Wednesday, January 28, 2015

Will a Drone and a Robot Take Your Job?

In the past, when talking about the use of robots to replace human workers, I have often given the example of ground transportation at the airport. To get from Terminal A to Terminal B at many airports, you take a robot-controlled trolley. No human judgments are needed to navigate the rails, make the stops, and open and close the doors. However, to get from the airport to your hotel, you take a shuttle driven by a human, because a robot cannot make the many judgments that are required to navigate through traffic out on the streets.

This example used to be a way I would indicate that some types of jobs may never be replaced by robots. But recently I am using this example to illustrate how robots may soon be extending their reach. Google has been experimenting with robot-driven cars for several years and has already logged hundreds of thousands of accident-free miles. The self-driven cars use GPS to understand their route and can consult a database of information to learn about speed limits and other considerations that we human drivers learn from signage. They avoid accidents with other cars or careless pedestrians by means of the same radar technology that is now being offered as an accessory in human-driven cars. Google’s technology is still experimental, but in a few years we may see it being used in airport shuttles, probably beginning with trips that involve the fewest variables, such as to and from the airport’s rent-a-car lot. I suppose the robot shuttle vans will also need to provide some mechanism that lifts heavy suitcases in and out of rear storage. And you won’t need to tip the robots.

When will these robot drivers take over? First, jurisdictions will need to change traffic laws that do not presently allow driverless vehicles on the roads, and you can expect some pushback from the Teamsters Union and other representatives of the people who earn their living by driving. Secondly, the cost of the technology will need to come down to the point where companies that deploy fleets of cars and trucks will save money by switching to robots. Besides saving on wages and benefits, fleet owners may realize savings if robot drivers prove to be safer than human drivers, as preliminary data indicates. It may take many years before all of these stars align, so human drivers can probably expect at least a decade’s reprieve.

The outlook changes, however, when you look at occupations with a shortage of human workers. There are lots of people who are qualified to drive airport vans. As far as I can tell, most states do not require a special license for the drivers, although employers look for a clean driving record. A modest level of fitness is necessary to handle passengers’ luggage, and the driver must speak English well enough to understand passengers’ destinations. But millions of Americans have these qualifications, so it is not hard to find workers to fill these jobs.

Long-distance truck driving requires a higher level of skill, and there currently is a shortage of qualified drivers. However, the higher skill requirements, which are reflected in the special licensure needed for this work, also mean that robots will probably take longer to make inroads into this occupation.

Japan furnishes a fine example of how a shortage of human workers can accelerate the adoption of robots. You may have already read about how Japan is using robots to perform certain routine health-care tasks, such as moving a patient from a bed to a wheelchair. Japan’s aging population means there is a growing number of elderly patients and a diminishing number of health-care workers with the physical strength needed to do the work. This provides the opening for robots.

Japan also has a shortage of workers who can drive heavy construction vehicles, probably also largely because of the physical demands of the work. The Komatsu company is planning to fill this employment gap by using self-driven bulldozers and excavators. Unlike long-haul trucks or even airport shuttles, construction vehicles function in a closed location and don’t have to deal with traffic or random pedestrians.

One thing that is particularly intriguing about Komatsu’s plan is that it also involves another new technology: drones. At a construction site, drones made by the San Francisco company Skycatch will survey the terrain from above, and the mapping data the drones gather on the actual lay of the land will be compared to a computerized map of how the site is meant to be shaped. The self-driving construction vehicles will then move earth as needed to achieve the desired result; their work will be periodically monitored by the drones.

Note that this arrangement displaces not only heavy-vehicle operators, but also surveyors. The Komatsu manager overseeing this project notes that the old way of surveying a site typically required a week’s work by two people, whereas the drones can acquire the data in only an hour or two.

Understand that this kind of construction will require some highly skilled human operators to program the machines, monitor their progress, and sometimes jump in to take control of a machine as needed. So consider this an example of how yet one more industry, construction, is seeing a trend toward eliminating many low-skill jobs and creating a smaller number of high-skill jobs. I have often said that construction jobs can’t be offshored, but the other trend eroding jobs—automation—is about to take its toll.

UPDATE.: Drones strike again: An Israeli company is marketing a self-piloted drone that reads water meters remotely. Also, a Dutch student has prototyped a drone that delivers a defibrillator to a heart-attack victim much faster than an ambulance could. Such drones presumably could also deliver other medical supplies needed in an emergency, plus a webcam to allow on-the-spot diagnosis that would enable helpful bystanders to be coached and thus provide better-informed first aid. Such drones certainly would not replace the need for EMTs, but they might mean that fewer EMTs would be needed to cover a geographic area because proximity would no longer be quite as important.

