Automation and Silicon Dystopia

Wage gaps, automation, politics and Silicon Valley collide in a future of increasing wealth inequality.

Hey Guys,

This is simply an Op-ed and rather off the cuff. I’m curious as to your thoughts about this. I don’t pretend to be an expert in economics, automation or technological policy, but I’m worried. Let me tell you why.

While A.I. is being billed as a solution to many of the world’s ills, it’s rarely talked about how it compounds the problems we currently have. I’d like to think about this outloud a little bit, perhaps you see the dilemma too?

With labor-supply shortages in the labor force, more companies are turning to A.I. and automation. However, simple automation, while producing value, can also be a path to greater inequality of income and wealth.

The demographic shifts of lower fertility is going to get expensive, and as productivity lags with a lower labor participation rate, A.I. could realistically fuel more wealth inequality, and wage gaps. The adoption of A.I. and automation is eventually going to fuel more social unrest.

Think of it this way as a consumer: When you use self-checkout machines in supermarkets and drugstores, you are probably not—with all due respect—doing a better job of bagging your purchases than checkout clerks once did. Automation just makes bagging less expensive for large retail chains.

New data suggest most of the growth in the wage gap since 1980 comes from automation

If the study is correct, the wage gap from automation in the 2020s and 2030s is going to be considerable.

Labor-Shifting is Actually a Transfer of Wealth

"If you introduce self-checkout kiosks, it's not going to change productivity all that much," says MIT economist Daron Acemoglu. However, in terms of lost wages for employees, he adds, "It's going to have fairly large distributional effects, especially for low-skill service workers. It's a labor-shifting device, rather than a productivity-increasing device."

A newly published study co-authored by Acemoglu quantifies the extent to which automation has contributed to income inequality in the U.S., simply by replacing workers with technology.

So what exactly happens as robots get smarter and smarter software allows us to do more with less? Are more jobs really created than are replaced? How can that be?

As the scope of Artificial Intelligence (AI) grows, some fear that hyper-automation could lead to a widespread loss of jobs. Yet the literature seems to debate this and propose that A.I. and automation won’t be responsible for job destruction, just job disruption.

The study, titled ‘Tasks, Automation and the Rise in US Wage Inequality’, has been published in the journal Econometrica.

So in the study, they found that the introduction of technology such as self-checkouts in supermarkets or assembly-line devices has contributed to a growing gap in wage equality.

The problem is around 2030, severe demographic changes coincides with a continuation of the drop in labor participation with lowered productivity in Western developed countries - which also coincides with more A.I. and automation, as an amateur futurist, I don’t have to tell you what this will lead to problematic outcomes in GDP growth and social unrest.

The U.S. has a limited capacity to prepare for that future. Major corporations are pushing A.I, and automation continues to pick up its pace. I read an incredible Op-Ed in Vox about what will happen to America’s Colleges in the coming years due to demographic factors. ~ The incredible shrinking future of college - why I find it an important read is demographic changes combined with automation will feel like a very different world.

Impact of Automation on Inequality is Profound

Since 1980, the income gap between more-educated and less-educated workers has grown significantly in the US. The study suggested that automation accounts for more than half of that increase.

So is this A.I. for good Microsoft and Google keep talking about? Acemoglu (in the study) believes that automation tech should be treated differently from other tech innovations in the workplace as it does not necessarily benefit everyone. He called it “so-so technology” or “so-so automation” because of the potential trade-offs.

Now Generative A.I. with an announcement of GPT-4, is seen as a movement that could contribute to some degree of task automation in the knowledge workforce or white collar jobs, can you imagine the potential impact on wealth inequality?

While A.I. will enable huge corporations like those in BigTech to have significant advantages by being AI-first, what will be the impact on the general population? As an A.I. writer, it’s not all hype and papers, you actually have to summarize how the tech is most likely to impact humanity.

There’s pros and cons we aren’t thinking about with the profit motive as the main incentive. There’s serious sociological and economic harm we might be racing towards. With inflation and a likely recession for Europe and North America in 2023, these are the periods where automation makes significantly quicker progress due to the labor-supply disconnect we saw with the pandemic, people retiring early and people leaving the labor force.

A.I. instead of being a force for good, may accelerate already dangerous levels of wealth inequality in America. For every feature of convenience in a supposed A.I. utopia, we are treading near a chasm of A.I. dystopia, where a few citizens enjoy the benefits of this brave new world.

A.I. ethics does not just mean more accessible models or the democratization of A.I. It means also means that A.I. and automation should benefit society and civilization more than it does harm. If this is not regulated, the incentives of free market Capitalism with BigTech monopolies, will produce very unfortunate and undesirable outcomes. According to the study, it is estimated that automation has reduced the wages of men without a high school degree by 8.8pc and women without a high school degree by 2.3pc. These figures have been adjusted for inflation.

So in reality, automation has also led to a lot of young men disappear from the labor force, either incarcerated or in a rural setting or possibly even as a victim of the Opioid crisis. Not just flashy A.I for good you see, the technological society has significant haves and have-nots. It’s not a coincidence that in America, there are significant ethnic and racial lines in the winner-takes-all Capitalism we are supporting.

The “Enrollment Cliff”

Demographic changes ahead compound the ill-effects of the impact of automation on wage gains and inequality.

In the Vox article they summarize it thus: in four years, (roughly by 2026) the number of students graduating from high schools across the country will begin a sudden and precipitous decline, due to a rolling demographic aftershock of the Great Recession. Traumatized by uncertainty and unemployment, people decided to stop having kids during that period. But even as we climbed out of the recession, the birth rate kept dropping, and we are now starting to see the consequences on campuses everywhere. Classes will shrink, year after year, for most of the next two decades. People in the higher education industry call it “the enrollment cliff.”

