Open Borders (If You're a Robot)

This week, a Wall Street Journal article on Australia's agriculture industry included one particularly interesting statistic: 80% of Australia's produce harvesters are usually backpacking tourists. Covid-19 has greatly disrupted Australia's agricultural labor supply, as border closures and quarantine restrictions choke off this unusually significant flow of workers. These scenes are replicated across the world with the US banning new foreign workers in 2020 with visa restrictions. Such disruptions are speeding up the adoption of automation and robots to replace lost workers, but how will this expedited timeline impact job opportunities, industry dynamics, and society in general? Pandemic-driven automation will reshuffle industries like food and manufacturing, risk intensifying inequality, and demand policy changes. 

Unlike the travel and hospitality industry, the food industry's work has intensified because of the pandemic. Coupled with outbreaks at locations like meat-processing plants, the food industry needed to automate in order to keep up with demand. Tyson Foods, which produced a fifth of America's meat, invested $500 million in automation and technology. Vertical farming is also transforming acres of tilled soil into mechanical, AI-driven stacks of produce. The agriculture/food industry accounts for 10.9% of all jobs in America. While surveys indicate the public still very much prefers human interaction at eateries, the automation of back-end work seems more certain. The Brookings Institute think-tank found that 76% of restaurant operators would like to use robots in quality control. Food sector jobs are typically low-paying, oftentimes just the minimum wage. Therefore, if firms decide to automate, workers do not really have any options to negotiate or prevent displacement; firms will replace workers when automation simply becomes cheaper. 

Due to the boom in e-commerce and housing, blue-collar jobs like warehousing and construction have recovered and exceeded pre-pandemic levels. Despite these rosy numbers, many warehouses have replaced traditional forklifts with automated guided vehicles. Bricklaying robots can lay ten times as many bricks as a human could in the same eight-hour shift. As robots become cheaper more advanced, they are increasingly competitive with human productivity. Walmart is investing nearly $14 billion in automation and other business areas in 2022. What fast tracked automation means is that technology firms will become even more important (and valuable). These benefits trickle down to the high-skilled workforce of tech companies, further increasing the return on education for technical skills. 

The pandemic's health and financial dangers are a double punch to workers without bachelor's degrees. A report by the Center for Economic Policy Research found that across 26 counties, people without bachelor's degrees had the highest risk for covid-19 infection and for automation replacement. This may be reflected in how even with increased manufacturing job postings, manufacturing payrolls have yet to recover. Tax breaks encourage automation, and even the richest companies have downsized. AT&T employed over 700,000 people as the most valuable company in 1964; Apple employs just over 130,000. With profits mainly reaching shareholders, automation will widen the divide between Wall St and Main St.

As automation becomes more commonplace, the return on technical education will increase, and this parallels the explosion of computer science and data science. Individuals may also be less interested in specific training, viewing general training as more applicable and safe. One thing to note, automation and increased returns to higher-education could stifle entrepreneurship. Because robots and software give established firms greater productivity, the fixed costs for entering a business rise. The opportunity cost of starting a business instead of pursuing education can also discouraging entrepreneurs from pursuing their small business ideas.

Sources:

• https://www.wsj.com/articles/without-tourists-to-put-to-work-australias-farms-are-short-on-labor-11613828602 
• https://time.com/5876604/machines-jobs-coronavirus/
• https://voxeu.org/article/pandemic-induced-automation-and-labour-market-disparities-covid-19 
• https://www.marketwatch.com/story/walmart-to-invest-nearly-14-billion-in-automation-and-other-business-areas-in-fiscal-2022-11613752795
• https://www.wsj.com/articles/blue-collar-jobs-boom-as-covid-19-boosts-housing-e-commerce-demand-11613903402
• https://www.brookings.edu/blog/up-front/2020/11/23/automation-from-farm-to-table-technologys-impact-on-the-food-industry/
• https://www.forbes.com/sites/adigaskell/2020/10/16/automation-covid-and-the-future-of-work/?sh=6d44302a5e10