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Title:   Is there a job in your future?
(effect of information technology on employment)
 
Summary:   There are concerns that the phenomenal advances in information technologies may make human labor obsolete.

Source:  BC Business
Date:  11/1996
Subject(s):  Information technology--Economic aspects; Employment--Evaluation; Technological unemployment--Analysis; Employees--Effect of technological innovations on
Citation Information:  (v24 n11) Start Page: p54(8) ISSN: 0829-481X
Author(s):  Blore, Shawn
 
  
Is there a job in your future?
(effect of information technology on employment
)

Have we finally reached the point where computers, software and telecommunications can do your job cheaper and faster than you? For many occupations, the answer is yes

It's 5 a.m. An autumn morning in East Vancouver. The sun hasn't yet risen over the eastern horizon, but here at the corner of Commercial and Broadway a lineup of yawning men stretches two abreast east towards Victoria Drive. Some arrived here at the office of the temporary agency Labour Ready as early as 4:30 a.m. They shuffle in the pre-dawn cold, waiting, hoping for the chance at another day of minimum-wage labor.

By 7 a.m as many as 200 of the early morning shufflers will have been placed at construction sites and warehouses throughout Vancouver. Business is booming, and not just for this one agency. For walking fingers it's a 9 1/2-page trudge through the Yellow Pages listings for Employment Agencies. Each day more than 200,000 temps nationwide - including accountants, lawyers, software engineers and research scientists - eke out another day's wages. At approximately 40,000 workers, BC's temp agencies employ as many people as the mining, fishing and forestry industries combined. As a group, contingent workers - temps, part-timers, contractors, and the self-employed - make up over 39 per cent of the Canadian workforce, up from 35 per cent just four years ago.

Over on West 6th there's another lineup - this one slightly scruffier - outside the office of the Canada Employment Centre. When the federal Liberals took over in 1992 they re-christened the department that runs this office Human Resources Development Canada, but about all that changed was the letterhead. The unemployment rate remained stuck at its decade-long plateau of just under 10 per cent (8.7 per cent in B.C., 20.7 per cent in Newfoundland).

The tale doesn't end there. Six-and-one-half per cent of British Columbians have given up looking for work; 5.25 per cent of workers are stuck working part-time when they'd rather be full-timers. Lumping the un-, under-, and unlikely-to-ever-again-be employed all together yields the discouragingly Depression-era result that fully 20 per cent of those who want to work full-time, can't. Mix in those contingent workers and you discover that less than half the working population has the kind of steady full-time employment normally associated with the word job. This, after three years of steady economic growth. Clearly, something is afoot.

Whatever it is, the trend is not confined to B.C. The jobless recovery is a fact of economic life in all OECD nations. According to Forbes magazine, it's nothing to worry about. Work isn't disappearing, it's just being repackaged in altogether more pleasant ways that generally tend not to involve having a job.

American author Jeremy Rifkin, on the other hand, has a more sobering diagnosis. Rifkin believes the layoffs, the unemployment, under-employment, the contingent and involuntary part-time labor are early signs of a malady that will eventually prove terminal. He believes we are seeing the end to the era of mass employment - in effect, an end to work itself.

Rifkin's thesis, outlined in a 1994 book entitled The End of Work, is simply that information technologies (IT) - computers, software and telecommunications - have finally gotten fast enough, cheap enough and ubiquitous enough that corporations are more and more able to produce goods and provide services with little requirement for human beings. The breakthrough in information technology, Rifkin argues, came sometime in the early '90s, when IT managers figured out how to rearrange corporate procedures such that large numbers of middle management were suddenly made redundant. The downsizing knives came out, and layers of middle management were flayed away.

Bill Watson was one of those caught by the carving knife. The head of the Bank of Canada's agency section in Vancouver, Watson is set to become redundant early next year when the 58 people he manages are permanently laid off. The work they used to do - processing large bond and currency transfers - will be taken over by a computer system located in Ottawa. Watson himself plans to opt for early retirement. His nearly 60 employees are only beginning to consider their options. "I think the employees were kind of stunned at first," says Watson. "Most people work at places like the Bank and government for security, always recognizing that while the pay is not great at least you have a job. I guess we're finding out that you have neither."

