engineering and Math (STEM) fields tied to technology based economic development.  These STEM jobs will succeed in the future while the growth of many high-wage, white collar advanced services occupations in financial services may be in jeopardy.  The economic reality of the 21st Century is that Amazon is approaching 300,000 employees while General Motors is sliding down closer to 100,000.  More importantly, regions with a strong base of STEM workers and a comprehensive technology based economic development strategy are positioned to develop the industries tied to automation- whether it is robotics or computer software.    These STEM occupations are good today but should be even better in the future but communities must take a proactive approach to making STEM jobs happen with comprehensive workforce development as well as company recruitment efforts built around these growing industries.

Automation is a scary topic but proper planning and executing on the development of a diverse, tech friendly strategy can position regions to succeed in these uncharted waters.

Categories: People Power