Technology innovations certainly make our lives better. But have we gotten to the point where we need to consider what we lose in the process?
“India will ban self-driving cars to protect jobs,” read the headline in Hindustan Times and you could have almost heard the reaction of card-carrying capitalists everywhere responding as one:
“How can India stand in the way of progress? After all, self-driving cars are by any objective measure a good thing. They will decrease accidents (think of the end of accidents from drunk driving and driving while texting); decrease traffic congestion (because the cars will keep better spacing between vehicles than people do) and make it easier for those with disabilities (such as impaired vision) to get around. Insurance costs will go down. Housing costs probably will too, since there will be less need to build a garage onto your home or construct a parking garage as part of an apartment (or office) complex.”
But a there is a downside to innovations like self-driving vehicles, and that’s what Indian Transport Minister Nitin Gadkari was responding to. Here’s how he put it: “We won’t allow any technology that takes away jobs.”
And he is definitively right about self-driving cars putting people out of work. In the U.S. alone, some four million people (cabbies; limo and bus drivers, truckers, et. al.) will potentially lose their jobs in coming years.
Sure, it is easy to say “well, that’s the price of progress. We don’t have typewriter manufacturers (or repairmen) any more. Pay phones and encyclopedias are virtually non-existent. And when was the last time you bought a map? I am sorry for those people who used to work in those industries, but economist Joseph Schumpeter got it right when he described this march forward as ‘creative destruction,’ a short-hand way of describing the free market’s messy way of producing progress.”
To which I say, no one wants to stop progress.
But I think we are now at the point where we need to find a better way to deal with it: It seems like 15% of all of us can produce the goods and services needed by 100% of us. That’s never happened before in human history.
More and more money is being poured into high tech startup companies. That’s fine. But the number of jobs created per dollar of investment in these companies are quite low and the products and services created are often labor saving, or labor replacing, which, of course, reduces the jobs even further. In fact the great successes of our day are so successful precisely because the can “scale” which means grow geometrically without having to hire and train human labor at the same rate, to keep up.
Sure, that app that allows to you to shop on line is great. But jobs at brick and mortar retailers fell by 46% over the last 15 years, according to the Labor Department.
And it is not blue collar and service jobs that are being impacted.
“Every year, Russell Reynolds Associates surveys more than 2,000 C-level executives on the impact, structure, barriers, and enablers of digital technologies across 15 industries,” Rhys Grossman, co-lead of the company’s digital transformation practice, wrote last year in The Harvard Business Review. “The barometer below shows the percentage of executives surveyed who responded that their business would be moderately or massively disrupted by digital in the next 12 months, broken down by industry.”
Sure, the industries at the top and bottom of the list come as no surprise. But look at the ones in the middle: Non-profits, business and professional services, and my favorite—given the irony–technology.
So here is the problem. These new high tech companies who are receiving a disproportionate amount of investment capital are increasingly responsible for the loss of good paying jobs. They are helping to hollow out the middle class. And, as the chart above shows, the problem is only going to get worse. A lot worse.
We have a country that has an underemployed working and middle class, and yet the capital flows are exacerbating the problem rather than addressing it.
Something needs to be done.
In a book I just completed, I talk about how entrepreneurs start companies to solve problems, not just maximize financial return.
And clearly we have a problem: The hollowing of the middle class.
The question is how can they solve it?
Is knowledge of the problem enough? After all, the traditional formula for entrepreneurial success has always been “spot a need in the marketplace and fill it.”
I have clearly identified the need (we must have more worthwhile middle class jobs to replace the ones we’ve lost and are losing.) Will they create companies that will do just that?
Or must we do more like providing incentives to firms that employ a disproportionate number of people or perhaps create partnerships between entrepreneurs and the industries most subject to disruption.
What is the best way for our education system to address this challenge?
Our tax code?
Our fiscal policy?
I look forward to your responses.
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