Creative destruction – the process whereby something new kills something older – is nothing new.
Anyone over the age of 35 can probably remember when bank tellers were displaced by ATMs or, if you are a Melbournian, when tram conductors were replaced by automatic ticketing.
The computer industry has been an area subject to constant flux and the creation and destruction of many a product and company. Microsoft and Intel destroyed many mainframe computer companies, in turn creating one of the most important inventions of the past century – the personal computer – and making many typists obsolete in the process. Now companies like Apple and Samsung are changing the landscape all over again, via the tablet and smartphone.
Meanwhile, there is the growing threat from automation, computerisation and artificial intelligence, which according to The Atlantic could place at risk half of current jobs in the United States within a decade or two.
The Atlantic argues that routine-based jobs or jobs that can be solved by smart algorithms are most at risk, whereas those jobs requiring high levels of critical thought and analysis are relatively safe.
Most in the firing line are manufacturing, administrative support, retail, and transportation workers, who will continue to lose workers to automation – as has been the case for decades. However, cashiers, counter clerks, and telemarketers are equally endangered.
The Economist has produced an interesting new report arguing that universities are also likely to face severe disruption as three forces – rising costs, changing demand, and disruptive technology – is likely to push learning online, lessening the need for bricks-and-mortar universities:
Higher education suffers from Baumol’s disease – the tendency of costs to soar in labour-intensive sectors with stagnant productivity. Whereas the prices of cars, computers and much else have fallen dramatically, universities, protected by public-sector funding and the premium employers place on degrees, have been able to charge ever more for the same service.
The second driver of change is the labour market. In the standard model of higher education, people go to university in their 20s: a degree is an entry ticket to the professional classes. But automation is beginning to have the same effect on white-collar jobs as it has on blue-collar ones. According to a study from Oxford University, 47% of occupations are at risk of being automated in the next few decades. As innovation wipes out some jobs and changes others, people will need to top up their human capital throughout their lives.
By themselves, these two forces would be pushing change. A third – technology – ensures it. The internet, which has turned businesses from newspapers through music to book retailing upside down, will upend higher education. Now the MOOC, or “Massive Open Online Course”, is offering students the chance to listen to star lecturers and get a degree for a fraction of the cost of attending a university.
The Economist argues that the shift to Massive Open Online Courses will be a net positive for society, since it will enable workers to retrain at lower cost, dramatically improving the flexibility and productivity of the workforce. However, there will obviously also be some big losers, such as university towns and less charismatic lecturers, who will likely find it more difficult to find work.
As an aside, with the economy facing immense technological change, requiring workers to retrain like never before, it is somewhat perverse that the former Labor Government capped deductions for education expenses in a bid to stop taxpayers enjoying “significant private benefits at taxpayers’ expense”, while continuing to allow uncapped negative gearing deductions, as noted by Paul Wallbank last year:
So the government is going to save $500 million dollars over the next few years by capping legitimate educational expenses on the grounds they were ‘unlimited’.
We could ask why negative gearing continues to be unlimited where taxpayers claiming the expenses of property speculation cost the Federal government eight billion dollars last year.
So Treasurer Wayne Swan says a salaried worker has effectively no limits on claiming losses from property speculation against their taxes but is subject to a ludicrously low limit for claiming education expenses.
This one comparison – between negative gearing and self education expenses – shows the magic pudding fairyland that Australia’s political leaders live in and their cowardice.
What’s bizarre about this policy is that most industries are undergoing major changes and almost every worker will have to reskill a number of times through their careers…
In the real world though, Australia’s economic future will depend on the workforce picking up the skills to operate in rapidly changing times.
That Australia’s politicians and economic policies are focused on encouraging property speculation over skills only guarantees mediocrity.
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