Innovation

More money for the rich, fewer jobs for everyone else: The price of the coming AI revolution

Financial analysts forecast AI and automation will drive "greater income inequality" and lower wages for low and middle-skilled workers.

Baxter is a robot made for manufacturing environments that can perform a variety of repetitive tasks.
Image: Rethink Robotics
Office workers whose jobs have so far escaped automation should prepare to be replaced, according to the investment bank UBS, as AI-enabled technologies widen the global gap between rich and poor.

"Middle skill" workers who "have so far felt immune" to their roles being automated should expect the "greatest disruption", the report from financial giant cautions, in its analysis of how near-future technologies will upset job markets.

"Automation will initially affect clerical work, sales, customer service, and support functions," write UBS executives about the advances that will be made possible by ubiquitous connectivity, big data analytics and progress in narrow AI fields such as machine learning.

"Robotic process automation, automatic reporting, and virtual assistants will become common."

Admin jobs that UBS expect to be entirely automated are the processing of minor insurance claims, low-level financial advice, and legal research. Demand for manual assembly line work could also shrink further - the report states - as mobile bots join the fixed machines already found on factory floors - offering "a higher rate of production relative to that of lower-skilled human workers".

"Lower-skilled and middle-skilled workers may face greater unemployment in the near term unless a number of criteria are met, allowing them to reskill," according to the report.

Its predictions follow a projection by the World Economic Forum that by 2020 the number of administrative roles will shrink by almost 4.8 million in developed and developing countries across the world. The WEF figures also tally with the UBS forecast that routine manual work will also be hit hard by automation, with the body predicting 1.6 million jobs will be lost in manufacturing industries.

"Greater income inequality"

Despite the gloomy tone of this future-gazing, the UBS report says it doesn't expect what it calls The Fourth Industrial Revolution to necessarily lead to "an aggregate increase in global unemployment" - stressing technological advances could improve the productivity of existing workers and create demand for new jobs.

But while it says there may not be a decrease in the overall number of jobs, it also points out that doesn't mean those who benefit from the Fourth Industrial Revolution will be the same people as those who lose out.

On a personal level the report expects many of the new jobs that are created to be suited to "highly skilled" individuals - which the WEF characterises as those with abilities in computing, maths, architecture and engineering - in contrast to the dwindling prospects for those in "low skilled" or clerical roles.

"Automation will continue to put downward pressure on the wages of the low skilled and is starting to impinge on the employment prospects of middle skilled workers. By contrast the potential returns to highly skilled and more adaptable workers are increasing."

Employers and business owners also stand to benefit, as they can invest capital in reducing employment costs.

"Many labor-intensive firms should be able to boost profit margins as they substitute costly workers for cheaper robots or intelligent software.

"Near-term polarization in the labor force and greater income inequality imply larger gains for those at the top of the income, skills and wealth spectrums," the report concludes.

The forecast comes on the back of findings by anti-poverty charity Oxfam that just 62 people, 53 of them men, are as wealthy as the poorest half of the world's population and the richest one percent own more than the other 99 percent put together.

Conversely, one benefit for those facing unemployment is that the cost of living could fall as the price of labor-intensive goods drops.

The rich get richer

This discrepancy between the winners and losers is expected to also be true on a global level.

The report forecasts that robotics, automation and 3D printing will lead to companies bringing manufacturing and other roles back to developed nations, as these technologies will deliver products and services more cheaply than low-cost labor available offshore.

"Developed economies are likely to be the relative winners at this stage, whereas developing economies face greater challenges as their abundance of low-skill labor ceases to be an advantage and becomes more of a headwind."

These same emerging markets may not have the infrastructure to allow them to benefit from these new technologies to the same extent as developed nations.

"They will face the threat of the Fourth Industrial Revolution compromising low-skilled jobs via extreme automation, but may not have the technological ability to enjoy the relative gains that could be re-distributed via extreme connectivity," according to the report.

In an assessment of which countries will be hit the hardest by changes wrought by these new technologies, UBS says India, Mexico and Argentina will suffer the biggest impact and Switzerland, Singapore and the Netherlands the least.

Not everyone agrees about the rate at which AI software and robotics will disrupt existing industries. There is still a gulf between the abilities of robots and humans when it comes to certain complex physical tasks that we take for granted. These shortcomings were very apparent at last year's Darpa Robotics Challenge where many bots failed to stay upright. Robots also struggle with manual tasks that we find simple, such as picking items from warehouse shelves, and an AI researcher who works in the field recently advised caution.

"It's inevitable that robots at some point will acquire human-level manipulation skills. But whether it's 10 years, 100 or 1,000 years, it's entirely speculation," he said.

Nevertheless successful companies that exploit new internet and AI-enabled technologies will be characterised by a high-value and relatively small workforce, compared to big firms of the past, the report says.

The trend is already evident among the most popular internet services today, the report states, citing messaging service WhatsApp, which in 2014 was bought by Facebook for $22bn, despite having just 55 employees.

This capital-intensive business model is contrasted with that of older firms such as the US airline United Continental, which also has a market value of about $22bn but has 82,300 employees.

"The $400 million of enterprise value per person garnered by WhatsApp is an extreme example, but it highlights the possible outsized gains and inequality that may arise from low capital-intensity business models of the future," the report states.

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Nick Heath is chief reporter for TechRepublic. He writes about the technology that IT decision makers need to know about, and the latest happenings in the European tech scene.

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