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West: Will Robots & AI Take Your Job? The Economic & Political Consequences of Automation

Wednesday, April 25, 2018

 

Darrell M. West

In Edward Bellamy’s classic Looking Backward, the protagonist Julian West wakes up from a 113-year slumber and finds the United States in 2000 has changed dramatically from 1887. People stop working at age forty-five and devote their lives to mentoring other people and engaging in volunteer work that benefits the overall community. There are short work weeks for employees, and everyone receives full benefits, food, and housing.

The reason is that new technologies of the period have enabled people to be very productive while working part-time. Businesses do not need large numbers of employees, so individuals can devote most of their waking hours to hobbies, volunteering, and community service. In conjunction with periodic work stints, they have time to pursue new skills and personal identities that are independent of their jobs.

In the current era, developed countries may be on the verge of a similar transition. Robotics and machine learning have improved productivity and enhanced the economies of many nations. Artificial intelligence (AI) has advanced into finance, transportation, defense, and energy management. The internet of things (IoT) is facilitated by high-speed networks and remote sensors to connect people and businesses. In all of this, there is a possibility of a new era that could improve the lives of many people.

Yet amid these possible benefits, there is widespread fear that robots and AI will take jobs and throw millions of people into poverty. A Pew Research Center study asked 1,896 experts about the impact of emerging technologies and found “half of these experts (48 percent) envision a future in which robots and digital agents [will] have displaced significant numbers of both blue- and white-collar workers—with many expressing concern that this will lead to vast increases in income inequality, masses of people who are effectively unemployable, and breakdowns in the social order.”

These fears have been echoed by detailed analyses showing anywhere from a 14 to 54 percent automation impact on jobs. For example, a Bruegel analysis found that “54% of EU jobs [are] at risk of computerization.” Using European data, they argue that job losses are likely to be significant and people should prepare for large-scale disruption.

Meanwhile, Oxford University researchers Carl Frey and Michael Osborne claim that technology will transform many sectors of life. They studied 702 occupational groupings and found that “47 percent of U.S. workers have a high probability of seeing their jobs automated over the next 20 years.”

McKinsey Global Institute analysis of 750 jobs concluded that “45% of paid activities could be automated using ‘currently demonstrated technologies’ and . . . 60% of occupations could have 30% or more of their processes automated.” A more recent McKinsey report, “Jobs Lost, Jobs Gained,” found that 30 percent of “work activities” could be automated by 2030 and up to 375 million workers worldwide could be affected by emerging technologies.

Researchers at the Organization for Economic Cooperation and Development (OECD) focused on “tasks” as opposed to “jobs” and found fewer job losses. Using task-related data from 32 OECD countries, they estimated that 14 percent of jobs are highly automatable and another 32 have a significant risk of automation. Although their job loss estimates are below those of other experts, they concluded that “low qualified workers are likely to bear the brunt of the adjustment costs as the automatibility of their jobs is higher compared to highly qualified workers.

While some dispute the dire predictions on grounds new positions will be created to offset the job losses, the fact that all these major studies report significant workforce disruptions should be taken seriously. If the employment impact falls at the 38 percent mean of these forecasts, Western democracies likely could resort to authoritarianism as happened in some countries during the Great Depression of the 1930s in order to keep their restive populations in check. If that happened, wealthy elites would require armed guards, security details, and gated communities to protect themselves, as is the case in poor countries today with high-income inequality. The United States would look like Syria or Iraq, with armed bands of young men with few employment prospects other than war, violence, or theft.

Yet even if the job ramifications lie more at the low end of disruption, the political consequences still will be severe. Relatively small increases in unemployment or underemployment have an outsized political impact. We saw that a decade ago when 10 percent unemployment during the Great Recession spawned the Tea party and eventually helped to make Donald Trump president.

With some workforce disruption virtually guaranteed by trends already underway, it is safe to predict American politics will be chaotic and turbulent during the coming decades. As innovation accelerates and public anxiety intensifies, right-wing and left-wing populists will jockey for voter support. Government control could gyrate between very conservative and very liberal leaders as each side blames a different set of scapegoats for economic outcomes voters don’t like. The calm and predictable politics of the post-World War II era likely will become a distant memory as the American system moves toward Trumpism on steroids.