Throughout the '90s workers in both the public and private sector have been making the same discovery. In 1995 the already profitable U.S. telephone giant AT&T announced it was chopping more than 77,000 of its management personnel in an effort to increase profit margins. Eastman Kodak reduced its management levels from 13 to four, and laid off thousands. In all, downsizing cost U.S. firms 375,000 jobs in 1995 - more than 1,000 jobs each and every day of the year.

North of the border in 1995, Bell Canada announced a three-year plan to cut 12,000 people from its workforce of 46,000. In B.C. the five largest public companies, including MacMillan Bloedel, Westcoast Energy and BC Telecom, reduced their workforces by nearly 29 per cent from 1989-1995, while increasing revenues by more than 66 per cent MacMillan Bloedel, for example, increased its revenues by over $2 billion, or 75 per cent, between the years 1989 and 1995, at the same time as it eliminated over 4,000 employees, 34 per cent of its B.C. workforce.

In Rifkin's view, developments like these will continue and accelerate in years to come, and society will be forced to cope with a structural (that is to say permanent) unemployment rate somewhere in the mid 20s or higher.

Not everyone accepts Rifkin's reasoning, of course. Textbook economic theory argues that the three outcomes of capital-intensive automation - lower prices, higher corporate profits, or higher wages - all result in more money in the economy, more demand and more jobs. The real-world proof of this theory, critics argue, is the current U.S. unemployment rate of 5.5 per cent.

In a phone interview from his home base in Washington, DC, Rifkin counters this argument by pointing out that the U.S. rate doesn't include the four per cent of Americans who have given up looking for work, the five per cent involuntarily working part-time, nor the three per cent of American males currently in jail or on bail. "Just adding in the number of people who have stopped looking," says Rifkin, "and the number of people who are temporaries who used to have full-time employment, and the unemployment rate is hovering at 14 per cent." Comparable to Europe, or British Columbia.

Textbook economists also make the point that the process of capital replacing labor is hardly new. When tractors and combines replaced horses and field hands, workers simply shifted over to the industrial sector. As robots landed on the manufacturing floor, workers trooped over to the service sector.

Automation, however, has finally hit the service sector, home to more than 70 per cent of the province's workers. Banking - picked by the Fraser Institute as one of the winners of B.C.'s new service economy - is expected to lost about 35,000 jobs in Canada over the next 10 years, according to a Deloitte & Touche study. Like Bill Watson's job at the Bank of Canada, most of these losses will be the result of computer-driven automation. Some of the cuts have already begun.

In late 1994, for example, the Royal Bank chopped 3,500 people from its workforce, followed by the Bank of Montreal which cut 2,000 jobs in September, 1995. In early 1996 CIBC announced it was merging backend processing operations with the Bank of Nova Scotia, a move that will affect about 4,800 employees from CIBC and 1,800 from ScotiaBank.

B.C.'s largest credit union, VanCity Savings, announced in September that it planned to expand its services across Canada, all without opening a single new branch. It will be a 'virtual bank'. Customers will access their accounts via ATMs, phone lines or the Internet.

According to Richard Wafer, vice-president of information systems at VanCity, the technological transformation of the banking sector is inevitable. "What's happening in banking is the same thing that's happening to the rest of the business world; it's becoming more and more self-serve. One of the reasons VanCity is spending a lot of money and a lot of time thinking about technology is simply because we believe that if we don't, we'll become fairly irrelevant."

In other words, customers are demanding the convenience of out-of-branch banking.

VanCity is loathe to share information on the relative costs of in- and out-of-branch banking, but it's clear that cost savings is another big reason behind the corporate commitment to automated banking technology. According to a recent study of the banking system, a machine-mediated ATM withdrawal costs only 46 cents, compared with $2.46 for a withdrawal mediated by a live human being.

Currently more than 70 per cent of VanCity's transactions take place outside a branch, either on an ATM, a point of sale machine or over the phone. Wafer believes that figure will rise in a year or so when cash cards come into general usage and it becomes possible for customers to make cash withdrawals over the phone. Bank tellers will become even more dispensable.

