Why the rise of smart machines could terminate jobs
HARRISVILLE, Utah — Holly Prince's new work partner is helping her make more money as a server at a Chili’s north of Salt Lake.
"Normally I can serve five or six tables at a time," Prince says while taking an order on a busy Saturday night. "Yesterday, I was able to serve nine tables at a time all day long. The tips have gone up and the number of people ordering desserts has gone up."
Prince's other fellow server, Stewart Pickett, also has nothing but praise for the new guy, Ziosk, who works with both Pickett and Prince throughout the day.
Ziosk isn't a human, but a tabletop computer. Ziosk allows customers to order appetizers, desserts and drinks by tapping and swiping on colorful displays of food such as gooey gobs of melting chocolate and caramel covering domes of ice cream.
"It's a time saver," Pickett says. "And a time waster."
The time-waster part refers to the games on the tablet, available for 99 cents, that can keep kids occupied while waiting for food.
The Ziosk tablet is part of a growing trend of automization and technological integration into the workplace. Chili’s recently announced that it was partnering with Texas-based Ziosk to install tabletop tablets at all 823 of the restaurant's locations by the middle of this year.
Applebee's is going to roll out a similar tablet in 100,000 locations this year.
But it isn't just restaurants that are seeing the rise of smart machines, software and robots. It's a trend that has troubling implications for the American workforce. IBM's Watson computer may be used to diagnose cancer and determine the most effective treatments, and lawyers already rely on another computer system to analyze hundreds of thousands of documents in legal cases, a task that would have taken a large team of paralegals.
A study last year by Carl Benedikt Frey and Michael A. Osborne at Oxford University titled, “The Future of Employment: How Susceptible Are Jobs to Computerization?” looked at how machines are radically transforming the global workforce and displacing tens of thousands of jobs in the process. Some experts say Americans are in the midst of a seismic reordering of the world's labor force, unlike anything before in human history. The report concludes that 47 percent of all U.S. employment is at risk of being taken over by computerization.
All of this is happening at a time in which political leaders are arguing about the merits of raising the minimum wage. President Barack Obama recently argued that raising the minimum wage will pull millions out of poverty. Economists and futurists say the rise of technology may wipe out any gains made by a minimum wage hike, and that its impact won't be felt just among low-skilled workers, but on the middle-class as well.
The nonpartisan Congressional Budget Office report, "The Effects of a Minimum-Wage Increase on Employment and Family Income," acknowledges that a raise in minimum wage might mean some employers will reduce the number of low-wage employees in favor of using technology, but it doesn't address the pace of technological change except to say it is "difficult to predict."
Martin Ford, author of "The Lights in the Tunnel," a book about the impact of information technology on the economy, isn't afraid to make predictions. He says the coming world of employment is essentially a story of machines and robots and software substituting for human labor.
"Technology is going to be able to take on, in particular, the routine things that people used to do and that is going to be a huge driver of inequality going forward," Ford says. "We are going to see fewer and fewer people over time really have the marketable skills they need to compete in the job market."
One of the industries hardest hit will be restaurants like the Chili's where Prince works. Nearly 12 percent of the country's 115.5 million private-sector employees work in restaurants or other food service jobs, a sector significantly affected by labor inflation, according to a report by Christopher O’Cull, an equity research analyst with KeyBanc Capital Markets Inc. The report points to minimum-wage hikes and health care mandates as two pressures increasing labor costs.
By using computer tablets at tables, the report found, restaurant owners can reduce the labor time of servers by 30 to 40 percent.
“Obviously," O'Cull wrote, "the number of servers employed would fall, but the take-home pay of remaining servers would increase significantly.”
For example, the report found that using tabletop tablets at an average mid-scale, casual dining restaurant chain, could double the maximum number of tables that a server could handle at a time from four to eight. This means the number of servers would drop from seven per shift to only five per shift — saving $30,500 in payroll costs. For the servers who remained, average hourly earnings would increase by almost 50 percent from $19.68 per hour to $29.35 an hour.
In the hustle and bustle of a packed restaurant on a Saturday night, however, it doesn't seem like any servers are going to be let go anytime soon.
Harrisville Chili's manager Benjamin Neilson says the Ziosk tablets are not replacing servers, but creating a better experience for guests. The tablets, he says, eliminate two of the areas that are universally frustrating for customers in a restaurant: trying to get the server's attention in a busy shift to order a dessert or drink and trying to get the bill when they are done. The tablets are there for immediate action on those items.
"There are no plans for replacement," he says, "it is just a helper."
Jobs at risk
The majority (62 percent) of CEOs say they are aware of the accelerating nature of science and technology, according to a study by Gartner, an information technology research and advisory firm based in Stamford, Conn. Yet a majority of CEOs (60 percent) say they do not believe that "within 15 years computers exceeding human intelligence will absorb millions of middle-class jobs."
"CEOs really don't see this smart machine issue as real," says Kenneth Brant, research director for Gartner in Durham, N.C. "They really dismissed it as futuristic fantasy. In past eras, that seemed appropriate, but I don't think we are there now."
The problem, according to Brant, is that to prepare for this future CEOs need to respond now. Gartner's study, which it identifies as "maverick research," looks at the extreme possibilities of current trends, and it isn't pretty.
Through 2023, one-third of highly skilled work by doctors, lawyers, traders and professors will instead be done by smart machines, or by less-skilled workers using computers.
