January 22, 2021

Will Automation Increase or Decrease Salaries?

One of the perks of working at Proactive Talent is the conversation. Between client calls, project engagements and virtual lunches, we discuss trends in our industry, the impact of those trends on our clients and the latest Netflix show we are obsessed with. One of our virtual watercooler chats centered around automation and how it might affect salaries long term. I went on a long tangent and afterwards my fellow tribe members chimed in with their thoughts. Unlike the current political climate, we were able to freely speak and debate insights without being disagreeable. At the conclusion of it all I thought, wow, this would be a great article. So, I laid out my point of view and asked others to chime in with their thoughts. Whether you agree or disagree, I hope you keep the conversation going in the comment below.

WILL AUTOMATION INCREASE OR DECREASE SALARIES?

When the topic of automation is brought up in relation to the job market, the arguments tend to repeat themselves. One view is from the doomsayers who suggest robots are going to steal all the jobs away with the contrarian position being somewhere between a robotopia (where machines do all the work and humanity is sustained on a Universal Basic Income) and an Iron Man scenario where tech and humanity operate simpatico. I think to some extent all workers will become Tony Stark with our iPhone or variant wearable technology augmenting our intelligence. If that seems far-fetched, consider the last time you dialed a phone instead of commanding Siri or tapping the name of a desired party. (God help us all if we wander off lost on a road trip without the aid of GPS.) As the new status quo of office robots and automation encroaches, it strikes me as odd that no one seems to be voicing the next great worker concern. If automation can eliminate certain tasks for a certain worker by X percent then, should that worker have his compensation reduced accordingly?

I do not have a background in benefits and compensation analysis but, I think that such is an argument that will be made in the near future. Lately, I have been thinking about this from various angles. Pardon my ramblings as I share my thoughts.

IS IT FAIR?

From the employer’s perspective, I consider the amount of money spent on technology designed to make my workforce more efficient. If the tech does as intended and reduces the daily grind by so much, is a reduction in future salary fair? Conversely, if workers are doing less of one type of work, does that mean they will be doing more of another? If so, would it be unfair to reduce their salaries? How would one qualify a percentage of work in order to make a right assessment?

DOES IT AFFECT THE VALUE OF THE EMPLOYEE?

If there are tasks that can be safely delegated to robots then, it stands to reason that the work automation cannot conquer is of higher value. Does that higher value offset the percentage of work done by robots? I wish I knew. What I do speculate though is that the more work is automated, the value of the worker decreases if they do not acquire new skills. This is why I think the most competitive companies are those with the most robust training organizations. In addition to improving your existing labor force, it also improves retention. A quick aside…

According to a recent survey by the career platform The Muse, 58% of its largely millennial user base said they plan to change jobs this year. What they are searching for is learning and growth opportunities, as well as work-life balance, according to Muse co-founder and CEO Kathryn Minshew.

IF AUTOMATION REDUCES SALARIES, WHAT THEN?

I think if automation reduces salaries across the board, there will be an even more significant upswing in gig workers. Said gig workers will become a key option to companies who do not have a robust training program and cannot remain competitive waiting for the upskilling of their workforce. As an example, consider India which is predicted to have a highly significant non-employee workforce for its companies over the next few years. In fact, to quote The Economic Times

The use of non-employee talent, or employees not on the rolls of organizations, is expected to grow dramatically in India over the next three years, according to the findings of a survey by global advisory firm Willis Towers Watson.

At the same time, full-time employees’ share of the total workforce is expected to drop 3.3 percentage points in India and 4.1 percentage points globally over the next three years, stated ‘The 2019 Pathways to Digital Enablement Survey’.

“There are two things increasingly happening in work. First is work is increasingly being pulled out of the organization and being done elsewhere and then being brought in. The second is the growing plurality of means of getting work done,” Willis Towers Watson managing director Ravin Jesuthasan said. “Today, business leaders have a lot of choices on how they get work done. Automation is just one of the different options for them. The various other options could include sending work to the talent marketplace, tapping gig workers, using volunteers, etc.,” he added.