Socially-conscious VanCity takes some pride that instead of laying people off it has retrained its tellers to take on more complicated tasks, like advising customers on how to best invest their money, but even this so-called 'smart work' may soon be taken on by a computer system. Already loan and mortgage applications can be made via VanCity's on-line banking package. At the moment it serves only as a kind of electronic form, collecting information from the customer so that it can be viewed later by a loan officer. According to Wafer, however, creating an artificial intelligence program to evaluate the loan or mortgage application and give an answer yea or nay would not be overly difficult. (In fact, the Japanese have already done it with Mujinkun, or Mr. Unmanned, the world's first robotic loan officer.)

Outside the banking sector, cash and debit cards are already making store cashiers more efficient, and thus less necessary. Combined with do-it-yourself laser scanners, cash and debit cards could eliminate the need for cashiers entirely. And that's just the beginning of the productivity gains to be had in the service sector.

"Agent jobs, the kind where one person does something for another, are already going," says Roslyn Kunin, a Vancouver economist who specializes in predicting future labor trends. Travel agents, for example, are being squeezed by ticketless airlines like Kelowna-based Westjet, and by people who simply make their own travel plans using the Internet. Kunin herself recently planned an extended walking tour of the Maritimes using the World Wide Web. So many travelers are doing the same that airlines are beginning to cut the commissions offered travel agents.

Stockbrokers are another sort of agent job that may not be long for this world. Already services like E*TRADE and the TD Bank's Green Line allow people to buy and sell stocks over the Internet. True, securities regulations dictate that a licensed broker perform the actual trade, but in the current era of deregulation it's doubtful that such guild-like work restrictions can last for long.

Other service occupations, like the so-called pink collar office jobs - typists, secretaries, file clerks - traditionally held by women will continue to be phased out in favor of the desktop PC. Kunin estimates that there will be nearly 40,000 fewer clerical jobs in B.C. by 2005.

Rifkin's critics reply to these obvious and continuing service sector job losses with one final argument - the 'picnic' hypothesis. Technology, they say, will create just as many jobs as it eliminates. They can't say what the jobs will be, or even what sector they'll be in, but like ants at a picnic, they're sure to turn up sooner or later.

David Bond of the Hongkong Bank of Canada is an ardent picnicker. "In 1958, when I was writing my PhD thesis," says Bond, "I used carbon paper. Now try find a sheet of carbon paper. All the people who worked in the carbon paper industry are no longer employed doing that. However, building all the copy machines, and repairing all the copy machines have more than made up for the losses."

The knowledge sector is often touted as being the best source of new good jobs, but unfortunately for British Columbians, opportunities in the province's high-tech sector are comparatively few, with only two per cent of the total workforce employed in the high-tech sector. On a per-capita basis, B.C. employs fewer than half the number of high-tech workers as Ontario or Washington, and according to the Science Council of B.C., things are unlikely to improve anytime soon.

B.C. does have its success stories in the high-tech field, however, among them the new fuel cell being developed by Ballard Power Systems in Burnaby. SFU professor Lindsay Meredith believes Ballard's fuel cell will be the automobile power plant of choice in the next century. Its effect on industry, he says, could well be as revolutionary as that of the internal combustion engine or, more recently, the personal computer. The employment dividends to B.C. could be enormous.

According to Rifkin, picnickers like Bond and Meredith are missing the point. "In the information age," says Rifkin, "if an entrepreneur invents a new product, he or she can manufacture that product in a near workerless factory. He can market it with a virtual company using a just-in-time workforce. So while the information age will produce good jobs, high paying jobs, it will not produce mass labor. The information age is based on the idea of elite, boutique labor."

The Bank of Canada layoffs are a case in point. At the same time the Bank closed down the Vancouver agency section - eliminating 58 medium-skill clerical workers, and one manager with over 30 years of service - the analysis section expanded, creating exactly two new jobs for highly-skilled financial analysts. It's a pattern that's being repeated throughout the economy. If Rifkin is correct and the trend continues, then the already large gap between rich and poor workers will widen in the future.

Perhaps as compensation, those with less money will have more time on their hands. A Statistics Canada study published last spring found that those with highly-developed skills are working longer and longer hours, an average of 46 hours a week, up from 42 only two years ago. Those with comparatively lesser skills work less, an average of 32 hours a week.

