One More Industry Where Employment is Dropping as Output Rises

by Andrew McAfee on April 24, 2013

Mona Vernon, senior director of emerging technology at Thomson Reuters (and a former RA of mine) pointed me to an amazing Bloomberg chart of the day showing that ” the number of people employed in New York City in “securities and commodities contracts intermediation and brokerage,” which includes investment banking and securities dealing, fell to about 101,200 in March, a decline of more than 30 percent from the peak in December 2000 and the fewest in Bureau of Labor records dating to 1990.”

Screen Shot 2013-04-24 at 12.33.48 PM

This employment decline has taken place despite the fact that US financial industry profits are at an all-time high. Even more amazing is the face that there are fewer people employed in intermediation and brokerage now than there were in late 2008, when the financial industry was losing almost $100 billion in a quarter.

The story quotes bank analyst Richard Bove that “The desire is to drive the cost of executing a trade to its lowest point — this means automating the system and getting rid of the traders… All they do today is hit buttons on computer screens. Twenty-five years ago they would be calling their buddies at different firms. It was a highly labor intensive effort.”

This continues a pattern we’re seeing in other industries. The Wall St. Journal reported in 2011 that employment throughout the US wireless industry was falling even as revenues rose, thanks at least in part to “gains in productivity and the fact that more customers were going online to choose their phone and pay their bills, reducing the need for more call-center workers and salespeople.”

And as I posted before, this has long been the pattern in US manufacturing.

It’s true that some industries, most notably health care, are growing and adding lots of jobs as they do so. But I strongly suspect that this is because a lot of the work of health care delivery — especially the physical stuff – hasn’t been automated yet.

In some cases, automation seems a long way off; I do NOT want a robot dentist yet. But Dr. Watson and other instances of health care automation are coming, some pretty so0n. As they do, won’t more and more industries come to have output vs. employment graphs that look like those above?

I honestly don’t know why this won’t happen. Do you?

Rick Taylor April 24, 2013 at 12:23 pm

We’ve seen this pattern in IT for decades. It is a natural progression of technology, and not a bad thing at all. Adjusting societal relationships for the common good is the real problem.

Tan Nguyen April 25, 2013 at 12:27 am

so what should young people do ? Between outsourcing and automation, there’s nothing left for America.

Alexander Zhdanov April 25, 2013 at 7:40 am

Get any amount of cash together that you can, open a brokerage account and start trading. Increasingly, I see capital gains replacing labor income as the main source of purchasing power. Sad to say, the discourse is still all about “jobs”. Increasingly, “work” will be outsourced to the developing world, and the bulk of the developed world will live as rentiers.

Alexander Zhdanov April 25, 2013 at 7:44 am

A good first step would be to stop stigmatizing those who receive social insurance. The best way to do that is by merging the hodgepodge of safety net programs into one: a basic income. If a program is broad enough it’s much harder to demonize e.g. welfare vs social security.

ChrisF April 26, 2013 at 8:32 am

Buying (and holding) stock in large corporations is one way that individuals can benefit from increasing productivity. But unless you’re lucky enough to have inherited a million or two, it’s unlikely to provide a liveable income.

Tan Nguyen April 29, 2013 at 11:48 am

Most of the things we learned in school is not relevant in the real world. Where can we learn relevant skills for a reasonable price ?

Tan Nguyen May 1, 2013 at 9:57 am
Anonymous May 1, 2013 at 4:03 pm

Does similar data exist for various government sectors? Are there any examples of government agencies/organizations at the federal, state or local level where we can see an increase in efficiency as a result of technology implementation.

For the past two years I have been working in city government where there has been no push to update IT systems. The financial systems are from the 1980’s. There are no automated invoicing or payment systems. Time records are done on paper. There are no document management systems. Documents are stored on shared drives. And city leaders appear to have no inclination to adopt new systems. I suspect that a big reason for this is that, in contrast to the private sector, there are very few ways of quantifying the impact of technology investments in the government sector. There is no P&L.

Are there benchmarks or other studies that could be used to help influence city leaders to at least begin to move into the later part of the 20th century in terms of technology?


Comments on this entry are closed.

Previous post:

Next post: