March 14, 2013
Tech is great for corporate profits, dismal for job market
With such new technologies and services as online calendars and cloud storage, many people have realized new efficiencies in their workflow. It is now easy to, for instance, send out invitations to an event and get real-time responses. Corporations have also taken note of the increase in productivity technology affords, and some have responded by cutting jobs.
It is primarily this trend that Steven Berkenfeld '81, managing director of investment banking at Barclays, sought to analyze in his talk, "What Is the Future of Work?" at the ILR School March 13. Technology is displacing workers at a rate faster than it is creating jobs, he said. Where there used to be administrative assistants for every manager, one can now cover 12 to 15 people.
Berkenfeld's other examples include automated checkout lanes in stores and the U.S. Postal Service's plan to cease Saturday delivery.
"I just went to Home Depot, and they're allowing me to check out my own stuff. Well, there used to be a cashier that was doing that. What happened to that job? And what kind of new job will there be?" he asked.
The answer may simply be that no job will replace the one that was lost. Although the stock market is at an all-time high, and many companies have returned to profitability, unemployment is still at 7.7 percent (which Berkenfeld claims is "just the tip of the iceberg"), and underemployment is prevalent.
"What the Great Recession did was allow companies to think about their workforce ... and say, 'I need to rationalize my workforce so that it fits with the productivity I've gotten out of technology,'" he said.
Companies have introduced unprecedented "productivity layoffs," he said, where workers are no longer terminated due to difficult economic times, but rather as part of a recurring business strategy designed to take advantage of efficiencies created by technology.
For example, he said that at industrial conferences, "I would see companies like GE present and say, 'We've cut 50,000 jobs and half of those are permanent. It doesn't matter what happens in the economic cycle; we're never going to rehire those people.'" The cuts are usually even in industries that were not as affected by the recession, such as the technology or health care sectors, he said.
The result: record earnings for corporations, whose profits as a percentage of GDP are now at a 50-year high, but stagnation and unemployment in the job market, where earnings as a percentage of GDP are at a 50-year low. The reason, Berkenfeld argued, comes down to a classic "collective action problem" -- where companies seek to maximize short-term growth at the expense of long-term growth, and the rest of the economy suffers.
Berkenfeld said that he hopes that by bringing these issues to light, a national conversation will start. He hopes to answer such fundamental questions as "How do we balance the efficiency and profitability against the need for jobs? How do we ensure the healthiest overall economy that creates the broadest amount of security and wealth for our population?"
He concluded by quoting John D. Rockefeller: "The world owes no man a living, but it owes every man an opportunity to make a living."
Mikhail Yakhnis '14 is a writer intern for the Cornell Chronicle.