Trump and the crisis of jobless growth

RAJKAMAL RAO | Updated on January 17, 2018


While the advance of automated technologies has shrunk jobs across the globe, immigrants have become easy targets

When Brexit happened, elites around the world bemoaned a sense of nationalism which seemed to grip the world’s richest countries. They feared that globalism was losing its appeal to inward looking leaders such as Donald Trump, Nigel Farage and Norbert Hofer (Austria) who each touted a “country first” approach to remarkable success in political campaigns.

But a look under the hood reveals that nationalism is simply a basic human reaction to the threat of competition. Except that this time, the threat is not from low-cost labour in India’s service industries or Asia’s factories. Rapid advances in technology are automating jobs, many of them rather mundane, making entire categories of occupations go the way of the typewriter.

As the world’s population grows, this is a serious problem. Each year, millions of new entrants hit the labour market while limited savings and sunken financial portfolios of those already employed force them to delay retirement. The number of new “net jobs” created is therefore an important figure because it represents how many new entrants can be accommodated into the workforce.

Devil in the detail

India’s Labour Bureau reports that for the entire Q3 quarter in 2015, just 1.34 lakh new jobs were created across eight major industries including textiles, metals, automobiles, and IT/BPO. Our colleges and universities release up to 50 lakh new graduates each year. Lakhs more never go to college. Yet GDP growth is robust at over 7.0 per cent — the highest among G-20 nations. Something is not right with these numbers.

In the US — to which the world looks to for trade — the situation is far worse. In his book, The Rise of the Robots, futurist Martin Ford says that during the first decade of the 21st century (2000-2009), the US should have created a million new jobs a year — 10 million new jobs for the decade — simply to keep up with the growth of the country’s population. But it didn’t. It created zero net jobs during this period in part because technology rendered many jobs obsolete. Peter Sondergaard of Gartner said in an interview with Computerworld in October 2014 that “one in three jobs will be converted to software, robots and smart machines by 2025.” This is already happening across many industries — even sectors that have traditionally used technology only for core business operations.

Consider America’s dull grocery industry, a low-margin business. In prior decades, it was common to see “We are hiring” signs pasted on store-front windows of the big supermarket chains. Jobs at the checkout counter in a grocery store were a sure path for someone without a college degree to earn a pay slip. As an added bonus, these positions couldn’t be outsourced to India or China.

Not anymore. The dull American grocery industry is rapidly going high-tech and is needing far fewer employees than before — for example, by deploying ATM-type self-checkout kiosks in stores. By 2014, so widespread were these kiosks that over $1 trillion/year in goods were transacted through them, with little or no human interaction.

Labour pains

For the average non-college educated employee, this rate of technological advancement is scary. Once laid off, a worker seeking a new job is not only competing with other unemployed humans for scarce positions but is also up against technology in a constantly losing battle.

If low-cost immigrants are added to this mix, the problem compounds. In regions with chronically high unemployment, these immigrants are seen to either take jobs away from long-term residents or add to the public burden demanding social services, both of which tax residents even more.

It is no surprise that older and non-college whites are Trump’s largest constituency. Exit polls showed that a similar demographic in the UK provided the victory margins for Brexit. These groups want to use the power of government to protect their standard of living and are open to reversing 25-plus years of globalisation efforts.

For India, technology has come around a full circle. Digitising initiatives in both public and private sectors have greatly improved services while costs have fallen. On the export side, innovation is rendering many low and mid-level service jobs in call centres and basic IT support businesses redundant. And these translate to extremely low rates of hiring. The Labour Bureau reported that only 56,000 new jobs were created in the IT sector during last year’s Q3 — a pittance. Current year Q2 financial reports from the major IT companies also show similar trends.

Jobless macroeconomic growth is the single biggest headache for the world, just as important as global warming. Unfortunately, the automation genie is already out of the bottle meaning that this problem will likely get worse, not better.

The writer is the managing director of Rao Advisors LLC

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Published on August 26, 2016
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