Fed Chair Powell’s comments on Thursday were in-line with our perspective published on Wednesday. The Fed will continue to work to “stimulate” the economy (it can’t of course, it can only inflate asset prices). However, every time Chairman Powell mentioned “full employment” in his speech I couldn’t help but think of the job dislocation that’s occurring now and will only accelerate as a result of advanced automation. Whereas in the past, automation typically impacted unskilled labor, this current automation tsunami is affecting unskilled and skilled labor alike including white collar professionals. Not only do I fear permanent double-digit unemployment, I fear the potential fiscal and monetary response.
Job dislocation will accelerate as automation capabilities become increasingly sophisticated. My former industry – Investment Management – is increasingly replacing portfolio managers with machines on the active management side. Technology companies are constantly reallocating resources (more engineers, less “G&A”) to optimize growth.
From a fiscal and monetary perspective I fear that the response to job dislocation will be to print money and mail checks to the unemployed – which is to give up on them (see our proposed solution next paragraph). This type of response is essentially a version of the Universal Basic Income (“UBI”) plan proposed by one-time Presidential candidate Andrew Yang. UBI would be a “solution” to permanent job dislocation that politicians and central bankers could feel good about at a superficial level, but would not “solve” anything. In fact, UBI would motivate people to not find gainful employment, to not retrain and reposition themselves for the job market. UBI would be a wet blanket on Real GDP growth along with the many other rudderless entitlement programs that create an expense without generating a commensurate return – economic or otherwise.
My proposed solution would see a public-private partnership where State and Local government would engage market-leading companies to develop programs dedicated to training people for value-added jobs. State and Local government could work with companies to define scope and process. Further, State and Local government could provide tax incentives to encourage corporate participation. Government could then best serve the process by getting out of the way. Take credit at will to advance your political campaigns, but for the love of country get out of the way.
Software, data, machine learning, artificial intelligence and other advanced analytic capabilities are the modern economy’s lifeblood. Not everyone has the capacity to become a software architect, engineer or data scientist. However, there is a middle ground between these highly-skilled jobs and unskilled labor. Jobs exist where individuals could be trained for roles that support engineers etc., whether it be for necessary processes such as data acquisition, data cleansing, data labeling and the like.
Several years ago we wrote that the largest Technology companies would take a more active role in K-12 and collegiate education. It is only logical that this educational effort extend to training experienced employees for new careers where they may add value to the modern economy and in the process improve their quality of life.