Experts warn that the pandemic accelerated workplace automation

In February, an article published in the Journal of Environment and Occupational Medicine found that 14.3 percent of a broad cross-section of workers surveyed had their role partially or entirely automated during the pandemic. Days later, a working paper discussing this very issue was published by the Federal Reserve Bank of Chicago, titled ‘The Covid-19 Pandemic Spurred Growth in Automation: What Does this Mean for Minority Workers?’ The authors of the paper Kristen Broady, Darlene Booth Bell, Anthony Barr, and Ryan Perry, aimed to update the central bank’s analysis of the demographic groups whose jobs are most threatened by automation.

While common to place the interest of workers in opposition to automation, it is a false choice that brings with it devastating consequences. Typically, rather than automation allowing for more workers to labor for fewer hours by reducing the workload for employees, technological progress often eliminates jobs from the workforce entirely. Consider the impact that ATMs had on bank tellers or how self-checkout reduces the demand for cashiers. The Bureau of Labor Statistics has projected that employment for bank tellers and cashiers is expected to fall by twelve and ten percent, respectively, between 2021 and 2031. Machines, in these cases, reduce the demand for labor overall. If the economy does not add jobs to offset these losses, wages will fall since a greater number of workers will be competing for a smaller number of jobs.

The movement toward the gig economy in the face of automation

When the formal labor economy begins to eliminate workers from payroll, as it did in March and April 2020, Broady and her research team noted the gig economy might appear “appealing and useful” to increase income after suffering a job loss. However, the working paper cited research that came to the opposite conclusion. While massive layoffs spurred interest in gig work, most who entered were not able to recoup income lost.

Following the classical economic theory of supply and demand, this conclusion is obvious.

Perhaps before the pandemic, some gig workers who drove for a ride-share company or walked dogs found it to be worthwhile But, when pandemic-related layoffs led millions of workers to flood this informal labor market, they drove prices and wages down.

Take ride share as an example. If there are more Lyft or Uber drivers in a given area (i.e., high supply) and a low number of riders (i.e., low demand), the prices for consumers decrease, meaning drivers take home less money. However, when say, after a major event, there are many riders (i.e., high demand), and fewer drivers (i.e., low supply), prices often “surge.” Under lockdowns and stay-at-home orders, many rideshare users did not need the service, and it was at that time that the number of drivers looking to offset losses in income began to rise. Not to mention that the companies which offer these “gigs” do not, in the name of worker autonomy, offer benefits like paid time off or sick leave.

A warning to policymakers

Taking a step back, we can begin to see how increased automation in the formal economy would impact wages in the gig economy. As workers are stripped from the formal economy, they may move into the gig economy, but if that happens in high numbers, the price of services offered will drop further and further. While researchers at the Fed may think that the gig economy can help absorb some of the workers laid off as a result of automation, it is critical that policymakers consider the lack of protections and benefits afforded to these workers.

A survey examining the availability of healthcare access for gig workers conducted by Stride Health found that of 4,000 respondents, almost a quarter were uninsured; of that group, costs were the primary barrier cited (58 percent). Gig workers are also far less likely than those in the formal economy to have access to a private retirement account (i.e., 401(k), IRA, etc.). The informal labor market is, by definition, not an alternative to its formal counterpart and should not be treated as such. Full-time salaried employees in the United States must be offered health insurance by their employer, who is also responsible for paying Social Security and Medicare taxes and is incentivized through tax benefits to offer employees a private retirement savings plan. Setting aside the issues that plague the formal labor market, there are at least a few protections that do not exist in the gig economy, not to mention for workers who are without employment entirely.

Why aren’t workers working fewer hours if productivity has increased so much?