My thesis is that A.I. adoption and automation including Generative A.I. could actually be dangerous for civilization if adopted too fast too soon. Every year there are more robots to workers in societies all across the world, a world of 8 Billion people now.

In China, younger chinese aren’t just deciding children are too expensive, they are spurning factory jobs that power the economy. This incentivizes the adoption of more robots, for example. Declining fertility combined with more automation and A.I. is becoming an existential risks and in the 2030s all of this will become much more clear. I can say in 2022, it’s a major issue we have to plan for.

In reality, A.I. is much less likely to do good at scale, than harm the present. BigTech lobbies Congress and financial incentives reign supreme for shareholders and how major trends of automation will commence, from robots to fanciful Generative A.I. Just look at the last 40 years:

The gross domestic product value of the USA has risen from US$6.82 trillion in 1980 to more than $20 trillion in 2022. But with nearly three times the pie to go around, not everyone's ended up with more on their plate. The impact of automation and A.I. in the next 40 years, that is 2020 to 2060, is going to be much much more profound and thus the impact on wealth inequality will be as well. This could result in the failure of Capitalism and democracy.

It would be ironic if our fabled A.I. and cherished automation lead to great collapse or dark age, but that is now increasingly becoming probable. Of course the study is not generalized like I am, to conduct the study, the MIT and Boston University researchers used US Bureau of Economic Analysis statistics on the extent to which human labour was used in 49 industries from 1987 to 2016, as well as data on machinery and software adopted in that time.

That U.S. workers have “skills deficits,” that is, lack the skills necessary to deal with technological change, including primarily automation, has been the predominant explanation offered by economists, pundits, policymakers, and the media to explain sluggish wage growth and inequality in the United States, at least until recently.

This narrative is sometimes presented as explaining the wage gaps between “skilled” and ‘‘unskilled” (meaning those without a college degree) earners and the disappointing wage growth for the vast majority. However as more knowledge workers and white-collar jobs are impacted by A.I. and automation, this argument will begin to break down.

When A.I. accelerates and robots learn to self build and self-learn, how will have the skills to keep all of their jobs? If a robot or smart machine can perform a surgery better than a surgeon, what will be the point of having so many human surgeons on stand-by? The Automation narrative used in Politics in the U.S. has fundamentally been a story of misinformation about technological disruption from the 1980s to the present time. This does not bode well for civil rest in the future as wage gaps, inflation and the cost of housing continues to spiral out of control.

A.I. and automation are actually central to the economic interests of citizens, voters and what a real democracy should feel like - and yet strikingly, there’s so little debate about it. This is a sign of a Misinformation State. Politicians driven by BigTech have a story they like to tell somewhat like this: In this story, rapid technological change has led to substantial growth overall and for those at the very top—the ones with “unique skills” and “access to capital”—while those without unique skills and access to capital experience diminished demand and are unable to push for higher pay.

As this story begins to unravel when the actual data is studied, we have to question A.I. and automation and its macro impact not just on the economy, but on well-being, healthcare, trust in our institutions and the health of our systems and way of life. In 2022, that simply isn’t happening.

The Automation Narrative was a Lie

The skills deficit story sounds logical, but it’s not true. It fails to explain wage patterns over the last four decades, and it is a prima facie implausible explanation for at least the last 20 or more years (since 1995 or 1999). The problem is the narrative and the narrative pushed by BigTech that automation creates mores jobs than are lost really begins to break down in the 2025 to 2045 period we are about to enter.

Other research has found links between automation and job insecurity. A 2016 study by the Oxford Martin School programme and Citi on technology and employment found that developing countries had a higher percentage of jobs at risk of automation.

Around a third of jobs across Europe could be at risk from the rise of automation and 12m jobs will be lost across five European countries by 2040, according to a report from Forrester earlier this year. These reports always try to note that new jobs will be created also - as if somewhat apologetically. We will not witness an A.I. for Good world in the 2030s, we are likely to witness very significant disruptions of social unrest due to the wage gaps, increasing inequality and breakdown of our education and healthcare systems, among other consequences.

Indeed as smart robots and advanced A.I. begin to do more and more of the tasks we once did better than us, it won’t feel great. For many of us, it won’t even be that convenient, because we won’t be able to afford to participate in the brave new world. Automation and A.I. may not fulfill our Sci-fi fantasies simply because wage gaps, unaffordable housing, healthcare and education will only get worse! Adoption more Automation and A.I. is not the answer! Not all innovation is created equally.

The demographic shifts alone China and other developing countries will experience even without the significant wage gaps and inequality would alone slows global GPD growth in the 2030s and 2040 combined with an aging percentage of senior citizens. But now you have pandemics, climate change disruptions, geopolitical conflict and a quickening pace of automation and A.I. adoption in society. Thankfully places like India, Indonesia, Brazil and Nigeria’s younger populations somewhat offset the aging demographics in more developed countries.

The winner-takes-all dynamic from education to BigTech means continuing wealth inequality in the U.S. could lead to significant upheaval. With BigTech becoming even more ambitious in leveraging A.I. and robotics for profit, while peddling a brand of A.I for good for show, will mean significant harm to wage gains, wealth inequality and the general health of capitalism and democracy in the coming decades. What will Google, Microsoft, Amazon and their peers be responsible or exactly by 2050? It’s Silicon dystopia right before our eyes.