In a 1992 study of the B.C. economy, Roslyn Kunin coined the term 'layer cake' to describe this stratification of the workforce. Frantically licking the icing on the top layer are the 32.2 per cent of the workforce with highly-developed skill sets. These are the research scientists, design engineers, software analysts, public relations specialists, investment bankers, management and tax consultants, architects, financial and tax consultants, strategic planners, film producers, art directors, writers, editors and journalists that comprise Rifkin's 'elite, boutique' workforce. They tend to be very highly paid, very busy and very stressed.

Down in the dregs are the 47.7 per cent of the B.C. workforce with only low skills. They exist to provide poorly-paid, low-skill services for the time-crunched knowledge workers. Squished in the middle of the cake is the 20.1 per cent of workers with medium skills. Occupants of this layer, says Kunin, can expect times to be especially lean in years to come, as demand for medium-skilled folks withers away.

"You're going to see a polarized two-tier society," says Rifkin. "Very good jobs at the top - not mass but elite - and a lot of menial jobs at the bottom. What we're going to be missing are the middle class jobs that were created in the industrial revolution that led to bourgeois culture and a democratic form of government."

The worry that the information revolution might eventually undermine democracy is very much a part of European political thinking. In a 1993 speech, German Chancellor Helmut Kohl observed that "more people are unemployed in Chemnitz, Leuna and Frankfurt an der Oder than in 1933, when people there elected the Nazis." An awareness of democracy's fragility has been at least partly responsible for the broad, business-labor consensus behind German and European efforts to deal with unemployment.

Here on the Pacific coast, however, business leaders seem much less concerned about downsizing and unemployment. The CEOs of B.C.'s largest companies, including MacMillan Bloedel, Fletcher Challenge and BC Tel, all declined to be interviewed about their views on these changes. Interesting, considering that BC Tel, for example, has reduced its workforce by about seven per cent in the past few years and considering further that many telecom analysts believe the company will have to downsize even further if it hopes to remain competitive.

According to David Cawood, a management consultant who helps companies deal with change, few business people fully accept the fact that there is a revolution underway. "Many of the companies I work with are doing their best to cope with change," says Cawood ,"and some are doing quite well, but they all vastly underestimate the degree of change required." The temptation, it seems, is simply to muddle through and hope for the best.

Economist Roslyn Kunin, for example, sees no reason to make special provision for the downsized and the delayered. "People don't lay down and die when there are changes," says Kunin. "I see people already making adjustments away from the sort of 'dental plan jobs' and towards the new economy." She's right. Some are.

When Lillooet native John Duncan was downsized from his job as a mill foreman a few years back, he went out and found a job selling life insurance. Later he switched to selling long distance phone time for Westel, and then, just this summer, he branched into the tourism industry by buying a small company that rents bikes to tourists on the Penticton waterfront. A self-described red-neck, Duncan shares Kunin's belief that it's unnecessary to make any sort of provision for those forced out of the manufacturing world. "Maybe those guys should have thought ahead and saved up some of that good coin they were pulling in, instead of blowing it," he says.

In Duncan's view, making the switch is just a matter of getting off your duff and trying. He will admit, however, that the stress of making the adjustment to the new economy cost him his marriage. He'll also admit that he's now working longer hours, for less money.

In that, he's much like other workers in B.C. The tough ones, the ones that learned to market themselves and network like mad, have managed to get jobs. But they're also getting poorer. The average weekly wage in B.C. has declined steadily over the past decade, from $440 in 1986, to $432 in 1995.

Not surprisingly, B.C.'s retail sector has lately been feeling the pain. This erosion of purchasing power is one of the trends Rifkin believes will eventually convince business leaders to embrace his solutions for dealing with the long-term loss of mass employment. Simply put, companies need people with money to buy their products. The second trend that Rifkin believes will convert employers to his cause is the slow erosion of pension funds - currently the largest source of investment capital in both the U.S. and Canada - that will occur as fewer and fewer people have long-term, full-time jobs.

Rifkin may of course be underestimating the relentlessly short-term focus of most successful businessmen. Jim Pattison, for example, has been 'exposed' to the problems posed by the workerless economy, but as he says, "I'm more focused on the everyday job of competing. That's the key to everything. When you get up in the morning you have to compete with people and companies from around the world. Otherwise you're out of business."

That narrow focus on competitiveness has left Pattison with little time to consider whether the ideas Rifkin and others have put forward for putting more people to work are necessary, or even a good idea. "You're talking big stuff here," says Pattison. "You need to ask people that spend their lives working on these things. I'm not in that category."

