Christopher Mims reports in the Wall Street Journal:
With automation, workers use their brains more, managing the flow of goods and adapting. This has led to lower turnover. (But) the machine-assisted, human-accomplished step is common to high-tech warehouses. Which means for millions of warehouse workers across the globe, the one thing standing between them and technological unemployment is their manual dexterity, not their minds. As individual tasks are automated, U.S. workers on the low end of the barbell distribution of wages must retrain for other jobs, or switch to easily learned roles. "We’re seeing a net increase in demand for jobs [due to automation] but a lot of churn.”
Right in the center of Florida is a metro area that’s home to more than 600,000 people, along with some of the most technologically sophisticated distribution centers in the country.
In and around the city of Lakeland, you’ll find operations from Amazon, DHL (for Ikea), Walmart , Rooms to Go, Medline and Publix, along with a huge Geico call center, the world’s largest wine-and-spirits distribution warehouse and local factories that produce natural and artificial flavors and, of all things, glitter.
Yet a recent report by the Brookings Institution, based on data from the U.S. Census Bureau and McKinsey & Co., argues that the economic good times for Lakeland could rapidly come to an end. Brookings placed it third on its list of metros that are most at risk of losing jobs because of the very same automation and artificial intelligence that make its factories, warehouses and offices so productive.
Lakeland, in other words, might be a microcosm of what’s happening all over the U.S. and across the globe. As technology drives people out of the middle class, economists say, it’s pushing them in one of two directions. Those with the right skills or education graduate into a new technological elite. Everyone else falls into the ranks of the “precariat”—the precariously employed, a workforce in low-wage jobs with few benefits or protections, where roles change frequently as technology transforms the nature of work.
“The economy has changed radically, but the American social model hasn’t,” says Mark Muro, an author of the Brookings report. “Coincident with all this automation is the erosion of government benefits that might make the precariousness of some of these positions more tolerable.”
To understand what’s going on in Lakeland, look at Southern Glazer’s Wine & Spirits LLC, one of the area’s top employers and the country’s biggest alcoholic-beverage distributor. Its highly automated 1.3-million-square-foot facility in Lakeland is also the biggest liquor-distribution warehouse on the planet, shipping out 85,000 to 90,000 cases a day. Like many other distributors in the area, Southern Glazer’s chose Lakeland because the city and state offered incentives, land is cheap, highways are readily accessible and wages are relatively low.
The facility employs 368 warehouse workers as well as 392 delivery drivers, many in roles that require no more than a high-school degree. As in automated warehouses the world over, humans do only the jobs that machines can’t—either knowledge work like managing the overall system or physical tasks that require a combination of delicacy, speed and visual acuity. All of the heavy lifting—from placing 2,500-pound pallets into five-story shelving systems to conveying individual crates throughout the warehouse—is done by machines.
In many ways, the Lakeland warehouse represents a triumph of engineering. Ten years ago, Southern Glazer’s operated five warehouses in Florida. It consolidated them all into one thanks to automation, says Ron Flanary, senior vice president of national operations at Southern Glazer’s. That meant boom times for Lakeland, as jobs shifted from elsewhere in the state.
Early in the company’s decadelong transition in Florida, automation initially meant some layoffs, up to 20% of the total workforce, says Mr. Flanary. But many of those workers were rehired and more brought in as automation led to growth in the business.
The nature of their jobs changed, however. “The reality is, we have these people who work in the warehouse, and if they’re just using their body to stack cases rather than engaging their brain and their heart, we just cycle through them and it’s completely unrewarding,” says Mr. Flanary.
With automation, he adds, workers use their brains more, managing the flow of goods through systems and adapting them as consumer demand changes. This has led to much lower turnover.
One step in Southern Glazer’s warehouse still requires a significant number of low-skill workers: the final “pick” station where individual bottles are moved from bins to shipping containers. This machine-assisted, human-accomplished step is common to high-tech warehouses of every kind, whether they’re operated by Amazon or Alibaba. Which means that for millions of warehouse workers across the globe, the one thing standing between them and technological unemployment is their manual dexterity, not their minds.
As labor markets tighten, the pressure to automate increases. Florida’s unemployment rate is already low, at 3.3% in December. “I think there will be a time when we have a ‘lights out’ warehouse, and cases will come in off trucks and nobody sees them again until they’re ready to be shipped to the customer,” says Mr. Flanary. “The technology is there. It’s just not quite cost-effective yet.”
For now, the relatively low cost of human workers in Florida compared with highly automated countries like Germany or Japan limits how quickly automation rolls out, says Michael Chui, who leads research on the impact of technology at McKinsey.
Over the long run, there’s no evidence that automation reduces the number of jobs. Indeed, countries that automate the fastest appear to also grow their economies the fastest. But that’s hardly a consolation to people who face automation-related layoffs. “What we’re seeing is a net increase in demand for jobs [due to automation] but a lot of churn,” says Becky Frankiewicz, president of staffing giant ManpowerGroup North America.
As individual tasks are automated, U.S. workers on the low end of the barbell distribution of wages must retrain for other jobs, or at least switch to other easily learned roles. The result is, potentially, lifelong job insecurity, says Brookings’s Mr. Muro.
Bill Mutz, the recently elected mayor of Lakeland, is realistic but upbeat about his city’s future. Lakeland is happy for the distribution business and thinks it’s sustainable. “I would be concerned if we were expanding on a retail basis, but not on the wholesale side because you’ve still got to get the goods to people.”
Nevertheless, he would prefer it not be the priority going forward. “We have 6 million square feet of distribution centers finishing in the last 12 months,” he says. “We’re not really trying to attract any more of that because we want more high-skill, high-wage jobs.” In addition to providing a home for Florida Polytechnic University, a tech- and engineering-focused college founded in 2012, Lakeland has a co-working space and startup incubator called Catapult, he adds.
As for older workers who lose jobs because technology is changing at such a rapid pace, the most determined learners can “upskill” to get into more sophisticated roles, a trend that was a major theme at this year’s World Economic Forum meeting in Davos, Switzerland.
For anyone who is made redundant by new technology, there are plenty of other jobs that robots won’t be taking anytime soon, according to McKinsey. Some require training, such as nursing and home health care. Others, like housekeeping and driving for Uber, don’t. The question is whether the growing ranks of the precariat will be happy with the working conditions and wages of those roles.
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