United States: Tech, Not Trade, Poses Biggest Threat To American Jobs

Donald Trump's successful road to the White House was fueled by heated rhetoric against free trade deals and U.S. companies engaged in offshore outsourcing. Underpinning his slogan "Make America Great Again" was a premise that millions of jobs lost to other countries should and could return to the United States.

The president's ambitious goals include the creation of 25 million new jobs over 10 years. Central to the plan is adjusting trade policies—either scrapping them altogether or negotiating new ones more beneficial to American workers. So, too, it would seem, are policies aimed at discouraging companies from outsourcing operations abroad where labor is cheaper.

During the campaign, President Trump called out some of America's best-known companies for their reliance on foreign labor. He has kept up the rhetoric since being elected. In December, when he touted his success in persuading air conditioner maker Carrier Corp. to keep 800 jobs in Indiana, Trump signaled a policy of retribution to prevent further outsourcing: "Companies are not going to leave the United States any more without consequences," he said.

Many economists view President Trump's plans with skepticism. They note, for instance, that trade deals generally have little overall impact on jobs. Additionally, his threats to companies engaged in outsourcing would face practical obstacles. Levying punitive taxes on individual companies, for example, would probably require Congressional approval. Even if such a policy were put into place, it would not likely improve American competitiveness. After all, the U.S. cannot prevent non-U.S. companies from using low-cost labor to make less expensive goods.

The bigger problem is that President Trump's focus on trade and outsourcing appears to be misplaced. The real long-term threat to American jobs isn't foreign labor; it's the accelerating pace of technological disruption eliminating jobs altogether.

We're on the cusp of seeing entire job categories disappear—not move offshore, but vanish—because of rapid advances in artificial intelligence, robotics, automation, cloud computing, and other emerging technologies. A recent World Economic Forum survey of executives at large companies estimated that five million jobs in the world's leading economies could disappear over the next five years.

It doesn't require a vivid imagination to foresee some of the potential destruction.

As just one example, consider the four million Americans who make their living behind the wheel. With rapid advances in self-driving vehicle technology, their future is under a dark cloud. Some suggest the 1.7 million truck drivers are especially vulnerable, given that they spend most of their time on the highway where human intervention is needed least. Then there is the tremendous financial incentive: In the $700 billion trucking industry, an estimated third of costs go to compensating drivers. The temptation among trucking companies to cut those costs—and gain a competitive advantage—will be great.

Similarly, the potential widespread adoption of block chain technology could lay waste to millions of jobs in the financial services industry. The technology is now used to record and store Bitcoin payments, but startups and large banks are exploring ways to use it to improve a variety of other services and compliance tasks, which could save billions.

Automating tasks—a core function of many of these new technologies—is nothing new. But the pace of automation's march into areas beyond the assembly line is hard to overstate. Consider the now ubiquitous ATM or the airport kiosk. The march won't stop. A new restaurant with a machine capable of making a gourmet hamburger in 10 seconds, for example, is set to open in San Francisco. In Japan, an insurance company laid off workers following the company's adoption of IBM's Watson Explorer, an artificial intelligence system that will perform an important back office function at the company.

Of course, not all automating technologies will lead to the elimination of jobs. But if the president is committed to massive and sustained job growth, he will need to confront the inevitable, relentless advance of disruptive new technologies.

Andrew McAfee and Erik Brynjolfsson of the MIT Initiative on the Digital Economy have blamed new technologies on the "great decoupling" of productivity and job growth rates. After World War II, the two rates rose in near lockstep for decades, but beginning in 2000 job growth slowed considerably compared to productivity. President Trump's promise to reduce bureaucracy and roll back regulation may well fuel the growth of these new technologies, leading to more rapid displacement of workers than might have otherwise occurred.

History has shown new technologies create new jobs even as they kill off old ones. After talkie movies were introduced in the late 1920, for example, movie theatres no longer needed piano players to provide accompaniment to movies. But new job opportunities opened in Hollywood for audio engineers. The more recent innovation of online banking has surely limited the need for traditional bank tellers, but it has created new jobs for programmers.

So yes, technology creates jobs, but mostly for the skilled worker capable of exploiting the new opportunities. The truck driver, and other low-skilled workers facing disruptive technologies that threaten their livelihood, are in a much more precarious position. For many truck drivers, becoming a software programmer for self-driving vehicles, or a drone-repair person, isn't possible absent extensive training.

Moreover, the pace of technology-driven disruption is accelerating as new technologies combine and mutate in often unexpected ways. Autonomous vehicles using block chain technology for payment transactions will mean job losses for taxi drivers and bank employees. Commercial drones combined with big data analytics relying on cloud storage will mean less need for delivery personnel and supply chain managers.

Along with most elected officials, President Trump has been silent on this key issue. He ignores it at his own political peril. To make good on his campaign promises, his administration will want to focus on training displaced workers for these new emerging jobs, many of which will require programming, engineering, or similar skills.

President Trump clearly knows a thing or two about disruption—his upset victory in November is proof of that. But will he be able to get out ahead of the coming wave of low-skilled job losses arising from disruptive technologies? Doing so would help him address what threatens to be a growing source of economic anxiety among American workers.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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