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The impact of technological change

Coming home: The America’s Cup is simply coming home in essence to its incubator or birthplace

“Virtually every industry in existence is likely to become less labour-intensive as new technology is assimilated into business models — and that transition could happen quite rapidly.” — Martin Ford (Rise of the Robots)

“White-collar service industries are currently witnessing a huge increase in automation. Artificial intelligence, analytics and voice-recognition technologies are taking over more and more tasks employees used to do. Retailing is another example: we’re moving from physical to virtual retailing. Even lawyers, accountants or radiologists are afraid of the prospect of losing their job to a machine or algorithm” — Jeremy Rifkin, The European

Imagine a world without receptionists or one in which there are no secretaries, telephone operators or mail delivery personnel.

Imagine a world where there are taxis but no taxi drivers.

Or a world where actuarial studies, accountancy and a great deal of legal work is researched, and resultant opinions, calculations and conclusions reached, but there is no direct human agency involved in doing so.

The opinions, calculations and conclusions that are arrived at are achieved solely by the mathematical certainties of computer-generated algorithms delivered right to your office by way of smart software, accessed via the cloud.

Right now as we speak, these skills and services are provided by highly trained specialists; in this case actuaries, CPAs and lawyers, who would have invested tens of thousands of dollars to obtain their degrees and other credentials from the top universities in the world to gain, in most cases, high-end employment opportunities at top companies. Notwithstanding the above, these services even today at the professional end in Bermuda are increasingly being outsourced to places such as India and beyond.

More to that point further on.

A vast array of jobs and professions in the clerical, retail, law, financial services, medicine and other fields of endeavour have already been transformed by the widespread adoption of information technologies.

Robotics, advanced automation, 3D printing, artificial intelligence and the creation and deployment of algorithms to perform tasks — some of which are highly complex — that up until very recently were performed by human workers, is no longer the stuff of science fiction.

These revolutionary changes will not take place in some indeterminate period in the future; say, in 2050, but rather are powerfully gaining pace now and dampening or suppressing employment growth throughout the developed world and beyond — even as this debate unfolds.

Our challenge and one that is consistent with the Progressive Labour Party’s 2025 Vision for Bermuda will be to figure out how do we successfully adjust or navigate through these changes in a manner that enhances our competitive advantage?

Second, how do we continue to maintain our reputation as a global centre of excellence in light of these game-changing trends to stay relevant in this ever-hyper-competitive global environment?

And, third, how do we harness our human capital potential to meet the worldwide demand for smart talent while at the same time recognising the role of immigration in allowing us to source the best talent available from around the world?

Frankly, we have seen this movie before. During the late 1980s through to the early 1990s, Bermuda experienced a significant change to the industrial composition of employment and of our economy.

Tourism then began its near 40-year structural decline and Bermuda’s burgeoning offshore business sector, characterised by the global reinsurance and insurance industries, began its rise and eventual dominance of our economy.

As Ross Webber, chief executive officer of the Bermuda Business Development Agency, reminded us, while speaking at the recent Insurance Day summit at the Hamilton Princess & Beach Club, “Bermuda is one of the top three insurance markets, along with New York and London, supporting global economies and an estimated 500,000 jobs worldwide.”

He added that “according to recent figures released by the BMA, Bermuda’s insurance industry covers more than $500 billion in net assets”.

And most of that growth occurred over the past 30 to 40 years.

Just as astonishingly, Mr Webber also asserted that approximately 15,000 Bermuda residents are financial, business, legal and regulatory experts in transatlantic capital markets, banking, finance and insurance.

And he further noted that figure represents approximately one quarter of our population.

The question this raises, of course, is how many of those 15,000 persons are black Bermudians?

Yet we now know that we did not make that shift from tourism or the hospitality industry without paying a price.

There have been winners and losers in terms of our labour markets, and certainly the losers do not find themselves among the 15,000 highlighted by Mr Webber, if in fact that figure is accurate. Too many of those left behind conform to racial and class stereotypes that confirm the continued existence of two Bermudas.

