Michael Bernick
Adjunct Fellow; Counsel to Duane Morris LLP; former Director, California Employment Development Department California, Human Capital, Labor
California and Human Capital and Labor
Michael Bernick, the former director of the California labor department, the Employment Development Department (EDD), joined the Milken Institute in February 2004, as a research fellow, focusing on job creation and workforce development projects.
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What Technological Change Portends for CaliforniaaEUR(TM)s Job Structure
By: Michael Bernick
January 09, 2013
How is the internet/mobile technology changing the job structure in California? What jobs are being eliminated? What jobs are being created? Are more jobs being created than destroyed?

These questions are at the heart of several books and articles published in the past year, among the most prominent being Michael SayloraEUR(TM)s aEURoeThe Mobile WaveaEUR?. As we enter 2013, itaEUR(TM)s worth looking at the current thinking by technologists on job impacts, and what technological change means for CaliforniaaEUR(TM)s job training and education institutions.
Saylor is deeply engaged in the internet/mobile economy as Chairman and CEO of MicroStrategy. He is also a historian of science and an adapter of Thomas KuhnaEUR(TM)s theories of scientific revolutions.

Saylor portrays the internet/mobile economy as the latest and most disruptive phase in the Information Revolution, the successor to the Industrial Revolution. The internet/mobile economy is influencing all areas of how we live and conduct business, and its influence will only accelerate in the years ahead.
The book is at its best in describing the speed at which familiar products of the twentieth century are becoming software due to mobile computing technologies. Magazines, newspapers and books are now mainly software and will become more so in the future. So too with records, as Apple remakes music into software. Cash is becoming software following pay-with-your-phone technologies. Even everyday items, such as keys, are reappearing as software.

From an employment perspective, this evolution of physical products to software has meant the elimination of major employers and categories of retail businesses and services. Most directly, paper companies and related paper processing companies are cutting jobs, as are magazines and book publishers and most of all daily newspapers (newsroom jobs have been trimmed by 25% since 2000). Over 2700 record stores have disappeared nationwide, as have the neighborhood Fotomat shops, travel agencies, and branches of major booksellers, such as Barnes and Noble and Borders.
In other fields, particularly education and health care, in-person services are being replaced by online instruction and appointments. Both of these fields have become distinguished by their out of control cost escalations in the past three decades. The cost escalation is most pronounced in higher education. Through online instruction in higher education, one instructor can replace several, as well as reduce needs for other staff and a physical plant. In health care, online evaluations and appointments offer cost savings in staff and office needs.

Like most technologists, Saylor is optimistic about the future, seeing the new technologies as creating more jobs than they are eliminating. Each of the previous major scientific/economic revolutions has resulted in a greater number of jobs being created than lost. Human capital has been redirected to more productive uses -- first from agriculture to manufacturing, later from manufacturing to services, and currently to the internet/mobile economy.

Yet the book is vague about what types of jobs and how many will be present in this internet/mobile economy. Online retailers will need software engineers, customer service representatives, and warehouse staff, as these retailers continue to expand. But how many workers will they need, and at what pay rates? What will be the size and composition of the online university workforces or long-distance health care workforces? How do these numbers compare to current workforces in these fields?

As noted in previous Currency of Ideas postings, throughout the twentieth century in California, technologies destroyed a good number of jobs but created a larger number. However, just because the past has been one of job gains exceeding losses, this does not ensure this equation will continue.

Saylor correctly notes that as internet/mobile products require significantly less capital to manufacture and sell, there should be an explosion of start-ups in markets that previously had high barriers to entry. But according to the data so far on business start ups in California, this explosion has yet to occur. Basically, what we have seen so far in California is two major categories of job impacts of the internet/mobile technologies. The first category is the creation of jobs within firms centered on these new technologies. The number of these jobs is difficult to pinpoint, as the current sector and occupational measuring tools of the federal/state governments do not count these firms as an independent category.

These jobs, though, are not a large portion of the labor market, even in CaliforniaaEUR(TM)s technology rich cities. San Francisco is ground zero of the social media/internet commerce economy, and recent estimates by the city government are of 1700 technology firms employing 32,000-37,000 workers. The number of tech firms and workers has shot up in the past three years but remains a modest portion of the more than 900,000 jobs in the San Francisco-San Mateo-Marin metropolitan district.

The second category of job impacts is the impact of internet/mobile technologies on jobs in existing sectors and occupations. A recent article in Foreign Policy, aEURoeJobs of the FutureaEUR? cleverly contrasts existing jobs with their technology-based successors. A hospital orderly will become a aEURoemedical roboticistaEUR?, operating rehabilitative and therapeutic robots for elderly care. A teaching assistant will become an aEURoeeducational technologistaEUR?, designing and overseeing online classes. A market researcher will become a aEURoepredictive data analystaEUR?, analyzing the vast data collected by the social media and other internet sites. Beyond these examples, technology is altering job requirements throughout occupations -- in office services, sales, even automobile repair and trucking.

Workforce practitioners can learn much from the technologists and their writings. Technological change has far greater impact on job structure than government policies or business strategies or any other force.

But technologists, such as Saylor, are broad in their visions. Other efforts are needed by researchers and practitioners to better define and understand job impacts. CornellaEUR(TM)s Institute for Compensation Studies recently launched a research initiative on technologyaEUR(TM)s impact on employment, and other research efforts are underway. Here in California, the local Workforce Investment Boards are to be lead in understanding the firm-level and training needs associated with SayloraEUR(TM)s mobile wave.