Rising Automation Amid Labor Shortages: The New Workplace Reality
As the US economy slowly reopens, unwinding from the COVID-related lockdowns of 2020 and early 2021, employers are facing an unprecedented shortage of available workers. Many reasons have been cited for the lack of employees, such as low pay and overly generous unemployment benefits. Lingering fears of COVID-19 also play a significant role in keeping workers away.
Regardless of the reasons behind the labor shortage, one response has been the increased adoption of automation, particularly among major corporations. Businesses are turning to technology to fill gaps left by the lack of available workers. This shift means that more people are now competing against advanced automation systems for their jobs. As automation becomes more prevalent, the challenge of staying relevant in the job market grows.
Which begs the question: What will you do when you are replaced by a robot?
The Looming Threat of Job Displacement
In a study released in October 2020, economists Ziad Daoud and Scott Johnson concluded that as many as 800 million people “face a high exposure to the risk of their employment becoming obsolete.” This finding aligns with an even bleaker conclusion from a 2013 Oxford University study that estimated automation could threaten 47% of US jobs in the following two decades.
Soon, restaurants could be staffed almost entirely by robots or automated servers. At many fast-food restaurants, you already punch in your order at a kiosk, rather than speak it to an employee. Some hotels are already equipped with automated check-in systems and robotic butlers. Imagine a future where driverless vehicles become the standard, drastically changing the transportation industry. This shift alone could make over four million US jobs obsolete, dramatically impacting the workforce.
The Broad Impact on All Skill Levels
And it’s not just unskilled or low-skilled workers who are in jeopardy. Many of those at risk of losing their jobs to automation will be highly skilled professionals. After all, why pay for a physician’s diagnosis when an expert system powered by AI could perform just as well in most cases and never need to take a break? Robot judges that can determine guilt or innocence could eventually replace human ones. Indeed, in China, the Beijing Internet Court already offers a mechanism to adjudicate civil disputes before an AI-powered robotic judge.
This trend is unstoppable. And the transition’s speed is increasing exponentially. You’ll need to adapt, especially if you’re under 50. Occupations most likely to be automated include roles such as accountants, bookkeepers, and even certain healthcare positions. In contrast, jobs that require complex problem-solving, creativity, and technical maintenance, like those of robotics technicians and skilled tradespeople, are least vulnerable to automation.
The Shrinking Social Safety Net
Americans also need to face another reality: the social safety net that our parents and grandparents relied on will mostly be gone by the time we need it.
The good news is that if you’re already receiving guaranteed pension benefits such as Social Security, you’ll probably continue getting them for the next few years. The bad news is if you’re not yet old enough to qualify for these payments. In that case, you’ll receive some portion of the benefits you were promised. But it won’t be anywhere close to 100% of the amount you expected and planned for.
A big reason is the impact of higher unemployment on pension schemes like Social Security funded by worker contributions. And it’s likely to happen sooner than you might think.
The trustees of the Social Security trust fund estimate that payments will continue as normal only until 2034. After that date, the fund’s reserves will become depleted, and employee contributions will be sufficient to pay only 76% of scheduled benefits. The Congressional Budget Office (CBO) is even more pessimistic and predicts an insolvency date of 2031.
We believe that even the CBO’s prediction is wildly optimistic, especially if automation eliminates nearly half the jobs in America.
I’m 66 and I anticipate receiving much lower Social Security payments than what I’m currently entitled to. In my retirement planning, I’m counting on:
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A 50% cut in Social Security benefits in 2028.
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Another 50% cut in 2038.
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An additional 50% cut in 2048 (if I live that long, I will be 93 years old).
At best, Social Security will be able to pay out no more than 50% of promised benefits to anyone retiring in my lifetime. And well before that date, the entire system will likely collapse. Young workers will revolt overpaying into a system from which they will never benefit.
Medicare is in even worse shape. Each year, the Board of Trustees for Medicare publishes a report summarizing the financial status of the program. Recent trends suggest that the portion of Medicare funded with payroll taxes that pays for hospital care will be depleted as early as 2024.
So, you’ll not only need a Plan B for your job but for your retirement and medical care as well. And the younger you are, the more likely it is that the safety net won’t exist at all when you need it. If you’re under 45, you’ll need to self-finance essentially 100% of your future retirement income and medical care.
Actionable Strategies for Adapting to Automation
This means you need to save as much money as you can by any means at your disposal. One option we hear a lot about is the FIRE (financial independence, retire early) movement. The basic equation for FIRE is that once you’ve saved around 25 times your annual expenses, you’ve achieved financial independence and can retire.
But FIRE doesn’t always work out as planned. People have retired early only to find themselves looking for work again a few years later. They may not have saved enough, or their passive income stream didn’t work out.
Another critical strategy is to invest in skills and education that are less likely to be automated. This could include fields like healthcare, technology, and creative industries where human intuition, creativity, and complex problem-solving are valued. Learning to work alongside technology, rather than compete against it, will be crucial.
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