The authors of the working paper quoted economist John Maynard Keynes who, in the early twentieth century, estimated that based on increases in productivity by 2030, workers might only need to toil for fifteen hours a week. But, if the profits of increased productivity are invested in technology that reduces the need for human labor, and jobs are eliminated, then the number of hours worked cannot fall and could begin to rise. Since 1994, the labor force participation rate has fallen from sixty-six to sixty-two percent. Over the same period, the number of multiple job holders has increased by nineteen percent; more concerning is the rise in workers with two full-time jobs. When the number of jobs shrinks, and the population remains constant, longer rather than shorter hours often become a reality. Workers fearing their fate if removed from the labor market may be willing to accept worse pay and benefits because it is better than being left without a job completely. Keynes conceptualized this phenomenon, which he called technological unemployment, as temporary, theorizing that as workers were removed from one role, sector, or industry, they could eventually move to another.

Other economists, including Karl Marx, took a much more negative view.

If technological advancements led to the elimination of jobs, like is the case with ATMs and bank tellers, it becomes critical that the economy build another path into the labor market for tellers who are laid off and future workers who would have occupied those roles if they still existed. Nevertheless, even in cases where automation does not lead to a net loss in jobs, if those available are worse in terms of benefits and conditions, the threat to workers and their quality of life persists. Professor David Harvey has taken this conclusion one step further and argues that the incentive to automate will exist so long as it continues to cheapen labor costs. While some may applaud the market in these circumstances as it has built its own mechanism to disincentivize the purging of workers, it is important to remember that it is not innovation that is the enemy of workers. Who would object to an invention that allows them to work fewer hours or reduce the number of physically intensive tasks they are required to complete? It is when the choice becomes choosing between those benefits and one’s job that the tensions created by the capitalist economic system emerge.

Although inadvertently, Broady and her co-authors recognize that private firms place innovation and improved labor conditions in opposition when discussing the effects Amazon has had on general retail.

“For example, while sales from e-commerce companies like Amazon, particularly considering the growth in e-commerce during the pandemic, reduce the number of sales and employees at traditional retail stores, Amazon also creates new jobs by hiring workers at fulfillment centers and in other parts of its distribution network” argue the authors. To support the claim that the pandemic boom in e-commerce would not disrupt the labor market, the authors referenced a study that found a net increase in jobs in the US resulting from the move away from traditional brick and mortar retailers towards e-commerce: “from 2007 to 2016, the general retail sector lost 51,000 jobs while the e-commerce sector added 355,000 jobs.”

But this conclusion conflicts with Amazon’s own records.

In 2022, Verge reported that only a third of new hires at Amazon remained employed at the company for more than three months. The high turnover was mentioned as a major concern for some of the company’s executives who, in a report obtained by Vox’s Jason Del Rey, said that they could run out of new hires by 2024 if they do not improve their ability to attract and retain employees. The company mentioned two possible “levers” that could be pulled to make this a reality: increase wages or increase automation. According to Del Rey, the same document stated a goal of increasing warehouse productivity by twenty-five percent “all strictly through increased automation.”

The most vulnerable will pay the highest price

The main purpose of the working paper was to update the central bank’s analysis of which demographic groups face the greatest threat to automation.

“Our analysis finds that Black and Hispanic workers are overrepresented in jobs at high-risk of automation and underrepresented in jobs with low risk of automation,” reads the report. The unemployment rate for Black (5.7 percent) and Latino and Hispanic (5.3 percent) workers is already higher than the national average (3.6 percent), which adds an additional layer of vulnerability to the level of threat faced by these groups. Not to mention the other destabilizing effects for workers and their families automation may have that were outlined in an earlier section of the paper. These include “wage premiums” for higher educated workers “while displacing” those whose labor is cheaper to automate. As time goes on, fewer and fewer jobs would receive this “premium.” This is one way technological progress under capitalism exacerbates income inequality within and between countries. Lastly, similar to Marx’s own theory, the authors describe how “automation may intersect with preexisting incentives to invest in capital rather than labor.” The authors attribute that choice to lower taxes on capital expenditure. Increasing spending on capital expenditure to invest in technologies that will, in the end, reduce the number of workers needed may reduce profit margins in the short term, resulting in lower taxes. However, in the longer term, once these workers are off the payroll, the company reduces its tax burden by taking on fewer employees.

Innovations in automation threaten millions of jobs, but placing technological progress and the interest of workers at odds is a false choice, and we don’t have to make it.