The middle class: An endangered species

Posted by Flux on 

29 May 2017

What’s trending now
Stagnating or declining incomes for middle class workers is a global phenomenon.

The McKinsey Global Institute reported that 70% of households in developed economies saw their earnings drop in the past decade.

In South Africa, the 2017 Salam Benchmark Survey found 73% of professional, middle class South Africans are experiencing financial stress and are struggling to pay their monthly bills.

The recent spate of student protests highlighted the plight of the so called “missing middle”; that is the fact that working and middle class South African families, who do not qualify for financial aid, still cannot afford to support their children through territory studies.

It is tempting to think that these depressing statistics are merely the result of a normal business cycle downturn in the business cycle. However, a closer look at the underlying causes reveals the middle class is in far more trouble than it may appear.

The rise of automaton and robotics threatens to increase global inequality and hasten the demise of the middle class.

Why it is important
The middle class is largely an invention of the industrial era.

Throughout most of history, humanity was divided between a wealthy ruling class and the poor majority. The industrial revolution changed that. Factory workers required large staff compliments to produce mass produce. These workers used their wages to purchase goods from the factories, feeding the industrial, consumer and economy. At the same time, the workers’ children were placed in schools. Schools had two functions: firstly to occupy children so their parents could work, and secondly, to produce more and better worker-consumers to feed the industrial business model. This cycle created the middle class as we know it today.

However, we are no longer living in the industrial era. The advent of the Internet and the technological revolution has moved humanity into the post-industrial, knowledge era. Big businesses are finding they no longer require all the middle-class workers schools are producing.

Globally, about half the activities which the human work force are currently paid to do has the potential to be automated with currently available technology.

High risk jobs include those in transport, logistics, service industries, and office and administrative support – in their words: middle-class jobs.

Not even upper-middle class jobs are safe: Chat bots are already replacing lawyers, financial advisors, and even GPs.

The butterfly effect
If companies can replace human workers with algorithms or robots, they will.

For example, the Changing Precision Technology Company factory in Dongguan, China, replaced 90% of its human workers with robots. Production per employee increased from 8,000 to 21,000 pieces – a 162.5% improvement. The defect rate average dropped from 25% down to 5%.

What business owner would chose a human work force over those statistics?

Robots do not consume anything other than energy and maintenance and, thanks to technology led by companies like Elon Musk’s Tesla, energy is getting cheaper all the time.

Robots add value to their owners without reciprocal consumption costs. This facilitates a dramatic redistribution of value chain profits to those at the top of the capitalist food chain.

To avoid a tiny robot-owning ruling class extracting and holding all the values for themselves, we need to explore better mechanisms to redistribute that wealth than currently exist.

The pioneers
Bill Gates, amongst other intellectuals, has suggested a tax on robots to make up for lost taxes from workers whose jobs are destroyed by automation.

In 2016, the European Parliament voted on a similar proposal for a tax on robot owners.

The bill was rejected by a narrow margin.

Other proposals by Elon Musk include instituting a Universal Minimum Wage – or even implanting chips into our brains to help us compete with our future robo-colleagues.

Some companies have responded by getting their human employees to train their future robo-colleagues, to be more ‘human’. Lola, an app-based travel company hired staff with the express purpose of training “Harrison”, the company’s specialist A.I (artificial intelligence) computer system to interact with human customers in a more natural, human manor.

The global hot spots
The first world.

Middle class jobs in America and Japan are actually more at risk than those in emerging markets, like South Africa. The Harvard business review found that 41% of South African jobs are at risk of automation, compared to 45.8% of American jobs and 55.7% of Japanese jobs.

This is because systems and process based jobs are particularly easy to automate.

Accountants (and what could be a more middle class profession than accountancy), for example, have a 94% chance of being replaced by machines within the next 20 years, according to McKinsey Global Institute.

By: Bronwyn Williams

Interested in finding out more about the future of finance? 

About Bronwyn

Image credit: Marketing Land

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