Robots won’t take over the world, but we can’t ignore risks
By Felix Tran & Haim Israel
Don’t underestimate humans’ ability to one up technology…There are areas where humans can beat machines. In the future, there will likely be an increasing premium for jobs within occupational groups that require social intelligence, creativity and complex problem solving as opposed to repetitive, low dexterity skills. For instance, an event planner requires more social intelligence than a dishwasher in hospitality, fashion designers require more creativity than a seamstress in apparel… A recent study by McKinsey flags that ultimately it is activities rather than jobs that are being automated where $2tn in wages or 45% of work activities in the US could already be automated with existing technologies
But don’t disregard the risk from robots either: Covid has hastened the adoption of technologies such as AI, chatbots, robot process automation (RPA) in white collar roles and industrial robots in blue collar jobs—all of which could displace 2 billion jobs by 2030. Up to 47% of US jobs could be at risk over the next 20 years from computerisation. And in Emerging Markets, this figure could reach 85%. Finally a recent survey of AI researchers places a 50% probability on all human tasks being automated in 45 years where there is a 50:50 likelihood of full AI (humanlevel AI, full breadth of human capabilities) by 2040-50E and a 90% possibility by 2075E.
The wage differential between onshore (e.g., UK/North America) and offshore (e.g., India) has narrowed from $92k in 2005 to just c$40k in 2019. India-based IT outsourcers appear to be planning for a 3 million/30% reduction in ‘low-skilled’ roles globally by 2022 because of Robot Process Automation (RPA) upskilling. This represents $100 bn in reduced salary costs but, on the flipside, it offers a boon for IT services companies that successfully implement RPA—likely a >$10bn opportunity, as well as a vibrant new software niche. Given that robots can function for 24 hours per day, this represents a significant saving of up to 10:1 vs. human labour.
Nearly all the 10 million jobs created between 2005 and 2015 were outside traditional 9-to-5 employment. The pandemic has revealed the gig economy’s pros and cons. For example, four of the top Chinese digital platforms together created more than 5 million new gig jobs 1H 2020 alone. However, by creating new forms of employment, the gig economy has also muddied the legal definitions of employer/employee status. Two out of three gig-workers believe they should be given employment rights. As a result, regulatory disputes around sick/overtime pay, insurance, worker’s rights, etc are rising. Hence, it is unlikely to be a longterm viable solution for a robust future of work where ESG/UN SDGs stress ‘decent and fair work’ business models.
The crux of the global disconnect between labour and technology boils down to the skills gap between what we learn at school and what we do at work. In a nutshell, 20th century education practices dating back to the Victorian age have not kept up with the rapidly changing 21st century workplace. Around 100 million Europeans may need to acquire new skills this decade to transition to new jobs. Future skills will clearly be somewhat tech-focused but soft skills will be needed too.
For example, Google is currently looking for employees whose top skills are “learning ability” and “leadership”, with “technology content” expertise actually at the bottom of its criteria, according to the Brookings Institution. There is just not enough spending on retraining to fight off workforce skills obsolescence where >100mn workers in just 8 countries may need to switch occupations by 2030.
Countries like Denmark spend over 2% of GDP on assisting and/or retraining unemployed workers, while the US spends only 0.1%. One area of retraining could be from fossil to renewables where in the US, it could cost just $180mn to retrain 90,000 coal workers to work in solar. Lifelong learning, corporate training and development, vocational education, and massive open online courses (MOOCs) will also be critical tools to future-proofing employment prospects.
Equity strategists, BofA
With Martyn Briggs & Laura Kalns-Timans, equity strategists, BofA
Edited excerpts from BofA Global Research’s Thematic Investing report dated June 12, 2021