The Reason Managers, Not Workers, Are Losing Jobs To AI and Robots

Fewer supervisors are needed to oversee increasingly computerized operations, especially with regard to the processing of paperwork. JL

Joe McKendrick reports in Forbes:

Managers, not lower-level employees, are seeing their ranks diminished with the onset of artificial intelligence and robots, because as AI and robotics expands within a business, managers can oversee a wider breadth of operations. The decline in managers’ opportunities in the AI/robotics enterprise is the result of efficiencies introduced to processes that once required a cadre of managers to oversee. “There is less need for managers to supervise. Robots can record the work they have done, so there’re no agency costs."

Managers, not lower-level employees, are seeing their ranks diminished with the onset of artificial intelligence and robots, a new study out of the University of Pennsylvania Wharton School finds. That’s because as AI and robotics expands within a business, managers can oversee a wider breadth of operations.

In a recent podcast discussion, Lynn Wu, professor at The Wharton School and AIB Affiliated Faculty, points out that “contrary to the popular notion that robots will replace human labor, we find robot-adopting firms employed more people over time. Any displacement of labor came from firms that did not adopt robots. These non-adopting firms actually lost their competitiveness — and they had to lay off workers.” Details of Wu’s study, based on looking at the performance of firms that purchased AI and robots over a 20-year period in Canada, will be published in the INFORMS journal Management Science.

The most surprising revelation from the study, however, was that AI and robotics adoption resulted in a reduction in management and supervisory ranks. “This is a class of people we did not expect robots to have an effect,” Wu says. “Because managers, by definition, supervise other human beings, so we really cannot replace their functions until the singularity occurs with artificial general intelligence.”

The decline in managers’ opportunities in the AI/robotics enterprise is the result of vast efficiencies introduced to processes that once required a cadre of managers to oversee. “There is less need for managers to supervise, ensuring that workers show up on time, inspect their work, etc.,” says Wu. “Robots can record precisely the work they have done, so there’s no agency costs, no fudging of the numbers.” 

Another surprise is the fact that AI and robots boost employment with both low-skilled and high-skilled jobs. Rather, it is “middle-skilled” jobs that are threatened, Wu found. “Robots cannot directly substitute low-skilled workers such as pickers and packers,” she says. “A manager can potentially supervise many of these workers at a time.” For high-skilled workers, “the effect is a little bit less certain,” she continues. “They can manage themselves; these high-skilled workers know how to do their jobs better than their managers.”

Wu points out that as a result, “the career ladder is somewhat disrupted. For a low-skilled worker to become a high-skilled worker, they would need a college education and lot more training. Many low-skilled a workers are just not able to have that kind of education for a variety of reasons. They are potentially being stuck in these entry-level jobs, with almost no opportunities or very little opportunity to advance. There’s less demand for supervisory roles.” 

It’s a question of what to do with displaced workers. “How do we train them for the new economy?” Wu asks. “Where robots are widely adopted? As with all tasks, the work itself needs to be redesigned. We need to leverage the workforce to effectively use human capital, perhaps through retraining perhaps through entrepreneurship. We need to figure out ways to use this human capital. Robots cannot do most of what we can do.”

Wu provides advice for organizations seeking to leverage AI and robotics to grow their businesses. “Our research finds that the primary motivation to adopt robots it is not to save labor costs, but to improve product and service quality. Firms need to redesign and re-leverage work processes so they can best leverage the robot capabilities. If your firm is primarily looking to save labor costs, you may be disappointed — you can’t just take away some of the workers and replace with robots.”

Wu urges organizations to have a retraining plan. “It is likely that new types of middle-skilled work can be created, such as to help build repair and train robots,” she says. Wu also encourages more creative and visionary thinking when it comes to introducing AI and robotics into the workflow.