The non-employee workforce in India that is seen growing in the next three years includes free agent workers (15%), part time reduced hour (32%), worker on loan from other organization (3%) and free agents on talent platforms (230%), the survey said.

I think that a HUGE percentage of free agents being utilized by talent platforms is in response to the demands of worker flexibility and the booming gig economy. As such, I would not be surprised if more talent platforms debuted around HR freelance jobs or some other niche.

Another possibility resulting from automation reducing salaries, is the likely trend of companies tying year-end bonuses and worker performance evaluations to future potential. Traditional models postulate that if you did a good job last year then you will do a good job next year so a raise will reward you and give incentive to remain. But if automation is reducing the need for certain skills and reducing compensation to boot then, wouldn’t it make more sense to rate performance based on future potential? IBM thinks so. Using artificial intelligence (AI), Watson Analytics looks at an employee’s experiences and projects to infer the potential skills and qualities each person might have to serve IBM in the future. Watson also scours IBM’s internal training system to see if an employee has gained new skills. Managers then take Watson’s assessment rating into account as they make bonus, pay and promotion decisions. One more quote from the Economic times…

“Traditional models said if you were a strong performer in your current job that was the singular way that you got a promotion,” said Nickle LaMoreaux, vice president for compensation and benefits at IBM. “Well, we certainly still care about performance,” she said. But that now includes hypothetical future performance, too. IBM claims Watson has a 96 percent accuracy rate, as compared to IBM’s internal analysis with HR experts. The company spot-checks employee performance against its predictions.

Historically, employers used past accomplishments as the sole metric for compensation decisions, premised on the idea that the past is prologue. The method worked when job tasks stayed relatively static over time, but “the half-life of skills is getting shorter and shorter,” said LaMoreaux. What employees could do yesterday matters less than what they can potentially do tomorrow.

Okay, just in case I lost you in my verbosity, let me sum things up like this…

  • If automation does X percent of the work, should workers be paid X percent less? I don’t know. I predict it will be a hot debate topic in the near future and within companies worldwide.
  • Workers who do not learn new skills will be less valuable in the workplace. As a result, job-hopping will continue and gig working will increase because people want to retain and/or increase their value.
  • The most competitive companies have robust training programs and will leverage them to retain their staff.
  • Companies will increase their reliance on gig workers in response to demands for worker flexibility and to remain competitive.
  • Worker raises will be tied to the future potential inherent in new skills learned. Welcome to the new normal!

After sharing all of the above as a potential blog post the debate began with tribal members adding their comments to the original Google doc.

Somebody said, "Part of me feels like we are asking and answering the wrong question in this post. We know that with automation the old way we did the job disappears as certain tasks are taken on by the robots but new kinds of jobs are always created in every technological leap we make as a civilization and there is tons of research to support it. To me, the question is not about if automation decreases pay but instead does it increase demand in new skill sets to work with new technology, and does it actually INCREASE pay because work is more strategic and productive overall. So yes, a reduction in some jobs but an increase in new ones (people to repair the robots, people to write the code, etc). Also, what is automation's role in potentially increasing job satisfaction overall given there is less time being spent on repetitive tasks? I can definitely say my experience with driving has dramatically improved now that I have GPS and a car that drives itself on highways."

Another comment, "Maybe the discussion should be the shifting of talent vs shifting of salaries. Do we have any data to back up that hypothesis that automation might reduce salary?"

And then this was offered, "Sorry, Jim, there is some evidence to the contrary" and cited the following...

Automation is raising pay before it cuts jobs - Axios

Boxed is already shrinking the number of added workers required for expansion — one executive said that to triple business at the warehouse, he'll only need to hire 33% more labor. That aligns with an axiom of automation — that jobs offering the best chance of rising pay are usually in industries that are growing and adding labor-saving technologies at the same time, before the number of jobs eventually declines.

