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The Inevitable Self-Service Unemployment Crisis, Part 5

By Gary Deel, Ph.D., JD
Faculty Director, School of Business, American Public University

(This is the fifth of a five-part series that will be published on Online Career Tips each Tuesday for the next few weeks.)

In Part 1 of this series, I discussed the growing trend in implementation of self-service technologies across industries. In Part 2, I explained why self-service technologies are becoming so popular for businesses. In Part 3, the case was made for where I believe this self-service future is headed. And in Part 4, I outlined some ideas that individuals and whole societies should consider in preparing for this major change.

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In this fifth and final article, I will identify three common counterarguments to the idea that self-service technologies are going to cause a major unemployment crisis, and explain why each argument fails under scrutiny.

Counterargument 1: People Are Essential to the Companies that Employ Them

This first case is what I commonly refer to as the “fluffy” argument. It’s the idea that the people in various product and service industries are an irreplaceable component, without which businesses could not survive. Disney has “cast members” who “make the magic.” The Ritz-Carlton hotel chain has “ladies and gentlemen serving ladies and gentlemen.”

Companies across the business spectrum insist that their people are their most prized and valuable resource, for whom they would ostensibly do anything. I call this argument “fluffy” because it sounds awfully nice but it just doesn’t square with reality.

The Actions of Business and Industry Speak Louder than Words

The actions of business and industry speak louder than words. Theme park operators for years have been slowly replacing their employees with smart technologies for functions such as admissions and attractions controls. The hotel industry has undergone similar downsizing as technology has revolutionized routine processes like room inventory management, finance and accounting, laundry and concierge services. Restaurants, airlines, retail — everywhere you look, a slow revolution is rolling along.

Think about it. Everything we know about the behavior of big business tells us that employees aren’t nearly as important as companies claim them to be. And interestingly, we’ve structured our corporate law in such a way that, even if the leaders of major publicly held companies sincerely cared about the future employment of their workers, their hands would be largely tied to do anything about it.

Here is a hypothetical example. Suppose that Bob, the CEO of Big Box Stores Inc., is presented with an internal analysis that shows if he cuts all his expendable employees and replaces them with machines, he can save 50% of the company’s costs and reap tremendous dividends and returns for his shareholders.

Bob likes profits, but Bob has a big heart and doesn’t want to fire all of his employees, whom he credits with having built the company. So Bob decides to ignore the cost savings and profits, and forego the technology replacement.

This sounds like a touching end to the story. But unfortunately for Bob, the owners of the company are going to sue him in what is called a shareholder derivative suit. They will argue that he is acting in a way that is against their interests and that violates Bob’s fiduciary duty to the shareholders.

Now, normally Bob’s decisions would be protected by something called the “business judgment rule,” whereby courts will generally decline to scrutinize the strategic choices of a business executive even if they ultimately lead to loss, as long as they were at least reasonably engineered to serve the shareholders’ best interests. However, in this case, Bob had no intention of helping the shareholders. His decision was purely motivated to serve the well-being of the employees. On these grounds, he could very well be found liable for damages to the owners.

Counterargument 2: Technology Will Never Be Good Enough to Replace People 

This second argument is the classically shortsighted perspective. It’s the idea that, because today’s technology isn’t perfect, it will never get to the point where it can truly replace human beings in most jobs.

We can all relate to the source of this sentiment. It comes from the buggy interactions that we all have with machines every day: Your smartphone or computer that froze up or stopped working. That ATM that ate your debit card. That gas pump that didn’t give you a receipt. The printer at work that jammed.

The perception is understandable, but unfortunately it just doesn’t comport with reality and what we know about the rate of technological progress. Back in 1965, computer engineer Gordon Moore predicted that the number of transistors that could be squeezed onto an integrated circuit board would increase by a factor of two, every two years or so, as technology allowed for miniaturization and the improvement of efficiency in components.