Darrell M. West is author of the Brookings book “The Future of Work: Robots, AI, and Automation.” He is the Vice President and director of governance studies and the founding director of the Center for Technology Innovation at Brookings.

This article originally ran in Brookings on Wednesday, April 18, 2018. 

 

Related Slideshow: 17 Biggest Business Stories of 2017

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#17

Forbes Features RI’s “Bangle Billionaire,” Alex and Ani Founder Rafaelian

It is not often a Rhode Island business leader scores the cover of Forbes -- it may be never before that a Rhode Island woman took home the honor.

It is not a little blurb. Forbes ran an eight-page feature in its June issue titled, “How Alex And Ani Founder Carolyn Rafaelian Built An American Jewelry Empire.”

The Rafaelian feature was part of its cover story, "The Richest Self-Made Women. Forbes listed the top 60 self-made women, and Rafaelian came in at #18 at $1 billion. Leading the list was Marjian Ilitch, age 84 of Little Caesars at $5.1 billion.

Oprah Winfrey ranked #5 at $2.9 billion and Beyonce Knowles at #46 at $350 million.

The piece chronicled the growth of Alex and Ani and her involvement in everything from restoring Belcourt Castle to her vineyard in Little Compton.

As Forbes wrote, “Rafaelian has invested many millions in the estate, including a complete renovation of the library. She also added solar paneling to the roof and, of course, restored Alva's (Vanderbilt’s) bedroom to its Gilded Age glory.”

The total cost of the restoration of Belcourt? Unreported.

This news was the latest that week coming out of Alex and Ani, as, "Model, entrepreneur and activist Gisele Bündchen, co-anchor of Good Morning America Robin Roberts; and founder and CEO of ALEX and ANI Carolyn Rafaelian were among the women recognized...in New York City by the David Lynch Foundation (DLF), a global charitable organization that addresses the epidemic of trauma and toxic stress amongst at-risk populations."

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#16

RI's Real Estate

Prices are up and up and up. Great for sellers, but bad for Rhode Island buyers. For those coming in from Boston or moving up from New York, everything is selling at a discount.

While James Woods is selling his house (first reported by GoLocal), Jay Leno has bought Rick Brady's Newport Mansion Seafair (also first reported by GoLocal). 

Real estate could be the biggest business story in Rhode Island if Boston continues its growth.

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#15

Fane's Tower Withers -- Whither 195?

It was going to be a reshaping of the Providence skyline and the transformation of city living. The three massive towers were going to pour hundreds of millions into the Rhode Island economy during the construction phase. 

NY developer Jason Fane was going to tap off his career by reinventing Providence. Now, it is all quiet on the Hope Tower front.

Time will tell if Fane will see action back at the 195 Commission in 2018. 

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#14

Benrus Implosion

It was supposed to be the next big company in Rhode Island. But, now just three years later, it is in receivership. 

The historic watch brand was going to be transformed into a leading lifestyle brand. There was a retail store in New York, sponsorships of the Boston Celtics and the Buffalo Bills, and so much more.

Giovanni Feroce lived in a Newport mansion and the decline of the company and the foreclosure on the multi-million home were all newsmakers.

Now, Feroce is considering a run for Governor of Rhode Island in 2018, proving the adage that fact is stranger than fiction.

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#13

RI Commerce Spends Two-Thirds of its $12M in Contracts with Out-of-State Companies

In June, a GoLocal investigation found that under Governor Gina Raimondo, the agency in charge of building Rhode Island’s economy had spent 65 percent of its contract dollars with out-of-state companies in the last two years.

Nearly $8 million of taxpayer dollars went to consultants as far away as New York, Toronto, London, and Frankfurt under the Rhode Island Commerce Corporation. Even the money spent on porta-johns contracted for Volvo races went to out-of-state interests by an overwhelming margin. 

According to a GoLocal investigation, over $164,000 went to United Site Services NE Inc., a Massachusetts-based company, for the Newport sailing event - and there are a number of Rhode Island-based companies. One Rhode Island company, Hallman Septic Svc. & Portable Toilets LLC, received payments for $67,500.

