Tag: jobs

OM Podcast #31: The Impact of AI on Jobs and on the Environment

In our latest podcast, Barry Render interviews Charlie Render, President of Render Analytics, which helps businesses of all kinds implement AI.  Charlie is also the creator of the popular job-search engine, Apply Genie (ApplyGenie.ai). In this episode, Barry and Charlie discuss the impact of AI on the environment and on jobs.

 

 

Transcript

A Word document of this podcast will download by clicking the word Transcript above.

 

Charlie Render

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Prof. Barry Render
Prof. Barry Render

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OM in the News: U.S. Manufacturing Isn’t Doing So Bad After All

A mid-20th-century IBM typewriter factory

A common perception is that the U.S. “doesn’t make anything anymore.” According to this narrative, the country is a former manufacturing titan brought low by the forces of globalization that have left the rusting hulks of once‐​humming factories in its wake.  But The Wall Street Journal (April 2, 2024), quotes a recent Cato Institute study that U.S. manufacturing accounts for a larger share of global output than Japan, Germany, South Korea and India combined.

It appears that America’s productivity is far ahead, too. In 2019, the value added by the average American manufacturing worker was $141,000, exceeding second-place South Korea by more than $44,000 a worker and China by more than $120,000.

Global markets reflect this strength. Between 2002 and 2021, U.S. manufacturing exports more than doubled, with sales second only to China, which dominated low-end production. America’s success is thanks to its ability to move from low-tech, less-productive sectors to higher-value ones such as computers, pharmaceuticals, medical and scientific instruments, aerospace, and electrical machinery. (The U.S. even understates its performance because its definition of manufacturing is old. Software, for example, now accounts for about half the value of a new car).

 American manufacturing is productive, requiring fewer workers. Consider the much-protected steel industry. U.S. steel output increased 8% between 1980 and 2017, despite a workforce 1/4 its prior size. America isn’t the only country moving to higher-productivity manufacturing with fewer workers. From 1976 to 2016, manufacturing employment fell by 1/2 in Germany and 2/3 in Australia.

The U.S. has adapted to huge economic transitions before. In 1900, some 40% of Americans toiled in agriculture. Today farmers account for 1- 2% of workers, but they grow much more food. Between 1948 and 2017, U.S. agricultural output tripled while the number of hours worked plunged 80%.

The U.S. economy’s evolution from agriculture to manufacturing and now to services, a topic we discuss in Chapter 1, reflects changes in what Americans buy. Today, that means spending on healthcare, entertainment, sophisticated equipment and education. Commercial services now account for a quarter of all exports, with computers, research and development, and health activities in the forefront.

The 21st-century economy, including modern manufacturing, will depend on innovation in AI, quantum computing and other technologies.

Classroom discussion questions:

  1. Explain the 2 models by which productivity is measured.
  2. What are the main strengths of U.S. manufacturing?

OM in the News: Robots Aren’t Destroying Enough Jobs

Robots, like the welders at a Nissan plant in Mississippi, are growing increasingly sophisticated

Will millions of individuals be thrown out of work by the rapid advance of automation and artificial intelligence? This idea is certainly chilling, but is also misguided. “Robots aren’t destroying enough jobs,” writes The Wall Street Journal (May 11, 2017). “Too many sectors, such as health care or personal services, are so resistant to automation that they are holding back the entire country’s standard of living.”

By enabling society to produce more with the same workers, automation is a major driver of rising standards of living. Is it different now that technological change is so fast? Will millions of workers will end up consigned to menial, minimum-wage jobs? Monthly job creation averaged 185,000 this year. This has driven unemployment down to 4.4%, a 10-year low and below most estimates of “full employment.” If automation were rapidly displacing workers, the productivity of the remaining workers ought to be growing rapidly. Instead, growth in productivity—worker output per hour—has been dismal in almost every sector, including manufacturing.

Technology is still destroying jobs—just more slowly. In part, that’s because American consumption is gravitating toward goods and services whose production isn’t easily automated. Medical breakthroughs have mostly gone toward new and more expensive treatments, not to making existing treatments less expensive. Children may sit in front of better screens than they did in the 1950s, but they are watched by child-care workers, who doubled to almost 2 million between 1990 and 2010.

Since 2007, low productivity sectors such as education, health care, social assistance, leisure and hospitality have added nearly 7 million jobs. Meantime, information and finance, where value added per worker is 5 to 10 times higher, have cut or barely added jobs. So instead of worrying about robots destroying jobs, says The Journal, we need to figure out how to use them more, especially in low-productivity sectors.

Classroom discussion questions:

  1. Are robots replacing truck drivers in 10 years an issue for OM managers?
  2. Why don’t robots replace a lot more things that go into the GDP?

