In the ongoing discussions about unemployment and how to get people back to work, the issue of automation is, in my opinion, too often ignored. Politicians and the media tend to get focused on red meat topics like off-shoring and NAFTA, all the while brushing aside what I believe to be the largest challenge to current employment, let alone job growth.
Case in point: Company A has been in existence for nearly a half-century, and generates slightly over $192,000 in revenue per employee. Company B has been around for fifteen years, and generates nearly $1.18 million in revenue per employee.
Here is the rub: Both Company A and Company B are in the exact same industry.
Company A is Wal-Mart. In 2009, Wal-Mart generated $404 billion in revenue, and employed approximately 2.1 million people. Wal-Mart's sales represent slightly less than ten percent of total retail sales in the United States, or $4.4 trillion, which is close to 23% of the United States GDP of $14.6 trillion.
Company B is Amazon.com. In 2009, Amazon.com generated approximately $24.5 billion in revenue, and employed approximately 20,700 people. Amazon.com's sales represent nearly 20% of the $156 billion generated by online retail in 2009.
Based upon those numbers, this can be extrapolated:
Since its inception in 1995, Amazon.com has eliminated nearly 107,000 retail positions nationwide. As a whole, online retail has eliminated approximately 535,000 jobs.
This is the tip of the iceberg. As of 2009, online sales account for approximately 3.5% of all retail sales. By applying the Law of Accelerating Returns, it can then be assumed that, by 2016, online sales will account for 7 percent of all retail, eliminating another 535,000 jobs. By 2019, 14% of all retail will be online, eliminating yet another one million jobs.
The extreme scenario is, of course, if you apply these numbers across the entire spectrum of consumer spending, which accounts for 70% of US GDP. It raises the distinct probability of a loss of over six million jobs by 2019.
We are moving from the information age to the digital age, and it appears to be having a massive impact on the economy of every nation around the world. I have heard the argument that we can't account for future technologies that will create new industry and employment for upwards of 20 million people, but it is hard to foresee when, at least in certain segments of the vast retail sector, worker productivity has gone up about sixfold in the past decade.
A little over fifteen years ago, Jeremy Rifkin wrote a great book in which automation creates a scenario where there simply isn't enough work available, and the extensive ramifications it will have on a society that has to re-think how income is generated and distributed.
Will it soon be necessary to massively expand the welfare state? Is there a new industry on the horizon that can provide sustainable work for tens of millions? Will the sharp increase in worker productivity mean that it is more beneficial to society if we simply pay some people to be consumers?
Lots of big questions. I'd love to hear some big answers!