Havas Got as Much as All of Rhode Island

No companies scored more consulting dollars than consulting businesses located in New York. Havas, the public relations firm that oversaw the development of the tourism campaign that included the now infamous promotion video for Rhode Island that included footage from Iceland,  received payment in the past two years more than $4 million — $4,114,025.78 according to data provided to GoLocal from Commerce.

Havas was paid nearly as much as all Rhode Island contracts combined during the past two years.

Of the 136 contracts let by Commerce, Rhode Island-based companies received just $4,482,234.48 of the $12,475,469.90 in the past two years.

Commerce sent more than $6M to NY-based firms

It appears that Commerce "loves New York" as the New York City area received contracts from Commerce that top more than $6 million -- more than 25 percent more than RI-based companies.

Commerce’s Mission

According to the mission statement of the agency, “The Commerce Corporation works with public, private and non-profit partners to create the conditions for businesses in all sectors to thrive and to improve the quality of life for our citizens by promoting the state's long-term economic health and prosperity.”

However, the spending pattern of the agency shows that the contracts go to research firms all over America and the world — some with specialties similar to Rhode Island firms.

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#12

Wexford Moves Forward

A GoLocal investigation uncovered that claims about the Wexford project were full of bluster. 

A GoLocal investigation into claims of job creation by state officials at the 195 Wexford project were at best hyper-inflated.

Governor Gina Raimondo has repeatedly claimed that the $32 plus million in public subsidies will create 1,000 new permanent jobs in Rhode Island. After weeks of requesting information about tenants, rents, and job creation, GoLocal was finally able to secure actual job numbers for the project and then fact check those claims. 

In fact, actual jobs created will be closer to 80 to 90, at a cost of more than $32 million.

As an example, the project claims 706 permanent jobs will be created by building de facto spec space for Cambridge Innovation Center (CIC), but CIC itself promises only a handful of jobs.

The CIC is a tenant of Wexford and CIC will be leasing the state-subsidized office space for lease. The practice of claiming tenant space as job creation is specifically flagged by federal watchdogs as improper (see below).

“Where's the due diligence that provides a basis for these estimates? Assuming fixed proportions based on square footage is almost certainly going to prove overly optimistic,” said URI Professor of Economics Len Lardaro, when alerted to the job claims. 

As one example, as part of the 1,000 new jobs being created is the claim that Brown University will be creating 100 new jobs.  However, Brown only anticipates creating 15 jobs at the outset. 

“Of the 100 university positions expected at the Innovation Center upon its anticipated opening in early 2019, approximately 15 will be new jobs — our School of Professional Studies currently employs approximately 85 people and expects to grow to approximately 100 prior to the opening of the new space,” according to Brian E. Clark, the Director of News and Editorial Development at Brown University.

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#11

RI Pharma Alexion Closing Plant and Cutting 250 Jobs

Alexion Pharmaceuticals Inc. announced in September it was pulling out of Rhode Island and slashing jobs.  The cuts in Rhode Island are at the Alexion plant in Smithfield — once the site of the failed Alpha Beta facility.

Rhode Island will realize job loss of 250 with Alexion's departure and the news hit just days after Benny’s announced the company’s closing and the loss of over 700 full and part-time jobs in the region.

"We are disappointed by today's news regarding Alexion’s restructuring moves. Our number one priority is ensuring that every Rhode Islander currently employed at Alexion is able to transition to other work. The Department of Labor and Training will be working with Alexion officials on re-employment of their employees and the Commerce Corporation will be working with them on repurposing the facility,” said RI Commerce in a statement.

The winner in the Alexion slashing is Boston, of course. The company announced that in addition to closing the RI facility and slashing jobs, it is moving its headquarters from New Haven, CT to Boston.

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#10

CNBC’s Top States for Business Unveiled—RI Ranked Dismal 45th

CNBC’s annual ranking on the Top States for Business for 2017 found Rhode Island coming in at the bottom end of the rankings at #45.

In 2016, Rhode Island ranked 50th. For Governor Gina Raimondo, the 2017 ranking is slightly better than 2016, but still an embarrassing ranking on the eve of the National Governors meeting in Providence.

Raimondo, who ran for Governor in part on trumpeting her business experience, but even after handing out over $100 million in incentives -- much of it to out-of-state concerns, her strategies have failed to significantly spark the economy. This is Raimondo's third year in office.

