Bank of America received attention last month for announcing the rollout of fully automated bank branches. Three pilot locations will open this year, each about one-quarter the size of a traditional branch but with no one home. Think of a row of ATMs plus a couple of cubicles at which you can chat with a person via webcam.
This is the next logical progression in an inexorable trend: removing human interaction wherever possible. And it's picking up speed. The most critical challenge for policymakers may not be Obamacare or tax reform, but how to retrain a workforce that is rapidly growing obsolete.
Christopher Hopkins
The bank has already shuttered 22 percent of its locations since 2010, driven by the need to cut costs and reduce errors.
"We are literally automating every single thing," said Dean Athanasia, co-head of consumer banking. That means fewer jobs in the back office as well as the branches, thanks to advancing technology.
Of course, Bank of America is hardly alone. Most of us have suffered the indignity of having a kiosk shoved across the table at the end of a meal in what used to be a full-service restaurant. McDonald's is testing self-order screens and semi-automated kitchens. In some locations your order at the drive-thru is routed through a call center halfway across the country. And Wendy's recently announced they would put touch pad ordering stations in 1,000 locations during 2017. Self-checkout is now a standard feature at the supermarket, the home improvement store, even the pharmacy. These systems reduce cost and mistakes but also collect and analyze important personal information about your preferences that very well could determine what ads you see on Facebook tomorrow.
The same forces driving automation in retail are eating into employment in other critical American industries as well. The recent debate over U.S. manufacturing jobs that dominated the presidential election ironically missed the point. There were 5.6 million manufacturing jobs lost between 2000 and 2010, but very few were actually the result of foreign trade. In fact, U.S. factory employment has declined by 40 percent since 1980, while American manufacturing output has increased by 150 percent. Technology and automation are responsible for 85 percent of those job losses.
And it's not just factory workers who face replacement. Sophisticated computing algorithms referred to collectively as "artificial intelligence" and "machine learning" actually accumulate experience and literally learn from previous events, like a human but much faster and more predictably. Jobs previously assumed to require creative thought are increasingly subject to automation.
Chillingly, a recent study by consulting firm McKinsey estimates that fully half of all U.S. jobs could feasibly be replaced by machines today. Let that sink in.
We are well into an inflection point in U.S. history that may prove every bit as disruptive to our economy and our social fabric as the transcontinental railroad or the invention of the transistor. Many traditional avenues of employment will simply not exist in the next decade thanks to the unstoppable march of invention. This is particularly true with entry-level jobs so essential to imparting critical skills necessary to advance in responsibility and compensation. Rear-guard actions to slow the trend, like import tariffs or "buy-American" laws are counterproductive and will hasten the changes. Protectionist trade barriers, far from saving jobs, actually incent companies to accelerate technological solutions.
What is needed is an effort on the scale of the moon landing aimed at enhancing the skills of the workforce to supply the demands of the 21st century economy, not the 20th. This may prove to be the real challenge of our time, and not a moment too soon.
Christopher A. Hopkins, CFA, is a vice president and porfolio manager for Barnett and Co. in Chattanooga.