When it comes to our economy, boom-bust cycles are normal. However, with technology and automation set to grow exponentially in such a short amount of time, we are on a collision course to experience the extreme. There very well could be an automation bust that changes the way we do business forever.
So, why the bust? Large investments to get automation up and going, growing income inequality and an aging workforce are all huge causes. The economy has grown so much in a decade that we can no longer keep up with what we have. Customer experiences and expectations will rely on faster service and heightened intelligence. The result? Robots and automation like we have never seen.
Want to know how an automation bust could potentially play out? Can it be avoided? I’m glad you asked.
The Game Plan
There are quite a few factors to consider in the future of automation. But to keep it simple for now, I’m just going to be focusing on the three already mentioned: large investments, growing income inequality, and an aging workforce.
In an SHRM study, a little bit more than one-third of organizations were examining policies and procedures to address the aging workforce and the coming demographic change. Unfortunately, that leaves the majority completed unprepared for this switch. As the population within the workforce continues to age, growth will slow. This will cause an extreme lack of labor in some of the top growing industries.
As these labor shortages become more than organizations can bear, they will begin to increase their investments in automation. Experts conclude that capital investment in automation could reach $8 trillion in the US alone by 2030.
Just a reminder, 2030 is only twelve years away—shocking when you put that into perspective. Here comes the boom. These investments in automation will be greater than in times before and will directly impact the service industry. And according to an article written for Harvard Business Review, “An $8 trillion investment boom would result in average annual US growth of about 3% and roughly 60% more economic output in 2030 than in 2015.”
Now, it has been said that the investments would offset at least some of the impact on employment as robots and automation technology become the norm. This could stall the job loss for millions of workers in the next few years. However, as investments begin to pay off and automation is implemented at the end of the next decade, 40 million workers could be out of work. At this point, growth will become reliant on demand alone, an economy that was hidden by the initial investment boom.
The 40 million individuals who are no longer employed will spend less. And due to the demand for high-skill workers versus the decrease in low-skill, income inequality could grow even further, reaching all-time highs, causing growth to halt completely. Automation on this scale could eliminate jobs “two to three times faster” than in previous times in history. Are you hearing a tick tick tick? Because if all of this comes true an automation bust is definitely on the horizon—or is it?
Can an Automation Bust Be Avoided?
According to HBR, “The clear pattern of history is that creating more value with fewer resources has led to rising material wealth and prosperity for centuries. We see no reason to believe that this time will be different — eventually. But the time horizon for our analysis stretches only into the early 2030s. If the automation investment boom turns to bust in that time frame, as we expect, many societies will develop severe imbalances.”
Many companies have survived economy threats over the years. It simply comes down to preparation. Although the shift seems to be unavoidable, companies can prepare themselves for an automation bust by assessing their current business processes, employment, and other factors to see just how prepared they really are.
Let’s discuss a few areas organizations should be paying attention to, to ensure they are prepared.
Hiring. Organizations should hire for the skills required for the current position however, it should also be known that the current position will soon be changed into something else entirely with automation and tech. Employers should hire employees that are not resistant to change and have a good attitude about fluctuation. Patrick Mullane of Harvard Business School states, “If you hire somebody today with a perfect background, one thing you [can be] pretty confident about is that 10 years from now their job will have at least morphed into something different. So hiring for attitude and willingness to learn, combined with some basic foundational skills, might be a better way to go than looking for a specific skill.”
Training and Education. Organizations should invest in training and education for their current employees, no matter their age. Continuing education can help bridge the gap between low-skill and high-skill when it comes to the end of the automation bust. And employees who are prepared for what the future may hold? Those employees are critical to the change.
Prepare for new models of work. In order to survive, organizations may need to consider new work models including the “human cloud” which places emphasis on using workers from all corners of the world for tasks that otherwise fall into the cracks. Just like employees should be willing to face change, so should organizations. Fluidity will make all the difference.
In the end, the world will be able to move faster, another industrial revolution for the books. However, until we can get there, changes will need to be made, problems faced, and solutions found. Be prepared by learning more, hiring employees for the future, training your workforce and being open-minded about the future of work.
This article was originally published on Futurum.