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How iPads and smartphones are killing jobs

Rick Newman
·Senior Columnist
How iPads and smartphones are killing jobs

For millions of American workers, the economy is back to normal. For a distinct minority, it’s still in recession. The unsettling implication is that the unemployed are beginning to look unemployable.

The Federal Reserve--which has become the sole government steward of the economy, given paralysis in Congress--has basically acknowledged there may be little it can do to help the long-term unemployed. The Fed is decisively reining in its stimulative “quantitative easing” program, even though there remain many signs of weakness in the job market. Fed Chair Janet Yellen has also begun to chart a path toward short-term interest rate hikes--most likely in 2015--which would mark the end of an easy-money policy that began in 2007 and the beginning of a tightening cycle.

That’s what is supposed to happen in a healthy recovery. “I don’t think we’re in unusual times anymore,” says Rick Rieder, a managing director at investing firm BlackRock. “Employment is not abnormal.

That may be news to a lot of frustrated job seekers, but by several numerical measures, Rieder is right. Job growth in the 1990s—a prosperous decade—averaged 200,000 new jobs per month. That’s roughly the pace many economists predict for 2014, and job growth last year, at 173,000 a month, was near that level despite tax hikes, federal spending cuts, a 16-day government shutdown and ferocious winter weather in December. On top of that, the unemployment rate for people who have been jobless for 14 weeks or less is near the lowest level in two decades, which means most people who lose their jobs these days find new ones quickly.

The biggest weakness in the job market, and in the overall economy, is concentrated among workers who have been out of a job for more than 27 weeks, a group generally characterized as the long-term unemployed. There are many reasons for this, including worker skills that degrade quickly in a high-tech economy and weak demand for many products that leaves companies with no need to hire. Now, add one more factor that analysts are beginning to examine: The newfound ability of companies at all levels of the economy to replace traditional workers with computers or machinery.

Automation is nothing new, but what is new is the intrusion of technology into sectors that have long been dependent on a human touch—or thought to be, anyway. Restaurants are beginning to take orders through smartphone apps or electronic tabletop menus, reducing the need for waiters. Online banking, via smartphone or PC, has cut down sharply on consumer visits to banks and the need for tellers. Utility companies are replacing meter readers with gizmos that automatically report usage. Digital technology, in other words, may be transforming the workplace—including lower-skilled and menial jobs--in ways that are only beginning.

A testing ground for this is the debate over whether to raise the national minimum wage from $7.25 an hour to $10.10, as President Obama and many Democrats would like. Historically, raising the minimum wage has usually had no meaningful impact on hiring, regardless of what partisan advocates may claim. But this time may, uh, be different. Up till now, automation has mostly been used to streamline industrial assembly lines and other complex systems. Now, technology has gotten so cheap that a few iPads outfitted with ordering and purchasing software may be cheaper than a staff of retail clerks earning minimum wage. If the pay threshold were to rise to $10.10, it could boost overall costs at some employers by nearly 10%, according to BlackRock analysis. That may be enough to persuade a whole range of companies to replace workers with gizmos wherever possible.

Automation, in general, may explain other oddities of today’s economy, including incomes that are barely rising after inflation, and the huge and growing income gap between the technocratic class and everybody else. There may be enough ordinary workers benefiting from a tech-driven economy to make the aggregate numbers look normal. But the millions who don’t benefit may find it hard to earn a living at all.

There are at least 14 million Americans who can’t find enough work or any work, and probably many more who have given up looking. It would benefit mostly everybody if those folks were reintegrated into working America. The uncomfortable truth, though, is that the economy can muddle along without them if necessary. In fact, it already is.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.