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A World Without Work

Columnist: Michael E. Duffy
November, 2016 Issue
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Michael E. Duffy
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When the cost of a robot is less than the cost of an employee (considering benefits and turnover), companies will increasingly turn to an automaton.

On Facebook the other day—be kind, it’s my primary form of interaction with other human beings during the week—a friend sent me a CNBC video about Zume Pizza (www.zumepizza.com) which has built a highly automated pizza production line, coupled with a system that lets them cook the pizza en route to its delivery. The resulting savings in labor cost lets them source higher-quality ingredients and the patented cooking system means delivery at the peak of freshness. Zume is presently delivery-only and only available near Mountain View, Calif. A 14” pizza will set you back from $15 to $18. “Delivery is free…and no tipping, please.” (The full CNBC story is here: http://tinyurl.com/hxrzxm7)

The technology is nothing new—the countless frozen pizzas at the grocery store aren’t handmade. At Zume, humans may be chopping peppers, mushrooms and onions, and applying toppings, but robots take care of the repetitive operations like spreading tomato sauce on the dough and putting pies into hot ovens. Zume’s CEO calls it a “co-bot” operation. The company employs 50 people, 32 in lower-skill production roles. Zume also uses data analysis to predict which combos will be most in demand to optimize pre-production. To its credit, Zume provides employees with higher than minimum wage and enhanced benefits.

To quote the CNBC article: “Zume's co-bot workforce provides a model for what the future of many industries might look like: Within five years, robots and so-called intelligent agents will eliminate many positions in customer service, trucking and taxi services, amounting to 6 percent of U.S. jobs, according to a recent Forrester report.”

Whether you’re talking about pizzas or almost anything else, the trend is clear: fewer people and more automation. The jobs that remain are either highly skilled or relatively mindless fail-safes (the required human in an automated car or truck). Research from the University of Oxford estimates jobs are at high risk of being automated in 47 percent of the occupational categories into which work is customarily sorted.

I looked up the most common occupations in the United States. Based on Bureau of Labor Statistics information, the top 10 are retail salespersons, cashiers, food preparation, office clerks, registered nurses, waiters and waitresses, customer service representatives, laborers, secretaries/administrative assistants and janitors/cleaners. Many of these jobs could be largely automated. My local Safeway already has a single employee monitoring eight self-checkout stations. When the cost of a robot is less than the cost of an employee (considering benefits and turnover), companies will increasingly turn to automation.

The cost of a Zume pizza robot is between $25,000 and $35,000 (which can be depreciated over a few years, lowering the cost still further). Economically, that’s not much more than the cost of a minimum wage worker with an employer’s share of FICA added in. And the robot doesn’t expect a raise, takes no vacation or time off, is never late, never sick and requires no managing. Moreover, as more robots are employed in industry, the cost of automation will drop, broadening and accelerating adoption. This is the smartphone phenomenon writ large.

We can argue about the exact timeline, but over the next few decades, more and more people are going to find themselves out of a job—with little hope of finding another. Even if all these people could be retrained for higher-skilled work (like programming pizza robots), there will be only so many of those jobs. And the more people competing for a given type of job, the less money that job is going to pay.

Some segments will be hit very hard very quickly. I think long-haul trucking is one such case. Volvo has already demonstrated convoys of automated trucks, with a single human in the lead vehicle, mostly there to satisfy regulators who aren’t quite ready to take humans out of the loop. Taxi (and Uber) drivers may be similarly affected, depending on how quickly truly autonomous cars (without a human to sit and watch in case of problems) become accepted by regulators and insurers. Uber is already testing automated vehicles (with a human fail-safe) in Pittsburgh.

For better or worse, we’re a society defined by jobs. It’s how we provide for ourselves and our families, where we spend most of our time and get a significant portion of our social interaction (aside from Facebook, of course), and, for many people, defines much of their self-worth. What happens to society when work goes away?

The sharpness of the tipping point worries me most. When larger numbers of people can’t provide for themselves or their families, the social fabric becomes enormously stressed. The Great Depression, which lasted less than a decade, saw unemployment as high as 25 percent. How will we, as a nation, cope with the prospect of 10 to 20 percent long-term structural unemployment caused by the inexorable advance of technology? Who will order the pizzas?

Worried? Think I’m an alarmist? Drop me a line at mduffy@northbaybiz.com.

 

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