In our prior post we noted tech writer Greg Ip’s recent comments in an article in The Wall Street Journal, pointing out the little-known fact that automation today is actually creating more jobs than it is displacing. We noted in particular the retail and banking sectors which, counterintuitively, have employed technology for their own gains, but in the process actually created greater hiring of people, due to the increased productivity that such automation has created. Let’s continue to illustrate…
James Besson, an economist at Boston University created an early desktop publishing program in 1983 that great simplified typesetting and graphical design. When Sears purchased his program, it eventually laid off 100 employees, and Mr. Besson worried about those job losses.
But it turns out customers used his software to expand the number of variety of their publications. Supermarket chain A&P used it to publish dozens of versions of circulars in Atlanta with different promotions for different neighborhoods. Mr. Besson learned that while typesetting jobs fell by about 100,000 in the 1980s, the number of designers eventually quadrupled to more than 800,000, making up for the losses many times over.
Of course, the disruption was still devastating to those whose jobs were lost. The people displaced by automation – then as now – are rarely the same people employed in the new industries made possible by the new automation. But over time, the net effect has been shown to be consistently positive.
Today, retail is the largest industry being displaced. Yet evidence is beginning to show that e-commerce has probably added to overall employment. While over the past decade about 140,000 jobs have been sliced from brick-and-mortar displacements, according to think tank Progressive Policy Institute, about 126,000 have been added in the e-commerce space. However, that fails to count warehouse and fulfillment job gains, which have increased by 274,000 jobs during the same period. And, they note, those jobs pay about 30% better than the ones they displaced.
As the WSJ’s Ip points out, this begs the question: “If online retailers, based on sales per employee, are much more productive than regular retailers, how can they on net add to total retail employment? And how can they both pay more and keep prices low?”
Ip says the answer is complicated, but it comes down to this: E-commerce doesn’t just sell the same product as a store did at a lower price. It “enables customers to peruse a vast array of products and select precisely the one they want and have it delivered in a day or two, saving the time, cost and inconvenience of visiting multiple stores.” It’s estimated that saves the average adult about 15 minutes a week and uncovered the hidden demand for shopping from home.
None of this adds to price. It simply results in people consuming more retail services, once adjusted for improved quality, than before. Then, the e-commerce suppliers spur demand by using their greater efficiencies to absorb more of the delivery costs. Amazon uses the margin it earns on goods to build and operate the logistics centers needed to profitably serve customers – and those centers are creating ever more jobs than they displace. The day when Amazon will need fewer humans appears far off. In fact, last month Amazon in a one-day nationwide job blitz accepted 100,000 applications and has already made 40,000 job offers.
The e-commerce boom is as real as the brick-and-mortar decline. But the job displacements are turning out not to be doom and gloom, as the new jobs prove greater in number and pay than those displaced.
Just as it’s been happening for at least 500 years.