Dr Carl Frey & Dr Michael Osborne recently made headlines around the world with their Oxford Martin School study – ‘The Future of Employment: How susceptible are jobs to computerization?‘ which showed that nearly half of US Jobs could be at risk of being replaced through automation.
Much is written about how robotics and automation is displacing jobs in the manufacturing industry. Indeed the advanced manufacturing facilities of today and tomorrow are clean and awash with robots, computers, lasers, and other ultramodern machine technologies. The most common tool a production worker carries at the newest auto plants is not a wrench or screwdriver. It’s an iPad.
However little is discussed about the impact of robotics and automation on the financial sector.
The finance sector is now producing record annual profits despite significant staff reductions since 2008.
AIG, the Insurance company, reduced its staff from 116,000 at the end of 2007 to 63,000 by the end of 2012, a reduction of 53,000 people, yet profits recovered during the period of restructuring — despite the massive employee reduction, profits have nudged up slightly from $6.2 billion at the end of 2007 to $6.6 billion at the end of 2012, ($9 billion at the end of 2013). Two other major insurance companies AXA and Allianz have seen their headcounts reduce by a combined 98,566 over the last few years, despite rising profits. This may not be much of a surprise as insurance is increasingly sold online. Consider that in the UK alone some 70% of car insurance is purchased over the Internet, a massive transition in just a few years, which has in part contributed to the demise of so many jobs in insurance sales force and agents.
Insurance appears to be one sector that is using automated technology to improve productivity, reduce headcount and increase profits.
In the banking sector, Citi Bank, which had 357,000 employees until the global crisis of 2008 reduced its overall headcount by 98,000 to 259,000 by the end of 2012. There is a similar story at Bank of America (Merrill Lynch) with some 50,000 layoffs, whilst almost 25,000 people lost their jobs with the collapse of Lehman brothers.
A couple of weeks ago J.P. Morgan announced a further round of 12,000 – 15,000 job cuts: “the bank is looking to find new savings, partly because of technology that allows greater automation of clerical functions in branches.” Whilst looking online for future growth: “the bank is now looking at revamping its existing branch network with smaller buildings that make better use of new technology and require fewer staff.”
It’s fair to say that perhaps millions of jobs have been lost globally in the financial sector as automation drives efficiencies and both companies and their customers choose the improved services that online technologies offer to transact financial business.
So it would seem that companies are becoming leaner, doing more with less people, whilst maintaining, and indeed increasing, profitability.
The following video, streamed live on March 13th, is a very interesting overview by Dr’s Frey and Osborne on the challenges and opportunities of the automation age.
PS. I’m not a fan of the “robots will take ALL our jobs” meme, although Bill Gates did say this week that within 20 years, a lot of jobs will go away, replaced by software automation (“bots” in tech slang, though Gates used the term “software substitution”).