Boxed CEO Chieh Huang tells Axios that his company is growing quickly enough that it must add both technology and workers in order to meet demand. And Boxed may end up being an outlier to the larger trends — after all, Amazon, too, is reporting big hiring plans even while automating aggressively.

Will Automation Raise Pay?

In other words, manufacturing jobs will change, and that will have the biggest effect on lower-paid, lower-skilled workers. Jobs in the industry will require more skills and specialized training. On the upside, they’re also likely to pay more. The question is, will there be enough of these more specialized, higher paying jobs — and will workers have access to the training they need, in order to compete?

The Impact of Automation on Employment - Part I

By reducing production costs, automation will lead to higher output in affected industries, ameliorating the displacement effect on workers. Automation which increases worker productivity may also increase wages.

And then there was this passionate plea from Fara Rives, Lead Consultant, Technology Optimization here at Proactive Talent.

"I think salary reduction is the wrong focus point. Automation is disrupting the actual organizational models of how companies operate and the shift from a FTE to a gig worker and/or contractor is the bigger concern. Are you ready to be a gig worker and/or contractor and what does that mean?

Automation is about digital transformation - which in essence is a shift from a finance led organization- goal of getting to X revenue, to a product led organization - focusing on customer experience with goals of gaining x more type customers or increasing customer engagement. In order to create such focus on your customers, customer segmentation is key. This organizational framework allows companies to deliver customized experiences but also forces niche products and services to build and grow, allowing companies to focus on building amazing experiences for very specific segments of their customer base. This shift from generalist to specialist is the shift we will see in jobs, as automation takes over some of the more tactical pieces of our jobs. The need for the more experienced and specialized worker will be key, actually forcing wages to conceptually rise as the need for more specialized/niche roles rise.

Let’s take Truck Drivers for example:

The Autonomous vehicle is taking the truck driving industry by storm. What most people don’t realize though is that autonomous trucks are only allowed to drive on the highway (at least for now). This shift in truck driving will create the need for actual drivers to pick up at truck stops and navigate city roads to deliver goods. There will be a greater need for truck drivers to know and understand the streets and landscapes of the specific cities they reside in - potentially creating a gig economy for truck drivers that can effectively navigate certain cities, truck sizes, load weights, frozen goods etc. Truck drivers won’t necessarily work for a specific company but pick up delivery “gigs”.

Screen Shot 2021-01-22 at 1.56.42 PM

Hence the bigger question/concern, are full time employees prepared to transition to gig workers? What are the core competencies of gig workers and/or contractors that a majority of the population will need to be trained and educated on.

Tech Savvy - Technology will soon be ingrained into our life. Use it, understand it, be vulnerable with it. Those who adapt quickly to new technology innovations will move quickly to the top.

Expert - From picking and packing, customer service, and truck driving to consultants in specialized areas like law, tech innovation and medicine - become obsessed with being the best. Be the expert and follow the trends. This will separate you from the herd. Get the certifications, understand the industry trends, continually upskill.

Personal Brand - Communication will be key in branding yourself as an expert. Companies won’t define you, you define your work and your brand. Continually seek feedback and reviews from your customers to get better.

Negotiation - Understand how contracts work and you get paid. Calculate your value including expenses like taxes, health insurance, retirement savings.

Productivity - Drive to your strengths - right customer right opportunity. Understand that your time is valuable. Focus on the right strengths you have as an expert and find the right opportunities that make you the most money. Don’t be everything for everyone.

As companies transform, understanding which roles will hold PII and be FTE’s and which jobs will use gig and contract workers will be the biggest disruption to the general working population.

Are we ready to be gig workers?"

After saying that, it was time to drop the mic', duty called. Yet, it is not too late for you to add your insights. Please leave a comment below.

Comments
      4 Reasons To Start a DEI Program at Your Company

      4 Reasons To Start a DEI Program at Your Company

      Why Aren’t You Saving Money with Programmatic Job Advertising?

      Why Aren’t You Saving Money with Programmatic Job Advertising?

      Subscribe

      Want to work with us?

      Contact Us