Introduction
With Elon Musk of Tesla advancing the field of automation at a rapid pace and envisioning a million “robotaxis” on the roads by 2020, the question of risk management is one that has to be considered with respect to the field of automation. Numerous companies are turning more and more to robotics. Amazon uses robotics in its shipping and supply warehouses to streamline processes and keep shipping moving at an acceptable rate. One of the risks created by this advancement in technology, however, is the risk of automation displacing human employees. This risk has substantial social and economic downside plus potential political risk, as political backlash tends to follow social and economic developments. When America began offshoring jobs in the 20th century, it resulted in the rise of the working poor and the widening of the income gap between the upper and lower classes. If more workers are displaced by automation in the coming years, it could be another trend downward for unskilled laborers as jobs are either exported or eliminated by way of automation. This paper will examine what experts in the field—De Smet, Lund and Schaninger (2016), Goldsmith (1994), and Wike and Stokes (2018)—have to say on the topic and discuss what it means for the field of risk management in general.
Background on Social and Economic Risks of Job Displacement
As Wike and Stokes (2018) point out, the concern over automation displacing jobs is a global one: “In South Korea, there are more than 600 installed industrial robots for every 10,000 workers in manufacturing facilities. In Japan there are more than 300 and in the United States nearly 200. Profit maximization, and the relatively high cost of human labor, helps drive automation” (p. 2). Automation is happening whether people like it or not—and there are very definite risks not only for people as individuals but also for the global economy, which depends upon consumers have disposable income. If consumers all turn into the working poor—i.e., individuals who work low-skilled, low-paying jobs and rely on government subsidies for basic expenditure, such as housing, health care, food, and education, there will be little to no disposable income to help support the economy. Either all markets will end up becoming centrally planned (which has not worked well in the past, if the Soviet Union is to serve as any example), or they will crash—and it is quite likely that some combination of the two may occur. The people have noticed. Wike and Stokes (2018) note that “in all 10 advanced and emerging economies polled, large majorities say that in the next 50 years robots and computers will probably or definitely do much of the work currently done by humans. In three countries—Greece, South Africa and Argentina—four-in-ten or more believe this will definitely happen” (p. 3). It is therefore important to pay attention to what this means and what risk management should consider. The first place to look is the statistics on job displacement as caused by offshoring and what it does to increase the level of working poor in the nation. The rise of automation risks leading to a greater rise in the level of the working poor.
Economic Risk and Problems Currently Impacting the Sector
Job displacement in the U.S. has led to the rise of the working poor. Who are the working poor? The working poor, according to the Center for Poverty Research at University of California, Davis (2018), are “people who spend 27 weeks or more in a year in the labor force either working or looking for work but whose incomes fall below the poverty level.” There are currently 12 million working poor in America today (Policy Link, 2019).
The demographics show that the working poor in the U.S. generally fall into these categories:
· 11.7% Black, 11.7% Hispanic/Latino, 5.5% White, 4.3% Asian
· 7.2% women, 5.5% men
· 18.3% with less than a high school diploma
· 8.3% high school graduates with no college education
· 2% with a bachelor’s degree or higher (Center for Poverty Research at University of California, Davis, 2018)
Latinos and African-Americans make up the main shares of the working poor in the U.S., and women tend to be among the working poor more than men (often because they are single mothers). Nearly 1 out of every 5 working poor lacks a high school diploma. Nearly 10% of them...
References
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Center for Poverty Research at University of California, Davis. (2018). Who are the working poor? Retrieved from https://poverty.ucdavis.edu/faq/who-are-working-poor-america
De Smet, A., Lund, S., & Schaninger, W. (2016). Organizing for the future. McKinsey Quarterly, 1, 30-43.
Desilver, D. (2018). For most U.S. workers, real wages have barely budged in decades. Retrieved from
https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/
Goldsmith, S. J. (1994). The trap. Carroll & Graf.
Lee, T. (2018). Geography of poverty. Retrieved from http://www.msnbc.com/interactives/geography-of-poverty/index.html
Pew Research Center. (2014). America’s wealth gap between middle-income and upper-income families is widest on record. Retrieved from https://www.pewresearch.org/fact-tank/2014/12/17/wealth-gap-upper-middle-income/
Policy Link. (2019). An overview of America’s working poor. Retrieved from http://www.policylink.org/data-in-action/overview-america-working-poor
Wike, R., & Stokes, B. (2018). In Advanced and Emerging Economies Alike, Worries About Job Automation. Pew Research Center, Global Attitudes & Trends. Retrieved from https://www.pewglobal.org/wp-content/uploads/sites/2/2018/09/Pew-Research-Center_In-Advanced-and-Emerging-Economies-Alike-Worries-about-Job-Automation_2018-09-13.pdf
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