Bain forecasts 10-15 year automation driven economic boom but many impacts from wages losses and job losses

Bain Consulting forecasts that the coming phase of automation could eventually eliminate up to 50% of all current jobs. The job activity analysis only suggests the potential of technology to replace humans with hardware and software. It does not take into account the actual market conditions that would lead businesses to automate all work that could be automated. To arrive at an estimate of the likely impact of automation, they looked at the market context within which it could happen, considering four major factors:
1. job scarcity;
2. the impact of automation on the overall cost of a product or service; whether companies were likely to redeploy cost savings into higher profits,
3. higher wages or lower prices;
4. the impact of lower costs and prices on demand growth.

Using these four factors, Bain segmented the entire US labor force into distinct categories. Bain looked at more than 16,000 combinations of industries and jobs. They used a balanced sample of more than 130 individual industry and job categories in detailed case studies ranging from nursing assistants and flight attendants to insurance underwriters and management analysts. This method enabled them to calibrate their findings based on what level of automation is possible and probable given technological progress in the next decade and beyond.

Labor market disruption

By 2030, employers will need 20% to 25% fewer workers, equivalent to 30 million to 40 million jobs in the US. Automation technologies will affect each industry and occupation differently. In some cases, lower costs resulting from automation combined with high demand for goods or services may add back jobs in a given industry. Many sectors will be able to lower operating costs by 10% or more, including some of the largest service sector employers such as retail trade and food service. At lower prices, they will see increased demand for some products, which will offset some displacement. Without it, the total reduction in employment would rise to nearly 30% of existing workers, or almost 50 million workers in the US. To put these numbers in context, during the Great Recession, US employment fell rapidly from its peak in January 2008 to its trough in February 2010 by nearly 9 million jobs, or 6.3% of total employment.

The full impact of automation likely won’t play out until after 2030 because cheap labor will continue to be available in some sectors and some businesses will be slower to adopt automation. However, in some sectors, automation may put downward pressure on wages long before workers are displaced. For example, the introduction of self-service kiosks and smartphone-based ordering technology in quick-service restaurants is likely to place a ceiling on order-taking wages at the point which it becomes cheaper to automate than employ a human order taker. As long as wages remain below that point, employment levels will be unaffected by automation, but wages will be firmly capped.

* in the industries hardest hit by automation, some of the remaining workers may be more productive and better off financially.
* Automation may also lower the cost barriers to entrepreneurship. Online media has essentially automated away the newspaper delivery job and replaced it with a wireless or fiber-optic connection—just one of many changes in the migration from print to online media—but it also has lowered the cost of targeted advertising for local businesses that might otherwise have struggled for visibility

The growing gap between the majority of workers who suffer automation’s negative impact and the highly skilled few who benefit from it is likely to increase income inequality dramatically. Over time, an unchecked rise in income inequality risks choking off economic growth.

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