MNI INTERVIEW: Service Jobs Resist Automation - Fed Economist

Service job automation may have slowed during the pandemic compared with past recessions, St. Louis Fed economist Max Dvorkin told MNI, a surprising break with the past that may aid the labor market rebound.

"At least for now, the interaction between the pandemic recession and automation is not as strong as the links between automation and past recessions," he said in an interview. Routine jobs aren't disappearing as quickly as usual during economic downturns -- another sign that technology-driven job polarization is declining.

Close-contact jobs disproportionately impacted by Covid-19 business restrictions are more difficult to automate because they don't rely on repetitive tasks and workers instead must adapt to complicated customer queries, he said.

Automation isn't likely to replace enough workers to put major downward pressure on the labor market rebound, he said, and those jobs are even likely to grow.

SOME JOB EXPANSION

"If part of your job is to perform tasks or processes which require changing conditions or adapting to what your customer is telling you, then it's hard to just have a machine or a computer deal with that," he said. "Those are the jobs that will expand for sure."

The trend runs counter to regional Fed Presidents like Neel Kashkari and Mary Daly, who have said automation may continue to march forward as digital-based companies replace storefronts with home delivery and hotels set up check-in kiosks to replace front desk clerks. The issue is vital after the Fed's framework changed last year to closing a gap with full employment and holding rates near zero for longer to push up inflation.

While some service jobs seem to be resilient to automation, more routine office support and manufacturing positions were losing out long before the pandemic, he said. Those tasks were also among the first to go during the Great Recession as cash-strapped employers looked to cut costs.

"I don't see that," in the current recession, Dvorkin said. 'At least not yet."

LONGER-TERM CHALLENGES

Even though labor automation doesn't seem to be impacting the jobs recovery just yet, it's virtually irrefutable that technology is upending how companies operate, he said. That will have long-lasting effects on the labor market, he said, and will eliminate some types of middle-skill jobs.

Nearly half of U.S. businesses surveyed by the World Economic Forum last year planned to reduce their workforce by 2025 due to technology, though 34% said they were set to expand their workforce for the same reason.

Given how fast these labor-saving technologies are being put in place, "some jobs will perhaps never come back," Dvorkin said. "We need to accept that."

Policymakers must create measures to deal with job automation and programs dedicated to retraining and labor reallocation will be critical, he said.