Capitalism is dying... at least as many of us understand it today.

Two decades ago, this claim would have been ripe for ridicule, but recent trends in automation have given rise to a striking new narrative about the future of free-market economics.

Today, there are a growing number of economists and political think tanks arguing that modern capitalism will very soon outlive its usefulness. These predictions stem from a growing number of long-term job forecasts indicating that within the next half-century, as many as 90% of human jobs will be replaced by robotics and automation.

It's no secret that job-seekers today require higher levels of education to compete in the job market than they did just a few decades ago. You used to be able to get by just fine in the job market with a high school diploma, but some time over the last 20 to 30 years, a college degree has become the bare minimum for just about anyone seeking a respectable, living paycheck.

The sad reality is that today, if you're not in school until you're 25, there's a good chance you're going to end up working as a barista at Starbucks. In today's economy, a college degree is worth a dime a dozen, and given enough time, the same may eventually hold true for many post-graduate degrees.

The reason for increasing education requirements is simple: lower-skilled jobs are being replaced with automation at an accelerating rate. As machines become more dexterous, more efficient, and more intelligent, the market has required us humans to step up our game.

The problem, of course, is that not everyone can meet these rising skill demands, let alone the rising costs of acquiring said education.

In short, humans are fighting a losing battle with machines when it comes to the job market. Sure, technology will create many jobs we cannot even fathom today, but those jobs will require higher and higher levels of skill, unobtainable by the vast majority of the flesh-and-bone workforce.

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According to the Bank of England, for instance, machines could take over 80 million American and 15 million British jobs over the next 10 to 20 years. That's 50% of the workforce in each of the two countries.

According to the latest Economic Report of the President, today's low-paying jobs (those paying less than $20 an hour, or under $40,000 a year for full-time workers) have a striking 83% chance of being automated in the near future. Medium-paying jobs ($20 to $40 an hour, or $40,000 to $80,000 a year) are at substantial risk, too, with a 31% chance according to the same report.

And the Center for Economic Research in Tennessee suggests that up 1.4 million people, or half of all current workers, are susceptible to losing their jobs to automation. Those facing the highest risk are workers without post-graduate experience.

There are countless studies that could be cited here, but you get the idea: automation is a real and growing threat to job seekers and, by extension, modern capitalism. After all, if no one is working, where will the demand for goods and services come from?

Wages and Automation

As low-skilled workers have faced mounting pressure from lack of job opportunities, there has been a rise in progressive thinking throughout the West in response. Income and wealth inequality are directly tied to the automation phenomenon (technological progress is boxing out low-salary demographics while enriching those with high salaries and education), prompting many leftists to consider initiatives such as wealth redistribution, “free” college, and increased minimum wages to combat the issue.

On the matter of increased minimum wages, this is the elephant in the room when it comes to automation. By artificially increasing the value of human workers, legislators are only exacerbating the problem for low-skill workers and providing a greater opportunity for tech companies looking to fill the void.

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American economist Alan Krueger recently put out a rather scathing piece in the New York Times regarding California's new $15 minimum wage legislation. According to Krueger, a $15 minimum wage would “put us in uncharted waters, and risk undesirable and unintended consequences.”

Among these unintended consequences is no doubt the increased threat of automation. In response to this legislation, for instance, the California Restaurant Association put out a statement saying the law will force businesses to face "undesirable options” such as cutting hours, raising prices, increasing automation, and laying off staff.

The statement comes just two weeks after Andy Puzder, CEO of fast-food chain Carl's Jr., announced he is considering fully automated restaurants where customers would never see a person.

According to Puzder, “If you’re making labor more expensive, and automation less expensive — this is not rocket science.”

Puzder added:

“They’re always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case... Millennials like not seeing people. I’ve been inside restaurants where we’ve installed ordering kiosks... and I’ve actually seen young people waiting in line to use the kiosk where there’s a person standing behind the counter, waiting on nobody.”

Keeping the Free Market Alive

If raising the minimum wage will only compound the issue, then what — if anything — can be done for the low-skilled workforce? How can capitalism as we know it prevail in a world where half the people aren't worth their weight in flesh?

One possible solution to this dilemma that's gaining increasing popularity is basic income, or guaranteed minimum income (GMI). In short, basic income guarantees citizens a minimum income, removing the need for complicated welfare programs while keeping the free market alive by giving people choice in what they purchase.

Basic income is being considered by an increasing number of government organizations. Ontario, for instance, announced last month that it would soon be sending a monthly check to residents (up to a minimum income) as it plans to launch an experiment testing the concept.

While officials have yet to release any specific details (how much will be given to residents, etc.), the finance ministry has published a report confirming the government’s intention to roll out the experiment.

While certainly a form of welfare typically associated with the left, there is a solid conservative case for creating a wage floor. Noah Gordon goes into detail about this in a piece for The Atlantic titled, “The Conservative Case for a Guaranteed Basic Income.”

Ben Schiller has also written a great piece for Fast Company calling universal basic income “The Bipartisan Solution To Poverty We've Been Waiting For.”

If you're interested in learning more about basic income, I highly recommend seeking out the articles above as a place to start. If you're interested in investing in automation, I'd point you to robotics companies trading on the public market.

Like they say, if you can't beat 'em, join 'em.

Until next time,

  

Jason Stutman

 @JasonStutman on Twitter

In addition to his work at Wealth Daily, Jason Stutman serves as the Managing Editor for multiple investment advisory newsletters including Technology and Opportunity and The Cutting Edge. Jason has also served as an editor and contributor for popular investment services Energy and Capital and Tech Investing Daily. Jason holds a B.A. in Behavioral Science alongside an M.Ed.,with postgrad coursework in mathematics, technology, and science.