About the Rankings

RI ranks 50th for Infrastructure, 44th for Access to Capital, 43rd for Cost of Doing Business, and 42nd for Cost of Living.  

Rhode Island ranked 48th in 2015, 50th in 2014, and 49th in 2013.

In 2017, the state of Washington was ranked #1 by CNBC.

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#9

Infosys in Providence

RI Commerce is refusing to disclose any details of Governor Gina Raimondo’s latest deal other than to say, “When Infosys applies for tax credits, we are estimating the total amount to be in the neighborhood of $10 million.”

The Indian-based consulting and technology company has promised to create 500 jobs to Rhode Island, but questions about the jobs -- and future of the company -- surround the deal. Can the company move existing jobs and realize taxpayer subsidies? And, will foreign workers be eligible for the incentive program? Infosys and Raimondo say in the jobs will be American, but RI Commerce refuses to answer these questions.

In the past, Citizens Bank has tapped Infosys for substantial tech support. In 2015, Citizens laid off more than 350 workers in RI and outsourced the jobs to IBM. "The total layoff estimate by employees ranges from 250 to 350," reported Computerworld at the time, who interviewed four Citizen IT employees: "Two were interviewed by phone, and two by email and only on condition of anonymity."

For the past four years, Infosys has been hit with a number of controversies.

Reuters reported in 2013 that Infosys agreed to pay $34 million to end a U.S. investigation related to flying workers to client sites in the United States on temporary visas, the issue of worker visas -- H-1B visas in particular -- has continued to persist.

In April 2017, the Times of India pointed out that Infosys continued to come under United States scrutiny for visa issues:

The US has complained that Indian blue-chip IT firms Tata Consultancy Services, Infosys and Cognizant unfairly get the lion's share of H-1B visas by putting extra tickets into the lottery system, which the Trump administration wants to replace with a 'merit-based' immigration policy.

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#8

Amazon HQ2

It's hard to tell if Rhode Island is serious about trying to woo Amazon's second headquarters to the state. The proposal was submitted the last day and Governor Gina Raimondo's Commerce Secretary Stefan Pryor has refused to allow the public or the media review the incentives being offered to Amazon.

Rhode Island Commerce Secretary Stefan Pryor said:

“The Rhode Island Commerce Corporation today is submitting a proposal for Amazon’s HQ2 on behalf of the State of Rhode Island, its municipalities, and the Partnership for Rhode Island. The proposal includes sites in our capital city as well as across the Ocean State. Our application package lays out the partnerships, business climate, quality of life and incentives that make Rhode Island attractive – and make our proposal competitive.

“We are posting our website, which was created for this purpose, as well as releasing a list of submitted locations and key renderings. We will not be publicly releasing the detailed materials that are subject to negotiation.

“Rhode Island universities collaborate frequently and we are grateful to them for coming together on one of the key initiatives in this proposal: ‘Amazon Academy.’ We envision Amazon employees obtaining the professional development and continuing education they need to advance Amazon’s goals through this initiative. The Academy will braid together offerings from Rhode Island’s colleges and universities and will serve as a one-stop-shop for Amazon employees to access programming that is tailored to the company. 

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#7

Virgin Pulse's RI Expansion

In December of 2016, Virgin Pulse announced at a State House press conference that the company would grow its footprint in Providence from about 75 in the jewelry district to upwards of 300. The company is slated to receive $5.7 million in subsidies from RI Commerce. The agency approved the package in late 2016.

Virgin Pulse acquired Shape-Up, the Rhode Island-based work wellness company founded by Dr. Rajiv Kumar. The expanded RI footprint will be located in downtown of Fountain Street -- in the building which was housed the Providence Journal exclusively. Now, the office building has been rehabbed for multiple companies. Virgin Pulse is expected to move its Framingham, MA headquarters to Providence. 

Last year, GoLocal selected Kumar as one of the “16 Who Made a Difference in 2016.”

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#6

Deepwater Wind

Maybe no one in Rhode Island or in America had a better year than Deepwater's CEO Jeff Grybowski.

His first project and America's first offshore wind project just turned one year old. Now, he is competing to vastly expand wind operations throughout New England and New York.

