Thursday, December 7, 2023

Losing jobs to automation requires big retraining push, Mike Walden says

When you need to talk to someone who keeps his eye on the future, North Carolina State economist Michael Walden is a great choice.

Michael Walden

At State since 1978, and a prolific writer about North Carolina’s economy, he has a gift for being able to communicate complex ideas clearly.  In 2017, he published a book entitled “North Carolina Beyond the Connected Age: The Tar Heel State in 2050.” The book is a far-sighted look at the economic challenges facing us over the next three decades, and strategies to deal with them.

One big looming problem is the likely destruction of many jobs by technology, including livelihoods that look safe. I wanted to talk about this in the light of COVID-19.

“I think that is going to be one of our bigger challenges, post-pandemic,” says Walden.  In his book, Walden described the trend in the late 20th century and early 21st: The percentage of what he called “problem-solving” jobs — requiring creativity and judgment— jumped to nearly a third of all jobs. Also, the proportion of “nonroutine” jobs such as child care and other service economy occupations rose to almost 20 percent. But “routine” task employment’s share declined around 15 percentage points.

And now, here comes artificial intelligence and the robots of the 4th Industrial Revolution to blur the distinction between what is routine and what is creative.

“If anything, I think the pandemic will accelerate the kind of technological unemployment that I talked about in that book,” Walden said last week. “Think about an average business person thinking about, gee whiz, if I’ve got my business totally dependent upon human labor, and one or two of those folks get sick, and I’ve got to shut down, boy, maybe I’m really going to start looking at ways that I can do things without involving humans.”

Last spring, Walden was interviewed by an out-of-state reporter during the outbreaks of the virus at meat-processing facilities here and throughout the country.

“And I was talking about North Carolina’s economic profile, and I said this probably means that meat-processing in North Carolina — which is a significant industry, a significant employer, especially of lower-skilled people — probably, over time, not right away, I emphasized — those businesses are going to start using robots or some kind of technology to replace people.”

“And I think it was probably two weeks later I was reading some national publication, about a meat-processing plant in the Midwest . . . who had already begun that transition. And I thought, my goodness, that made a big impression on me, that already that industry had started to think about replacing people with machinery.”

That should make an impression on all of us, because the industry in North Carolina employs more than 30,000 workers and has an annual payroll of around $1 billion. The Smithfield plant in Bladen County is the largest pork processing facility in the world.

The solution, of course, is education. It is always education, but now as a career-long process, not a one-shot deal. Technology will keep coming. Every time you think you have burrowed into an industry that is safe, you may be surprised. And that will put more pressure on high schools and community and four-year colleges.

“It’s not just going to be about training young people for jobs,” says Walden. “It’s going to be increasingly about retraining workers who have been out in the labor force for 10, 20, 30 years, and they’ve got families to support, and they’re not close to retirement, and they find out one day that their occupation isn’t there.”

He doesn’t see the unemployment rate coming back to pre-pandemic levels quickly. Remember back in February 2020, when the jobless rate in North Carolina was 3.6%? It is now 6.2%. “I’d argue that most of the models are saying it’s going to be, at best, 2022 . . . 2023 before we even approach that sub-4% unemployment rate.”

Labor-intensive occupations in restaurants, hotels and entertainment were particularly affected by the pandemic, and, Walden says, “I think the second reason is this ongoing change in how work is done, with moving toward technology and away from people.”

Another long-term trend Walden wrote about in his book is the aging of the population. Our 65+ population in 2010 was close to 13%, according to the census, as Baby Boomers began to hit retirement.  In 2038, it will be 21%, according to state projections. North Carolina has also become a popular destination for seniors, places like Brunswick County, which has grown by a third in the past decade.

“If you’re a business, you’ve got to have a plan to incorporate older customers into whatever you’re doing,” Walden says. That may challenge for marketers who obsess about 18-49s.

In many states, the dependency ratio – the percentage of the population under 18 and 65 and older — is going to be a big problem, because the percentage of working-age people will shrink. North Carolina’s dependency ratio will increase from 36% in 2010 to 41% in 2050, but, according to Walden, it will be lower than the national ratio. We will add another 3 million residents by 2050, continuing our state’s ability to attract folks from elsewhere, and could be the sixth-largest state.

Walden wrote his book before COVID-19. He is writing a new book that will focus on where people will live post-pandemic. At the height of the pandemic, the work-from-home phenomenon saw as much as 40% of the workforce working remotely, he says up from around 8%. “Now it’s already slipped back— who knows where it’s going to land – but I think somewhere between 20 and 30%.  So significantly higher than it was pre-pandemic.”

That means that a substantial number of people will be able to live anywhere, not just within commuting distance.

“Could we see a rural renaissance?  Especially if we get high-speed internet in rural areas, with people who want to remotely work, remotely educate their children, interact with their doctors through telemedicine and then enjoy the lower cost of living, especially in terms of housing in rural areas.”

“So, I’m trying to take a dive into that.”

Walden, 70, mentioned in passing that he may retire this year, which was a jolt because it reminded me how quickly time passes. We were both in our 40s when I came to Raleigh in ‘96. He plans to keep writing, speaking and consulting. His father was a carpenter who had to give up his trade when he was in his early 60s. “He just physically couldn’t do it.” Walden says his knees aren’t what they used to be, but he doesn’t need them to write first drafts on legal pads, which he still does.

One of Walden’s favorite economists was the late Secretary of State George Shultz, who was writing up until his death at 100 earlier this month. Another was economist Walter Williams, who died in December at 84 shortly after teaching a class at George Mason University.

“My attitude towards retirement,” says Walden, “is you’re not stopping work.  You’re just moving on to a new phase of your life.”

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