"By 2030," the research says, "90 percent of jobs as we know them today will be replaced by smart machines."
The 2013 study by Frey and Osborne looks at U.S. Department of Labor data to analyze those 47 percent of jobs that may be at risk to computerization.
The most vulnerable of the 702 different jobs Frey and Osborne's study categorized are those "occupations mainly consisting of tasks following well-defined procedures." These high-risk-to-be-eliminated jobs are those in transportation or logistics occupations such as people operating farming tractors, forklifts and mining vehicles.
Also vulnerable are most office and administrative support jobs such as executive secretaries and administrative assistants as well production jobs such as in manufacturing. And say goodbye to a large percentage of telemarketers, title examiners, insurance underwriters, tax preparers, loan officers, tellers, sports officials, legal secretaries, payroll clerks, real estate brokers, cashiers, cooks, ushers, landscaping workers, paralegals, manicurists and a host of other job opportunities.
This means employment opportunities will be growing in high-income jobs that need a lot of brain work and also in low-income jobs that need difficult-to-computerize manual work. What is at risk, the study says, are the middle-income, routine jobs.
"What we see now is that computers, robots and algorithms are getting better and better at doing almost anything that is routine and predictable," Ford says. "Machines are going to take over more and more of this routine stuff and the jobs that are left are going to be more in the non-routine or creative areas, or require uniquely human skills. But those jobs will be relatively few in number."
Prosumption and tech
Many of the coming technological advances, and those that are already here, will eliminate jobs without relying on computers or robots to do them. George Ritzer, distinguished professor at the University of Maryland, looks at the changes through the prism of "prosumption," the way consumers are really becoming producers or workers. For example, pumping your own gas is a job that used to be done by workers and now is done by consumers, or prosumers, as Ritzer says.
The trend of having consumers do more work is being aided by increases in technology such as the tablets at Chili's and other restaurants.
"In my view it seems clear when you create things like the ATM machine, which is automated technology, and so the prosumer does his or her own banking, that means there are fewer jobs for tellers," Ritzer says. "The more tasks the prosumer does at no charge will translate into fewer paid jobs. Technology plays a huge role in that to empowers prosumers to do that sort of thing."
But even with technology eliminating jobs, that doesn't mean the future is all doom and gloom.
Race against machines
For proof, Ritzer points to the theories of Joseph Schumpeter, a 20th century Austrian American economist and sociologist.
"Schumpeter had this notion of capitalism as being characterized by 'creative destruction,'" Ritzer explains. "What he meant by that is that capitalism is kind of a ruthless system in that in order to advance, it must destroy."
In other words, older ways of doing work are destroyed by advances in technology as new types of work are created, hopefully, in an evolving capitalistic system. With today's fast changes, Ritzer says it is difficult to predict what that new system and work will be.
"Of course work is less and less labor intensive," he says, "so there is less for people to do."
Brant, however, says that the new information technology and smart machines may turn Schumpeter's theories upside-down. Brant says Schumpeter's "creative destruction" becomes "destructive creation" — or, in other words, our ability to create new technologies is at such a breakneck speed that jobs are lost faster than new jobs can be created to replace the old.
Frey and Osborne's study from Oxford envisions another possibility. Instead of technology pushing workers out of a job, workers resist the new technologies — bringing political and social pressure to slow the adoption of such technologies. There is a battle between technological progress and people being able to keep their jobs, a battle that shifts according to "the balance of power in society," Frey and Osborne say.
Society may also have to decided what to do as technology creates huge wealth with and for fewer and fewer people. Decisions will have to be made about how to tax that wealth if tax revenue declines among huge swaths of the population. Decisions will need to be made about how much of those concentrated economic benefits from technology should go to displaced workers.
The current push for minimum-wage hikes is one of those "balance of power" economic pressures affecting how fast technology is advancing. Michael Saltsman says government can set a higher minimum wage, but doing so will reduce the total number of jobs in the service industry.
Saltsman is research director at the Employment Policies Institute, a non-profit research organization, funded in part by donations from the business community. It studies policies that, from a free market perspective, impact the entry-level job market such as teen employment and minimum wage.
"If you create a $15 minimum wage, or whatever, then employers will just decide they are going to replace people with touch screens," he says.
Like other people studying the impact of technology on jobs in the future, Saltsman says that retail, restaurants and other venues will probably look a lot different, a lot more automated, in the future regardless of minimum wage and other economic pressures on businesses.
"Our concern in the immediate term is that we are talking about (policies that will accelerate these technology) changes at a time when a significant amount of our less-skilled job force still doesn't have a job," he says. "So I would submit to you this is the worst time to think about accelerating those kind of changes and dramatically changing the calculus between 'Does it make sense to automate?' versus keeping employees."
Currently at Chili's, however, there do not appear to be plans to automate the basic server job of taking meal orders. Prince even shudders at the thought as she works several tables on a Saturday night in Harrisville.
"I hope that doesn't happen," she says. "There would be nothing for me to do."
Meanwhile, all around the restaurant, customers will pay for their meals without calling Prince over. Instead they use her partner, Ziosk. The tablet has a screen where customers set the tip by swiping a sliding scale back and forth — defaulting at 20 percent. So far the Ziosk tablet hasn't asked its partner, Prince, for a cut of her tips.