They also form the bulk of the approximately 20,000 members of our workforce, the majority of whom will continue to be most at risk by the revolution at hand, although, increasingly those who count themselves among the professional classes will also see their careers affected as well.

The Columbia University final report entitled A study of Employment, Earnings and Educational Gaps between Young Black Males and their Same-Age Peers, which was commissioned by Ewart Brown as Premier and the Bermuda Government in 2007, spoke to this big shift of our economy during the aforementioned earlier period in our history.

On page four of the study, it reads: “In Bermuda the recession was accompanied by a shift in the industrial composition of employment from hospitality to the international business sector (financial and insurance companies). There were declines in the demand for less educated workers and an increase in the demand for workers in occupations requiring higher levels of educational attainment, especially in managerial and professional positions.”

Yet the same report also stated that “ ... race played a direct and indirect role in the predicted earnings gap for young black and white Bermudian men”.

The report further illustrated that 29 per cent of the predicted earnings gap between white and black males was accounted for by race alone, after allowing for education and other factors.

We contend that Bermuda is going through a similar shift now, which will be even more profoundly challenging than that which characterised the last one some decades ago. It will also likely result in even less demand for those workers without the requisite mastery of technical and/or professional disciplines.

It seems likely in other words that the bar to entry in terms of employment is about to rise even higher than that which was chronicled by that report. And, as author Robert Ford reminds us, “a computer doesn’t need to replicate the entire spectrum of your intellectual capability in order to displace you from your job; it only needs to do the specific things you are paid to do”.

What will that shift look like? Will it be one in which relentless innovation will produce the type of technological disruption that promises to eliminate a growing number of jobs and professions as envisioned by Ford and others such as Professor Erik Brynjolfsson, of MIT Sloan School of Management, and his collaborator and co-author, Andrew McAfee?

Or will it be similar to previous periods of creative destruction driven by advancing technological change that resulted in more jobs being created than those that were lost?

For example, Brynjolfsson and McAfee in their book Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, which was published in October 2011, assert that the ubiquitous growth of technology in our lives and workplaces has been destroying jobs at a far faster rate than creating them. They further contend that it has been this trend that is chiefly behind the less than robust employment growth of the past 15 years, in the so-called developed world.

There is a growing body of opinion and evidence that this time will indeed be different.

Columnist Joe Nocera, writing in The New York Times on February 15 this year, wrote a piece entitled: “Innovation, Optimism and Jobs”. He posed the following questions: “Is digital technology destroying middle-class jobs? Does it boost economic growth and productivity without creating the jobs that ought to come with economic growth?”

He added: “Last month I gave space to a book titled Who owns the Future, by the computer scientist Jaron Lanier. His answer to Lanier’s questions, was yes. He tellingly compared the great photography company of the analog age, Kodak, with the hot photography company of the moment, Instagram.

At its peak, Kodak employed 140,000 people; Instagram by way of comparison had only 13 employees when it was bought by Facebook for $1 billion in 2012.”

One could easily replace the name Instagram and substitute for it Google, Apple or the eventual buyer of Instagram, Facebook itself, to make the same point.

We on this side of the political aisle get it, but it is not enough for us to get it; we need our Government, our trade union partners and the Bermudian people to get it and mobilise for the type of change that will enable us to navigate these challenges effectively and in a manner that enhances our competitive advantage and, thus, our place in the global economy.

We declare today that the work to create the Bermuda we wish to see in the year 2025 must begin now.

The global economy is not a new phenomenon. It has existed for hundreds of years. In fact, when various European kingdoms, beginning during the 15th century, forcibly linked the so-called western hemisphere with Africa and Eurasia, the global economy was born and technological disruption has always been a key and even defining feature of it.

Bermuda, very early in its colonisation by the English, was fully integrated into this emerging European-dominated global economy of that era.

At every stage of that evolution — from the establishment of the institution of chattel slavery, accompanied by the importation of African and Native American enslaved labour; to the short-lived establishment of tobacco farms for the export of that cash crop to European markets; even to the rise of privateering which was essentially state-sponsored piracy; and piracy itself — Bermuda has played a leading role.

