Millions of Jobs Will Not Return After the Pandemic Ends!

Robots in hotels, self-service checkouts in stores, accountants replaced by bots – companies are optimizing costs by turning to automation. Everything indicates that the pandemic has permanently changed the labor market landscape. Contrary to appearances, this is bad news not only for low-skilled workers, but also for specialists in some fields. Artificial intelligence is capable of replacing accountants, lawyers, and bankers as well.

In the UK, nearly 1.5 million jobs could cease to exist within the next year, as employees are replaced by robots. That is 4.8% of all workers in the UK. This is according to a report by Faethm AI – a SaaS analytics platform that uses artificial intelligence to model the impact of emerging technologies on any economy, industry, organization, workforce, or job.

– The pandemic has accelerated digitalization and automation of work. We see the trend in Poland too. It is no longer just the increasingly common self-service checkouts, but also, for example, hotels where we can stay without staff service. Artificial intelligence is becoming more sophisticated and can already produce work that was previously performed by specialized employees. The self-development of artificial intelligence, so-called machine learning, has created algorithms that are able – in some areas of their work – to surpass doctors, lawyers, and bankers – says Marek Czyżewski, CEO of PRAVNA.pl. He adds: - Legislation must keep up with these changes, and it must be adapted to the new reality as soon as possible. This is the last moment to discuss, for example, the issue of artificial intelligence's liability for torts, such as when using autonomous cars, or to put the issue of basic income to public debate, for example in situations where robots take jobs away from people.

The data from the Fathem AI report is confirmed by other experts. According to the World Economic Forum, as many as around 85 million people may not return to their previous occupations within the next five years, and estimates by the McKinsey Global Institute even indicate that around 100 million workers will say goodbye to their jobs as a result of automation.

Robots already greet us at the door…

Robots already greet us at the door…

Faethm AI indicates that people employed in wholesale and retail trade, as well as financial and accounting services, may lose their jobs because of automation. Humans are already being replaced there by artificial intelligence equipped with complex algorithms. Layoffs can also be expected in Poland. Companies that used "anti-crisis shields" committed to maintaining employment for a year. The protection period is slowly ending, and more notices of possible collective redundancies are appearing in labor offices, concerning among others Poczta Polska, but also banks such as Pekao S.A.

– Work automation often accelerates during a recession, because companies try to cut costs. In the pandemic situation, one more factor has been added, and companies are using the need to minimize the number of employees related to sanitary restrictions for "experiments" with new technologies – notes Czyżewski.

In the post-pandemic world, companies will also spend less on business travel. According to the report "The future of work after COVID-19," prepared by the McKinsey Institute, business trips will be as much as 20% fewer. New communication and videoconferencing tools have proven effective enough that limiting business travel will be an important item among corporate savings. Fewer business trips is a blow to the aviation industry, because business class flights are among the most lucrative segments for airlines. Employment will be lower at airports and in the companies offering commercial flights themselves.

A domino effect will follow, hitting for example the hospitality industry. There will be lower demand for hotel staff, in restaurants, and even in shops located next to hotels. We can already see today how the automation process is displacing people there. A robot can check us in, bring the ordered food, or even handle a lost luggage case.

….and they are showing (mainly) women out of the labor market

….and they are showing (mainly) women out of the labor market

Bank of Canada economist Alex Chernoff and Casey Warman, a professor at Dalhousie University, in their analysis conducted during the COVID-19 pandemic, examined 26 countries (including Poland) and indicated in all of them that women are twice as likely to lose their jobs. Their research shows that women much more often perform work that is more vulnerable to automation. In addition, Eurostat data indicate that in 2019 women made up over 65% of those employed in the industries most affected by COVID-19 – retail, transport, hospitality, food service, tourism, childcare, culture and entertainment, the beauty and hairdressing sectors, and domestic services.

Job automation – which industries will suffer the most

The McKinsey Institute report also states that before the pandemic, almost all low-paid workers who lost their jobs could move to other low-paid occupations. Institute experts claim that after the period of fighting the coronavirus, almost all growth in labor demand will occur in high-paying positions. In the future, even more than half of low-wage workers, but also those performing work requiring modest skills, may need to move to occupations with higher earnings but also requiring specialized knowledge. Otherwise, they may remain permanently unemployed.

The set of skills needed will definitely change. Greater emphasis will be placed on technological and socio-emotional proficiency, at the expense of manual and physical dexterity and basic cognitive skills.

Who will pay for it?

– Data from Faethm AI and other experts indicate that many basic jobs in the world may cease to exist in the future, and intervention by businesses and government to retain, retrain, and redeploy workers is crucial for maintaining or improving employment levels and increasing productivity – says Marek Czyżewski, CEO of PRAVNA.pl.

Who will pay for it?

However, the American stimulus package worth 1.9 trillion dollars, intended to get the superpower's economy back on its feet, does not provide special support for retraining the unemployed. – The solutions of the Polish "anti-crisis shield" also leave much to be desired. The only program that can support the unemployed is micro-loans for starting a business. However, they apply to residents of only nine provinces – emphasizes the expert from Pravna.pl.

IP BOX – relief for innovators

IP BOX – relief for innovators

However, automation is not only a threat, but also an opportunity for increased labor productivity. If the Fathem AI forecast proves correct, then robots alone will increase the productivity of the British economy by 1.3%. In the education sector, which is one of the largest employers not only in the UK, automation will make it possible to do 5% more work, and this will ensure about 2% productivity growth. However, the IT and media sectors would benefit the most, as they could produce as much as 6.5% more work, which will bring productivity growth of 3%.

Admittedly, the new technology industry is not "virus-proof," because it must contend, for example, with clients' reduced financial resources or sometimes even their collapse (e.g., companies in the food service industry), but it is to them that those who want to optimize costs turn.

However, the IT industry is by nature one of the most creative and innovative sectors of the economy. Entrepreneurs operating in it can take advantage of the fact that policymakers want to increase the share of new technologies in Poland's GDP. Unlike many other industries, the IT sector can count on significant tax privileges. – The IP BOX relief is aimed at those taxpayers who are engaged in research and development. Innovative companies or sole proprietors (e.g., programmers) can settle taxes based on the reference 5% CIT/PIT rate in relation to income from qualified intellectual property rights – describes Marek Czyżewski from PRAVNA.pl.

According to the tax code, qualified intellectual property includes, among others, patented inventions, medicinal products or plant protection products, or copyrights to a computer program.

Summary

The pandemic has permanently accelerated labor market automation – according to the Faethm AI report, in the UK alone 1.5 million jobs may disappear within a year, and global forecasts speak of as many as 100 million eliminated jobs. The most at risk are the trade, financial services, and hospitality sectors, as well as women, who dominate in industries affected by COVID-19. Experts emphasize that retraining workers and government support will be crucial, although – as Marek Czyżewski from PRAVNA.pl points out – both the American stimulus package and the Polish anti-crisis shield leave much to be desired in this regard.

Interestingly, automation is not only a threat – the IT and media sectors may gain as much as 6.5% productivity growth from it, and innovative entrepreneurs can benefit from a preferential 5% tax rate under the IP BOX relief.