Wednesday, January 21, 2015

Young People and Urban Careers

Yesterday’s Wall Street Journal ran an article titled “More Young Stay Put in the Biggest Cities.” Drawing on an analysis of census figures, it noted that between 2004 and 2007, “before the recession, an average of about 50,000 adults aged 25 to 34 left both the New York and Los Angeles metro areas annually, after accounting for new arrivals.” But this turnover of young people diminished after the recession. “Fewer than 23,000 young adults left New York annually between 2010 and 2013. Only about 12,000 left Los Angeles—a drop of nearly 80% from before the recession. Chicago’s departures dropped about 60%.”

The article cites a demographer at the Brookings Institution who believes that young people may now be stuck in the cities for economic reasons: They are having more trouble getting their careers (and families) started, establishing a credit rating good enough to snag a mortgage on a suburban house, and paying off student debt. I agree that these factors are true for a lot of young people, but I also wonder why the demographer and the writer of the article did not consider another possible factor: that urban life may simply have become more attractive to young people.

The article does acknowledge one reason why young people flock to the cities: “In tough times, finding well-paying jobs may be easier in big cities, offsetting their relatively high costs of living.” Actually, there is a longstanding trend of college graduates concentrating in cities. One economist traced this trend from 1980 to 2000, so it is not just the result of temporary economic stress. As the percentage of young people with bachelor’s degrees keeps increasing, we should expect a greater percentage of young urban arrivals to make their permanent homes there.

And cities have other attractions besides job opportunities that might make young people less eager to leave. The crime rate in most large cities has plunged in recent years. Young people are showing diminishing interest in owning automobiles, a necessity of suburban life. And popular culture has changed the image of cities from the gritty and drab environment of “The Honeymooners” to the glamorous setting of “Sex and the City.”

You may be interested in which particular occupations are concentrated in cities. As it happens, in my recent book Your Guide to High-Paying Careers, I include a relevant list. Here’s how I created it: First, I identified the 38 largest metropolitan areas out of all 380 metro areas for which the BLS reports workforce size. For each of the high-paying occupations in the book (those with a median income greater than the 75th percentile for all salaried workers), I summed the number of workers employed in these 38 metro areas and then divided it by the total number of workers in that same occupation throughout the United States. This yielded a figure I call the “urban percentage.”

I thought it would be interesting to see how much better the wages for these occupations are in large cities than in the country as a whole. To do this, I computed the weighted average of the median earnings in the 38 largest metropolitan areas. (In a weighted average, the pay in each city is given a weight proportionate to the number of workers in that city.)

Understand that this single figure for the urban wage conceals the variation that may often be found among different regions. For example, look at the first occupation on the list: Agents and Business Managers of Artists, Performers, and Athletes. You’ll note that for this occupation (as for all the others on this list), the figure for average urban earnings is higher than the figure for the national average. No surprise here: Pay tends to be higher in big cities, partly to offset the higher costs of living there. But for the best pay, you may want to look for work in a particular city where your targeted industry has a large presence. This occupation earns an average of $103,380 in Los Angeles-Long Beach-Santa Ana, CA, the urban area that includes Hollywood, whereas it averages only $28,460 in Tampa-St. Petersburg-Clearwater, FL.

Here are the 20 high-paying occupations with the highest concentration in cities:

Urban Percentage
Urban Earnings
Nationwide Earnings
Agents and Business Managers of Artists, Performers, and Athletes
Art Directors
Multimedia Artists and Animators
Producers and Directors
Software Developers, Applications
Financial Analysts
Medical Scientists, Except Epidemiologists
Sales Engineers
Securities, Commodities, and Financial Services Sales Agents
Marketing Managers
Software Developers, Systems Software
Computer and Information Systems Managers
Market Research Analysts and Marketing Specialists
Architects, Except Landscape and Naval
Computer Systems Analysts
Advertising and Promotions Managers
Financial Examiners
Operations Research Analysts

Thursday, January 15, 2015

Careers in the Era of Cheap Oil, Part 2

In last week’s blog, I discussed some of the career-related effects of the current rapid declines in the price of petroleum. I mentioned that low-skilled workers in the oil patch will see job losses, and that the advantages that manufacturing will enjoy from low energy costs will be offset in some sectors by diminishing demand from the petroleum-extraction industry and from overseas buyers whose currency is losing ground to the dollar. This week I’m starting to wonder whether I was over-optimistic about the continuing outlook for green energy careers.

In the transportation industry, the large purchasers of energy (such as many airlines) are committed to hedging arrangements that prevent them of them from rapidly taking advantage of downward swings in price. But other airlines have reduced their hedging or have used the strategy of call options that don’t have to be exercised. This is also true for large truck fleets. And, of course, the current low prices will allow these transportation companies to lock in rates that will be advantageous when the price rebounds (although that may take some time). So the low price of oil has improved the long-term outlook for work in these industries.

