History Teaches Us the Workforce Will Adapt to Automation

Automation improves productivity which, in the short-term, can hurt employment. Rapid changes in technology are beginning to impact every sector of the economy. Longer run, and counter-intuitively, automation should lead to a meaningful increase in employment, as opposed to the mass unemployment depicted in popular press. History offers reason for optimism for the U.S. workforce.

Here in the US, one of the largest and most rapid increases in the workforce was during and immediately after World War II.  As thousands of men entered the military, women entered the labor force and filled their positions. From 1940 to 1950, the number of women in the workforce increased by roughly 50%.

In the aftermath of the Depression, and during World War II, unemployment dropped precipitously and, contrary to expectations, it remained low in the aftermath of the war. As shown in the chart below, the unemployment rate dropped from 14% in 1940 to 1% at the height of the US involvement in 1944, before stabilizing at 4% in 1947.

When the war ended, many women stayed in their positions, pushing the civilian workforce up by six million people, or 11%, in just two years, as shown below. Surprisingly, despite a drop in defense spending, the economy successfully absorbed the returning heroes. As illustrated below, non-agricultural payroll employment increased by more than five million from 1945 to 1947.

Thanks to the GI Bill, many soldiers found higher value-add jobs than they might have secured before the war. As shown below, education, retraining, and automation combined to drive productivity up by 33%, or 3% on average per year, from 1940 to 1950, despite the extreme dislocations caused by World War II.

While history doesn’t repeat, the post-World War II economic resurgence in the face of one of the biggest bursts in job seekers in US history holds lessons for the US economy today. According to an Oxford University study published earlier this year, roughly 47% of all jobs in the U.S. workforce will be automated during the next 10 to 20 years. While that trend sounds ominous, a deeper dive suggests that automation will spur productivity and add enormously to GDP per worker as higher value-add jobs displace lower skilled positions.

Education and retraining will be bridges for students and workers if they are to adapt successfully to the changes in automation during the next twenty years. Companies such as DeVry [DV], Robert Half [RHI], ManpowerGroup [MAN], Adecco [AHEXY], and Cornerstone on Demand [CSOD] will play an important role in creating curricula for less-skilled workers to add value in technology-focused emerging industries. After retraining takes place, LinkedIn [LNKD], Workday [WDAY], and Salesforce.com [CRM] will allow connections and networks to form within the new businesses, to share ideas and find the best employee- employer matches.

Historical results leave us hopeful that today’s workforce, and the resulting economy, will indeed accommodate the rate of change brought about by automation. Despite the elimination of many positions, automation will enable the development of new products and services that otherwise would not exist, further increasing demand for labor.