Latterly, the rise of Bermuda as a regional maritime power driven by its home-grown innovations, such as the legendary Bermuda rig and Bermuda sloop fashioned from our Bermuda cedars beginning during the late 16th and 17th centuries, spoke to our capacity as game changers when conditions required it. It is estimated that more than 1,000 of these ships were built by Bermudian shipwrights during this period of our history culminating in the mid-19th century. They were the killer app of that era.

It is quite fitting that the America’s Cup chose Bermuda as the site of the 2017 series of races, as it is in Bermuda that the prototype of the now commonplace rig that is found on virtually all sailing vessels was first developed.

In effect, it was in Bermuda during that period that the modern yacht first took form by way of those two technological innovations: the Bermuda sailing rig, which in turn powered the Bermuda cedar-built sloop that for a number of decades was considered the most sought after sailing vessel for trade and commerce of all sorts.

The America’s Cup is simply coming home, in essence, to its incubator or birthplace.

Throughout every transition that we faced, such as the demise of our shipbuilding industry owing to the rise of the steam-powered vessel, to the rise and fall of our agricultural industry and the latter establishment of tourism during the 20th century, to now becoming the risk capital of the world, Bermuda has been able to navigate successfully through these changes to the industrial composition of employment and our economy.

The PLP is betting that it can do so again.

In 2005, the Arnold Group LLC was commissioned by the Government, then led by Premier Alex Scott and under then-Labour Minister Randy Horton to work with the National Training Board to study and make recommendations with respect to workforce development in Bermuda. It was from those beginnings that the country began to craft and develop a workforce development model to address the obvious and acknowledged shortcomings in our ability to harness the human capital and potential in a country with little in the way of natural resources.

The goal as outlined in the Arnold Group’s report entitled Doing Better in Bermuda was “to maximise the potential of all Bermudians in all sectors and at all levels of the workforce”. And moreover “to simultaneously meet the needs of the citizenry and the Employers of Bermuda”.

As noted earlier, this was followed by the Columbia University Study in 2007 and, latterly, its final report which was disseminated publicly in late 2009 that highlighted the graphic challenges confronted by our young black men in this society, in the areas of employment, education and earnings, in comparison with their same-age peers.

It was precisely the failure to get it right after the last big shift in our economy from tourism to international business as indicated that led directly to some of the failures illustrated in that report. That, along with systemic racial discrimination, has left too many sidelined and/or marginalised with respect to their ability fully to participate in this economy and society over the preceding period under discussion — particularly our black Bermudian men and the black community more broadly.

Two recommendations were identified by the Columbia research team led by Professor Ronald Mincy and advanced out of that report for implementation.

First, Career Academies, which was rebranded as Career Pathways and which continues to make a valued contribution in preparing our students from middle school through to secondary school for the world of work through job shadowing and other related programmes.

Second, Job Corps, which was to have its own campus, was designed to more fully harness the world of technical and other forms of training to the real-world economy in Bermuda. Because of the result of the 2012 General Election, we were not able to complete the necessary negotiations with the US Government-approved service providers that would have allowed us to start the implementation of Job Corps in Bermuda.

We still believe that a great opportunity was lost.

The “great recession” has resulted in the significant loss of jobs in this economy but the rise of information technology, which has enabled the rise of disruptive technologies across of range of business and other sectors, as noted, has also contributed to a decline in levels of employment locally and transformed labour markets globally.

This impact precedes 2008-09, the generally accepted onset of the “great recession”, and some commentators have advanced the view that these job losses and the impact to our labour market and the structural shift in our economy were occurring throughout the early to mid-part of the past decade.

I have often deplored publicly the dissemination of what I have described as a spurious and/or even a dishonest narrative about the causes of our economic decline. The “great recession” resulted in severe hardship, record unemployment and business failures throughout our community, which no one can deny.

We know that the One Bermuda Alliance government achieved an unprecedented level of political success by the dissemination of that narrative. But my key point is that narrative which posits the previous PLP government as the sole source of all our economic and other woes. While politically beneficial to the OBA, it has precluded us and the country at large from having an honest and more productive conversation about the myriad causes, including technological change and outsourcing that has continued to undermine and erode Bermuda’s competitive advantage.