Those in the business sector who do spend their time thinking about these things have so far opposed nearly all suggestions for softening the impact of the information revolution. Rifkin, for example, suggests that benefits be extended to part-time workers, both to improve the lot of part-timers and to discourage the overuse of this kind of employee. The same suggestion was made by the NDP's Thompson Commission, but the business community's reaction was so adverse that the Harcourt government quickly dropped the idea.

Rifkin's plan for reducing unemployment - shortening the work week - was anticipated by the federal government's 1993 Donner Commission. The Donner report found that if the work week were reduced by 10 per cent, with a corresponding decrease in wages, it would result in a permanent 4.5 per cent reduction in the rate of unemployment.

B.C.'s business community wanted none of it. The Vancouver Sun excoriated the report as 'a long-winded thumb sucker'. Jerry. Lampert of the BC Business Council rejected Donner's recommendation out of hand, saying they were a call for "more entitlements and less labor market flexibility."

Stuart Nobel of the BC Labour Force Development Board was more measured, but as he explained in a phone interview, the business community "has a real concern about any reduction in working time where there isn't also a reduction in wages." But with wages stagnant or falling, many workers are unable or unwilling to take the cut in pay that would come with reduced hours. Perhaps for this very reason union leaders haven't been exactly brimming over with demands to reduce their own hours.

Rifkin believes he has a plan to square the circle. "I'm saying we can reduce the work week and increase pay." What's more, Rifkin believes that businesses will buy into his plan voluntarily.

Here's how it would work. A company would voluntarily agree to reduce its work week by, say, 15 per cent, and increase employment levels by the same amount. In return the government would agree to pick up 100 per cent of that company's payroll taxes for a period of, say, five years. For the company the deal would represent a savings. For the government the added expense would be more than made up by the reduction in social welfare costs and increased income tax. Everybody wins. Rifkin's scheme is based upon a plan that the French government began implementing starting September 3. Whether such a plan would fly in B.C. remains to be seen.

Even if it does, there still won't be enough work to go around, in Rifkin's view. "One of the most fundamental questions that we have to answer," he says "is what do we do with millions of people that the marketplace doesn't need anymore."

He proposes that the new economy's millions of supernumerary souls be put to work in a revised and expanded voluntary sector; this is not 'workfare', but rather a wholesale reconfiguration of society. In capitalist democracies the private sector has traditionally been in charge of generating wealth and the public sector has been in charge of redistributing it in the form of infrastructure and social services. The volunteer, or third sector, has been largely overlooked.

As governments offload more and more of their functions, however, Rifkin predicts voluntary agencies will expand to the point where third sector workers will provide many of the social services now provided by government, along with many more, like childcare, that government seems unable to provide. Governments' new and limited social role would consist of coordinating the activities of these third sector groups and providing funding for third sector workers.

This is the one potentially liberating aspect of the information revolution. Freed from the drudgery of labor for production, people would be able to spend their time working to rebuild and enhance community, and in developing 'human capital'. It's the kind of idea that just might win support from a middle class increasingly wary of workfare, welfare and money-for-nothing schemes.

There are questionable aspects of this vision, of course, not least the requirement that people whose fondest pastime up to this point has been conspicuous consumption suddenly rediscover the subtle joys of caring for their neighbors. Perhaps an even bigger challenge will be paying for the expanded third sector services, for though they will certainly be cheaper to run than current government bureaucracies, they will just as certainly not be free. Paying the bills will require taxes, either from the corporate world or from the shrinking middle class, groups that have always shown themselves to be remarkably loathe to contribute to new taxes.

Rifkin believes it's a question of pay me now or pay me later. "You have to talk taxes," he says. "What I always argue is that you can pay it for community, or you can pay it for prisons. Down here [in the U.S.] three per cent of the adult male population is in prison or awaiting trial. You Canadians have a chance to avoid that."

Should 'we Canadians' ignore the problems and opportunities presented by the information revolution, it is likely that the law of unintended consequences will slap back, either in the form of increased crime or in political instability. Instead of living through a tumultuous age, we will be cursed with times that are downright interesting. That would be bad for business.

Shawn Blore is a Vancouver freelance writer.

COPYRIGHT 1996 Shawn Blore