America Is Unprepared For The Coming Jobs Apocalypse

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by stockboardasset

About 240 years and numerous industrial revolutions from the first, America could be on the verge of a new age of automation, one controlled by Silicon Valley robots and artificial intelligence.

In fact, automation could destroy as many as 73 million U.S. low skilled, low wage laborers by 2030, a recent report by McKinsey Global Institute stated.

The dire prediction that robots could take a bulk of the middle-class jobs — has led many of macro strategists to believe that significant economic disruptions are coming to America.

Karen Harris, Managing Director of Bain & Company’s Macro Trends Group, presented her fascinating keynote tilted “Labor 2030: The Collision of Demographics, Automation, and Inequality” at the Strategic Investment Conference 2018, in March.

Harris started the conference by telling John Mauldin, who hosted the conference, “the combination of a demographically shrinking workforce plus increasingly cost-effective automation will aggravate inequality, constrain demand, and put a cap on economic growth.”

Harris also warned, “this will have all sorts of unpleasant effects in the next decade.”

Last week, Axios Editor Steve LeVine told CBSN that U.S. lawmakers and businesses are not prepared to help low skilled, low wage laborers navigate the changing tides of the economy and adapt to new skills and survive the coming “economic tsunami” via automation.

“The biggest takeaway is that the future is now,” LeVine said in an interview on Friday. “We’re not prepared at all,” he said, for the “jobs apocalypse” resulting from automation.

Some of the difficulties ahead relate to lawmakers, who are not actively moving quick enough to repair America’s broken education system to provide new laborers the skills needed to be productive in the modern economy while automation replaces bottom-tier jobs.

“You see scores of companies complaining they can’t find enough skilled labor…they are not prepared to train new workers. And as a country we have not even started talking about, ‘How do we retrain our workforce?’” LeVine said.

Automation is coming after jobs, from fast food burger flippers to accountants. CBSN examined which jobs are the most at risk:

Some of the jobs on the cutting block include “fast casual cooks” — think McDonald’s and Shake Shack low skilled, low wage employees.

Not too long ago, we reported on one burger chain in California that hired “Flippy”, a robotic kitchen assistant, to cook burgers.

CBSN believes movers, warehouse workers and retail workers including cashiers are also about to get axed because of the introduction of automation. There is also a significant risk that autonomous cars and trucks could disrupt the transportation industry.

To get a glimpse of the coming economic disruption headed to America via the automation tsunami. Deutsche Bank provides a series of visuals (below) indicating the shifting winds created by robots and artificial intelligence.

Major industrial users of robots

(Source: IFR, Deutsche Securities estimates)

Trade balances in related machinery

(Source: IFR, Deutsche Securities estimates)

And lastly, Deutsche Bank offers a counter-narrative to President Trump’s “Make America Great Again” narrative in the revival of America’s manufacturing industry.

For instance, the bank’s research desk focuses on Nike and other apparel companies that have limited plans on re-shoring their manufacturing facilities in the United States. It is more than likely that these companies will focus on low-wage outsourcing and the introduction of automation, indicating overseas factories will stay put. In a rare case, Adidas recently opened a manufacturing facility in Atlanta, Georgia, however, most of the factory was automated.

“Nike and other apparel companies employ similar types of robotic setups in their factories. Of course, the pursuit of lower manufacturing costs has been a crucial part of textile and footwear manufacturing since at least the industrial revolution.


The nature of cost reduction is changing, though. In the past decade, most cost optimization took the form of geographic relocation as firms moved production to China and then Vietnam as they sought lower-wage workers. But despite the rise in labor costs in these countries, a migration to new lower-wage nations is unlikely.


It is true that a lot of noise has been made about re-shoring to developed countries, particularly the US. Adidas has opened a partially automated factory in Atlanta, while Under Armour has discussed plans to open a manufacturing center in Baltimore.


So far, though, the large apparel groups have not done this en masse. True, Adidas has said it wishes to increase the output of its Speedfactories in Ansbach and Atlanta to 1m pairs of shoes each year by 2020. But this is equivalent to just one day’s requirement.


The ‘real’ investment by Adidas in its Speedfactory programme has already taken place in Vietnam. The world’s largest shoe contract manufacturers have invested over $200m each year recently to automate production lines that produce over 50m pairs of shoes each year. Rival Nike has completed a similar plan with its manufacturing partners. Its automation investment in China and Vietnam has been very fruitful for the company.”

To sum up, the coming jobs apocalypse driven by debt, demographics, and automation could displace tens of millions of bottom-tier jobs. In return, this transition could trigger significant economic disruptions, which could only accelerate into the 2020s. The magnitude of today’s workforce shift is expected to match that of the automation of agriculture from 1900 to 1940. The automation of farming transformed America’s economy and severely disrupted labor markets, ultimately climaxing into the Great Depression and subsequent world war.

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