Even Doug Soares, a managing partner of Expertise who has been viewed as no friend of the PLP — nor, some would say, of the Bermudian worker — and who infamously acknowledged in a speech to the Hamilton Rotary Club in 2013 that “being Bermudian is an undeserved privilege”, had the following to say about the causal factors that led to a large number of jobs in Bermuda literally disappearing. Many of them over the preceding, nearly two-decade span.

Soares stated (and the following are excerpts) that “when I refer to long-term trends, I am referring to the impact of globalisation on the Bermuda job market, particularly over the last 12 to 15 years. Specifically, I am talking about how the internet, technological advances and the relaxation of immigration policies around the world is making it so quick and easy to eliminate, or move jobs out of Bermuda.”

He continued: “I am talking about the hundreds of clerical and office administrator jobs. I am talking about the hundreds of customer service personnel, in all sectors of our economy from banking to travel agencies. I am talking about hundreds of industrial and manual labour jobs lost due to the use of more technologically advanced vehicles, appliances and machinery.

He added: “I am talking about the jobs that are gone and will not come back.”

He then went on to provide some of the relevant numbers: “Bermuda Government census and employment data illustrate that, over the 12-year period (2000-2012), 442 clerical jobs left Bermuda or were eliminated. During the same 12-year period, 753 jobs were lost in manufacturing; 1,087 lost in retail and repair services; 782 lost in transport and communications; and 63 jobs lost in the utilities industry.”

It is illustrative to note the following and to hear it clearly. Soares then added: “That’s a total of 3,127 jobs lost from the Bermudian economy since the year 2000. The majority of those jobs were lost prior to the ‘great recession’, which began in 2009. And the majority, I suggest, are not likely to be recreated when the economy starts growing again because many of those jobs were lost due to technological advances and automation.”

It is important to note that the jobs that Mr Soares referred to were disappearing during the greatest economic boom in Bermuda’s history post-9/11 when the GDP of Bermuda doubled from approximately 3.4 billion in 2000 to 6.1 billion in 2008 and work permits were being issued at a rate never seen before. And the picture certainly has not brightened. The Department of Statistics revealed this week by way of its 2015 Bermuda Job Market Employment Briefs that 802 jobs disappeared in 2014, representing 2 per cent of the overall total.

In 2013, there were 34,277 filled jobs as opposed to the 33,475 figure recorded in 2014.

The majority of these job losses during that period were of Bermudians who lost 671 jobs of the overall total, with the bulk of the losses falling upon black Bermudians, who again are carrying the brunt of so-called shared sacrifice to the tune of 571 positions lost during that period.

Ominously, the statistics reveal that black Bermudians have lost 2,085 jobs since 2010, with more than 80 per cent of those losses occurring after 2012.

Obviously, none of the job losses referred to by Mr Soares were owing to a bad economy, as the economy was experiencing the greatest boom in Bermuda’s history as stated. And certainly not all of the losses now can be attributed to the hangover of the “great recession”.

Mr Soares and others posit that this trend is being primarily and substantively driven by the adoption and deployment of advanced technology in this economy; it is a question upon which our future prosperity and sustainability depends.

In fact, we may find that both trends are feeding upon each other, but I truly believe that the dominant trend is the latter. This is likely contributing to the growth of structural unemployment in the economy.

On page ten of the June 22 edition of The Royal Gazette business columnist Nathan Kowalski wrote: “Outsourcing is only a way station to full automation. We could spend countless hours debating the social immorality of this, but unfortunately this is current economic reality.”

• Rolfe Commissiong is the Progressive Labour Party MP for Pembroke South East (Constituency 21) and the Shadow Minister of Human Affairs. This is the first in a four-part series that encapsulates a paper on the impact of technological change that was presented before the House of Assembly. At the invitation of Sandys Rotary Club, he will be appearing at 7.30pm today at Henry VIII restaurant to lead a discussion entitled “2025 Revisited”