For the layperson, what this means is that the processing power of computers would double every two years. This prediction became known as Moore’s Law, and it has held more or less true ever since. To be fair, a few years ago we began to see a slight slowdown in the rate of processor improvement, but computer processing companies are still managing to double the amount of power in their chips about every two and a half years. Some engineers anticipate that advanced engineering strategies such as hyperscaling will push the pace back in line with Moore’s Law in the 2020s.

What does this all mean? Essentially, it means that we can’t even begin to imagine what the next few years of technological advancement will look like. So to suggest that the performance of today’s technology is any indicator of the performance of tomorrow’s technology is indefensibly premature.

Those reading this who were alive in the 1980s and 1990s will remember the cell phones of the time. They began as obscenely large brick boxes, with poor service and even poorer battery life. Then they got a bit smaller, but still couldn’t do much more than make phone calls.

But as we turned the page on a new millennium, an explosion occurred. Cell phones became smartphones; to compare the best phones from 1999, 2009 and 2019 is almost comical. The leaps were huge. So we shouldn’t be tempted to assume anything about the phones of 10 or 20 years from now. Or the future of self-service technology, for that matter.

It’s worth noting that reaching a point where technology leaves nothing to be desired compared to a human doesn’t require that we move at a blistering speed, either. All that is necessary is that we continue to make progress at any rate. So long as we don’t stop, one day we will reach a point where our technologies will outshine us in almost every conceivable way.

Counterargument 3: People Will Adapt and Fill New Needs in the Technology Economy

This final argument is a tired one. It is the assumption that, no matter what changes our societies experience, there will always be a need for human workers, enough to employ anyone and everyone who wants to work.

This argument is actually refuted way back in the beginning of part 1 of this article series. I spoke about the history of horses as partners in the human way of life. Horses were once indispensable to our economies, to our means of travel, and to our ability to defend ourselves against enemies.

Yet horses today have no serious place in any of these aspects of our lives. Those who would assert that humans are somehow categorically different from horses — because we’re smarter or more abstract or more adaptable or more tenacious — lack a sufficiently vivid imagination with regard to how far beyond human capacity technology will eventually ascend.

The Technological Revolution Will Create New Jobs, But There Are Two Strong Caveats

Will this technological revolution create new jobs? Absolutely, but there are two strong caveats: First, there won’t be nearly as many new jobs created as old jobs destroyed. Consider the self-service checkout section at your local Walmart. If it’s anything like the ones near me, there are probably 10 or 15 checkout machines in a section.

As discussed in Part 2 of this series, one machine takes the place of about four to five employees in terms of hours and productivity. So 10 machines would remove at least 40 employees from the workforce. Now, it’s true that these 10 checkout machines will need oversight by human employees (at least for now) to handle problems, errors and unusual issues, but certainly not 40 overseers. One or two support personnel seem to be getting the job done in my local stores, and that means another 38 or 39 people are still out of work.

But there are other jobs created by technological innovation, right? What about the designers, engineers, programmers and installers of these machines?

Here is where the second caveat comes in: These jobs, unlike checkout clerk jobs, require specific skill sets and training. Sometimes college degrees are required. These are generally not “learn as you go” positions. So most of the workers displaced from their entry-level jobs by these technologies will not be able to perform the jobs that will be created in building these technologies.

The Penalties of Ignoring the Looming Unemployment Crisis

We’ve discussed the proliferation of self-service technology, why it’s happening, what it means for the future and why it’s not something to take lightly. We’ve talked about what people can do to prepare for it, and why weak arguments don’t win the day.

If people take this crisis seriously, self-service technology could be a great aid in the century ahead, making life easier and better for all. But if we ignore the unemployment dangers that this revolution poses, we risk the wealth, health and happiness of a huge portion of the global population. I know which option I’d rather go with.

Start a management degree at American Public University.

About the Author

Dr. Gary Deel is a Faculty Director with the School of Business at American Public University. He holds a JD in Law and a Ph.D. in Hospitality/Business Management. He teaches human resources and employment law classes for American Public University, the University of Central Florida, Colorado State University and others.

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