OM in the News: Human-Centered Operations Management

Ton's recent book is called The Good Jobs Strategy
Ton’s recent book is called The Good Jobs Strategy

A big theme in 2015 is jobs, writes The New York Times (July 7, 2015). How will America close the skills gap? Where will the good middle-class jobs come from? Will infrastructure or energy create jobs? Innovation? MIT Prof. Zeynep Ton believes that companies that provide employees a decent living, which includes not just pay but also a sense of purpose and empowerment at work, can be as profitable (or more) as companies that keep their labor costs low by paying the minimum wage with no benefits. Ton believes a “human-centered operation strategy” is needed.

Her thesis comes from studying supply chain and inventory management in the retail industry. What she discovered is that while most companies were very good at getting products from China to their stores, it was a different story once the merchandise arrived. Sometimes a product stayed in the back room instead of making it to a shelf. Or it was in the wrong place. Special in-store promotions weren’t being executed a surprisingly high percentage of the time. She saw this pattern in company after company. Ton realized that the problem was that these companies viewed their employees “as a cost that they tried to minimize.” Workers were not just poorly paid, but poorly trained. They often didn’t know their schedule until the last moment. Morale was low and turnover was high. Customer service was largely nonexistent.

Unconvinced that this was the only approach, Ton decided to search for retail companies — the same kind of companies that needed low prices to succeed — that did things differently. She found some, like QuikTrip, an $11 billion company with 722 stores. Paying employees middle-class wages allows the company to get the most out of them. Employees are cross-trained so they can do different jobs. They can solve problems by themselves. They make merchandising decisions for their own stores. The ultimate result of the higher wages QuikTrip pays is that costs everywhere else in the operation go down. At QuikTrip, says Ton, products don’t remain in the back room, and in-store promotions always take place, as they’re supposed to.

Classroom discussion questions:

1. What did Ton find was the biggest problem at retailers?

2. Discuss the concept she proposes.

 

 

Good OM Reading: Robots Probably Won’t Steal Jobs

hbr“There is no shortage of angst about the relentless advance of digital technology and what it means for the work force, if not humanity,” writes The New York Times (June 8, 2015). Dire warnings have come from no less than Elon Musk, Stephen Hawking and Bill Gates. So, to paraphrase many recent headlines, “will robots eat our jobs?”

Not necessarily, according to two new entries to the debate. One is a lengthy cover article in The Harvard Business Review (June, 2015), “Beyond Automation: Strategies for Remaining Gainfully Employed in an Era of Very Smart Machines.” The other is a new McKinsey study, “A Labor Market That Works: Connecting Talent With Opportunity in the Digital Age.”

The McKinsey study analyzes and forecasts the potential impact of so-called digital talent platforms. The report looks at three types of such platforms: job-finding and employee-seeking websites (such as Monster.com and LinkedIn); marketplaces for services (Uber and Upwork, for example); and data-driven talent discovery tools (like Evolv and Knack). By 2025, McKinsey estimates, these digital talent platforms could add $2.7 trillion a year to global gross domestic product–and companies that make efficient use of the digital platforms can increase their productivity by up to 9%.

The HBR article concedes the advance of automation, but adds: “Instead of seeing work as a zero-sum game with machines taking an ever greater share, we might see growing possibilities for employment. In an era of innovation, the emphasis has to be on the upside of people. They will always be the source of next-generation ideas and the element of operations that is hardest for competitors to replicate.” Competitive advantage will be lost by those organizations infatuated with technology alone. Automation, the article states, is often useful but rarely a game winner for most companies. “That realization will dawn as it becomes increasingly clear that enterprise success depends much more on constant innovation than on cost efficiency.”

OM in the News: The Changing Workforce

jobsIN 1930, John Maynard Keynes worried of a new disease: “technological unemployment…due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor.” Now, 2 Oxford professors are arguing that jobs are at high risk of being automated in 47% of the occupational categories into which work is sorted. That includes accountancy, legal work, technical writing and a lot of other white-collar occupations.

Automation processes have steadily and relentlessly squeezed labor out of the manufacturing sector in most rich economies, writes The Economist (Jan. 18-24, 2014). As we note in Chapter 1, the share of U.S. employment in manufacturing has declined sharply since the 1950s, from almost 30% to less than 10%. At the same time, jobs in services soared, from less than 50% of employment to almost 70% (see chart). It was inevitable that firms would start to apply the same automation to service industries.

jobs2The case for a highly disruptive period of economic growth is made by MIT profs in “The Second Machine Age.” Like the first great era of industrialization, they argue, it should deliver enormous benefits—but not without a period of uncomfortable change. They write that the amount of progress computers will make in the next few years will equal to the progress they have made since their very beginning!

The combination of big data and smart machines will take over some occupations wholesale; in others it will allow firms to do more with fewer workers. Some jobs—especially those currently associated with high levels of education and high wages—will survive (see table). Rich economies seem to be bifurcating into a small successful group of workers with skills highly complementary with machine intelligence, with the rest of workers less successful.

Classroom discussion questions:

1. In what service jobs will automation be a major factor?

2. Will manufacturing reverse its downward slope of employment?