Post-Coronavirus Automation Makes Job Creation for Economic Developers More Difficult

Automation replacing jobs will accelerate in the post-COVID-19 recession.

Businesses are already investing heavily in both automation and artificial intelligence as a means to cut cost, improve productivity, and accomplish tasks that are impossible for humans to achieve. The coronavirus pandemic strengthens the justification for greater business investment in computing, robotics, algorithms, machine learning, artificial intelligence, and other forms of automating work. Robots and software don’t:

  • Get sick or get quarantined.
  • Take sick days.
  • Have to care for children who are forced to be home from shutdown schools, unless they are programmed to do that.

Logically, automation occurs more quickly in the occupations which it can more easily automate. Routine jobs, many of which are low wage, are at the greatest risk of automation. But the depth and width of automation will reach many mid-range and high-paying jobs too. However, creative, technical, and jobs that require interpersonal skills and emotional intelligence are less likely to be replaced.

Automation and artificial intelligence are already impacting economic development organizations and Investment Promotion Agencies. EDO and IPA success is typically evaluated based on a measurement of new job creation. However, new job creation will become more difficult for EDOs and IPAs when economic productivity is becoming decoupled with human labor. In addition, for these professionals focused on growth in geographic regions, the trend in digitization and automation can create geographic economic inequality as the highest paying jobs and greatest economic output are created in tech-savvy regions of the world, while other regions are left behind.

The COVID-19 pandemic will accelerate the trend toward labor-replacing automation, although the reasons why this will occur may initially appear counterintuitive. Common sense might result in the thinking that a rise in unemployment will lead to a reduction in the cost of human labor and therefore companies would slow the adoption of labor automation. However, what actually happens is that surges of automation occur in bad economic times. This is because during a recession business revenue rapidly declines making employees relatively more expensive than pre-recession. When this happens, companies lay off employees and replace them with technology and (now more affordable) higher skilled workers which increase productivity. (Source: Brookings Institute)

Job loss during a recession is not uniform. Nir Jaimovich of the University of Zurich and Henry E. Siu of the University of British Columbia research, “Job Polarization and Jobless Recoveries,” showed that, over three recessions in the last 30 years, 88% of job loss took place in “routine” occupations. According to their report “essentially all employment loss in routine occupations occurs in economic downturns.”

United States Metropolitan Regions at Risk of Job Automation

Global professionals working in economic development and investment promotion can proactively respond to changing economic conditions and mitigate economic impacts. There are many ways to engage. Here are three to consider: 

  • Facilitate job transition – Repetitive jobs in your community which require very little real-time decision making are most at risk. Workers in your area doing these jobs are more likely to see these jobs eliminated. This dynamic will also create greater social inequality as higher income people who design and produce software, robots, and automation products will see increased wealth while less educated and unskilled workers lose their jobs and are in financial peril. Programs to find new work for displaced employees and to upgrade their skills will be important for maintaining economic and political stability in your region.
  • Increase tech labor – To avoid becoming a region that is left behind requires having a tech-savvy labor force and ecosystem that fosters techn business growth. A tech-talented workforce can be created over time through education (primary, secondary, and higher education as well as trade-schools and continuing professional development). This is politically popular and takes time to develop. In addition, it requires the region to retain the labor talent it develops instead of it leaving to existing tech hot spots. Economic regions can also gain quality tech entrepreneurs and employees by bringing them from outside of the region (elsewhere in the country or through immigration). There is global competition for quality technology workers as demand is larger than supply. As such, people with tech skills can often find jobs in geographic regions of their choice that are desirable places to live and work. Bringing in quality tech workers and entrepreneurs from outside of the country can also increase the supply. However, immigration to attract enough quality tech workforce may be constrained by legal, political, and cultural barriers.
  • Redesign the physical economy – The current physical landscape of your city was designed and built for a different economy. In the real estate configuration and locations buildings are now in, gas stations, drive through services, and automobile repair shops may no longer make sense with vehicles that drive themselves. Economic developers and city planners will need to rethink the urban fabric of their cities.

Economic developers interested in more programs, case studies, and strategies to respond to the economic consequences of the coronavirus pandemic can download the white paper, “Case Studies for Economic Developers to Mitigate Damage from the Coronavirus Pandemic.”

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