Grybowski and Deepwater are the focus of Citi's new national advertising campaign.

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#5

EXCLUSIVE: Hasbro World HQ Could Be Built in Providence and Superman Could Come Down

An exclusive story first reported by GoLocal, unveiled what could be the biggest business story to hit Providence in decades.

GoLocal learned that a plan by two real estate mega-forces, Providence developer Joe Paolino of Paolino Properties and Bob Gilbane of Gilbane Development, is emerging that would build an approximately 36 story tower at the location of the now vacant Superman Building. 

The new structure is being pitched to Hasbro for its new consolidated headquarters. The Paolino and Gilbane plan is just one of a number of plans submitted, but the only one that includes the demolition of the Superman building. Some of the other proposed offered for Hasbro's consideration include building a campus for Hasbro on 195 lands. Other potential developers include Procaccianti Companies who "has owned, developed or managed millions of square feet of real estate." The company owns the Renaissance Hotel in Providence to name just one of its holdings. 

Reaction to the "Hasbro Tower" was immediate and varied across the business community and the public. Top government financial expert Gary Sasse joined GoLcoal's Business Monday just an hour after GoLocal broke the story and Sasse said the new tower and the demolition of Superman building is a win-win. See more on his appearance on GoLocal. 

Bob Whitcomb, former Editor of the editorial page of the Providence Journal and now GoLocal contributor said the proposal was a plus for Providence as the existing vacant building faces too many challenges to ever be restored. 

As previously reported Hasbro is in some level of talks to acquire rival toy company Mattel. Today, Hasbro is enjoying a high performing stock, the top ranking in the best corporate citizen ranking list, and growing profits. The company employs a reported 1,600 in Rhode Island and 5,400 globally.

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#4

Benny's Closing

"Fredo, you broke my heart" is one of the most memorable lines from the Godfather trilogy - and a fitting sentiment to the end of a Rhode Island institution. 

The closure of Benny's 31 stores in southern New England is a shinning, in your face, an example of Amazon's growing power, the death of brick and mortar retail, and a lesson to everyone in business -- innovate or die.

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#3

Biggest Employment Sector is in Chaos -- Healthcare

GoLocal broke the story of the move by Partners to acquire Care New England. The financially failing hospital group is on the edge -- losing nearly $120 million in the past two years.

The industry is being hit from nearly every side:

Lifespan after posting significant losses in 2016, barely breaking even this year.

St. Joseph Pension Fund Collapse - impacting CharterCare

Owners of Landmark, Prime Healthcare, fined $1 million by Department of Health

Memorial Hospital forced to close by Care New England - knocking more than 500 (after a UNAP agreement) out of jobs.

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#2

T.F. Green's Rapid Growth

Up, up and away. T.F. Green has been one of the biggest success stories in Rhode Island -- this year or any other.

The addition of more than a half-dozen new carriers, international flights to almost a dozen locations, and economic impact on Rhode Island has been unmatched.

When sometimes the rest of Rhode Island's economy appears to be a roller coaster, the good news from Iftikhar Ahmad seems endless.

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#1

CVS and Aetna Deal - One of the Biggest Transactions in Business in the World in the Past 10 Years

CVS and Aetna finalized their agreement. The deal still faces federal regulatory review and the impact on Rhode Island won't be known for months or longer. The potential could be transformative for the positive or negative.

CVS Health President and Chief Executive Officer Larry J. Merlo said, “This combination brings together the expertise of two great companies to remake the consumer healthcare experience. With the analytics of Aetna and CVS Health’s human touch, we will create a healthcare platform built around individuals. We look forward to working with the talented people at Aetna to position the combined company as America’s front door to quality health care, integrating more closely the work of doctors, pharmacists, other healthcare professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers.” 

The deal is big. A GoLocal analysis found that a combined CVS and Aetna company will be the second largest revenue company in the United States — at $240 billion — ahead of Apple ($215B) and Berkshire Hathaway ($223B). The only company in America doing more revenue would be Walmart ($485B).

The biggest winner in the proposed acquisition of Aetna by CVS may be Rhode Island.  The deal is one of the biggest business deals in the United States will transform the company and its roll in healthcare in America.

 
 

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