Small trucking operations, those least likely to use hedging, can immediately profit from cheap diesel fuel, which will create opportunities for drivers and other workers at businesses that use these trucks. In fact, even before the price of oil plummeted, the long-distance trucking industry was expecting to face a shortage of drivers. A year ago, the Bureau of Labor Statistics was already saying (after now-obsolete comments on the rising price of diesel fuel), “Job prospects for heavy and tractor-trailer truck drivers with the proper training are projected to be favorable. Because of truck drivers’ difficult lifestyle and time spent away from home, many companies have trouble finding and retaining qualified long-haul drivers.”

The outlook is not good for state workers in the oil patch. As extraction slows down, states that depend on severance taxes (that is, taxes on the extraction of nonrenewable resources) will have less revenue to spend on road repair, aid to education, and other state budget items. In 2003, Alaska obtained 78 percent of its tax revenues from severance taxes; North Dakota, 46 percent; Texas, 9 percent. Other states, however, will have more tax revenue to spend as consumers increase their purchases in response to their low gas-pump expenditures and the general uptick in employment. Moody’s Analytics estimates about 5 percent growth in state tax receipts for the fiscal year ending June 30.

As I mentioned last week, the biggest concern now is a macroeconomic issue: How much of the declining price of oil is caused not by increased production but rather by decreased demand resulting from an economic slowdown in most of the world (with the United States a noteworthy exception)? One indicator pointing toward the latter explanation is the decline in prices of many commodities other than petroleum. The price of copper, for example, dipped sharply this week. A global recession would hurt job prospects even in the United States because of diminished demand for American products and services. The European Central Bank just got the go-ahead to take measures to stimulate the Eurozone economy in much the same way that our Federal Reserve did in response to the Great Recession. It remains to be seen exactly what the bank’s strategy will be, so it’s unclear whether it will be aggressive enough to provide sufficient stimulus.

Thursday, January 8, 2015

Careers in the Era of Cheap Oil

One of the biggest trends in the American economy right now is the low price of oil. As the price per barrel approaches and sometimes dips below $50, you can expect some changes in the job outlook for various occupations. But these are not necessarily easy to predict, and it is important to remember that the price of oil has a long history of ups and downs. The boom in domestic production was triggered by the development of fracking technology, but the continuing plunge in prices owes a large share to the decisions of Saudi Arabia, which often are based on political rather than market considerations.

The obvious first place to look for career consequences is the oil industry itself. The total number of operating rigs in the United States stands at 1,811, down 6 percent from its peak in the autumn of 2014. According to The New York Times, “Each rig represents about 100 jobs, from roughneck field hands to maintenance workers.” The Times article quotes one analyst as saying, “Exploration and production budgets are down anywhere from 30 to 40 percent and the cuts are happening faster than we thought.” He also predicts that the big three drilling companies are “likely to cut approximately 15,000 jobs out of the 50,000 people they currently employ.”

The author of the article notes that “large-scale layoffs across the industry are not expected, at least not immediately. Producers contract their rigs for as long as three to four years, and many companies have hedges that lock in higher prices than the going market rates. In addition, producers often need to drill simply to retain their leases or keep their revenue up.” The more highly skilled workers have the most security, because drilling companies anticipate that prices will rebound as global demand increases in coming years. For that reason, I expect the long-term job outlook to remain excellent for petroleum engineers, who commanded the highest salaries among college graduates in last year’s survey by the National Association of Colleges and Employers. The short-term prospects for newly minted petroleum engineers may not be quite as rosy, however.

Industries that are heavy consumers of energy can be expected to be the next place where career effects are felt. However, understand that bulk energy purchasers also use a hedging strategy to lock in stable prices over several years, so they do not benefit from oil price dips as quickly as you and I do at our local filling station. For example, this is true for the highly competitive airline industry. Manufacturing is feeling mixed impacts. Low prices at the gas pumps are helping automobile manufacturers to sell more of their highly profitable SUVs. The steel industry, on the other hand, is experiencing cutbacks in pipe and tube sales as demand from oil drillers slackens. Domestic steel is also being crowded out by imports, lured here by the current strength of the dollar. Manufacturers who depend on exports are finding that the strong dollar makes their products less attractive overseas.

The shift to green energy does not seem likely to be slowed much by cheap energy, so prospects are still good for job openings for engineers and technicians specializing in solar and wind energy production. The main drivers for this shift are improving technologies and continuing tax credits. An analysis by Deutsche Bank predicts that solar electricity will be competitive with grid-based prices in 47 states in 2016, assuming that the 30 percent tax credit continues. Even if the tax credit drops to 10 percent when the current law expires that year, solar electricity will be competitive in 36 states.

The darkest cloud on the horizon is the question of the economies of Europe and China. The low price of oil is partly the result of lack of increasing demand from these quarters. If Europe goes into a third round of recession and Chinese growth continues to cool, diminished world trade is likely to have an adverse effect across our economy. We can be proud of our strong dollar when we shop on the Champs Élysées, but eventually a stagnant world economy will hurt us, too.