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Algorithms Are Making Economic Inequality Worse – Harvard Business Review

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Executive Summary

There is a code ceiling that prevents career advancement — irrespective of gender or race — because, in an AI-powered organization, junior employees and freelancers rarely interact with other human co-workers. Instead, they are managed by algorithms. As a result, a global, low-paid, algorithmic workforce is emerging. You will increasingly find a gap between top executives and an outer fringe of transient workers, even within organizations. Whether in retail or financial services, logistics or manufacturing, AI-powered organizations are being run by a small cohort of highly paid employees, supported by sophisticated automation and potentially millions of algorithmically managed, low-paid freelancers at the periphery. Job polarization is only part of the problem. What we should really fear is the algorithmic inequality trap that results from these algorithmic feedback loops.

HBR Staff/Oleksandr Shchus/Getty Images

The risks of algorithmic discrimination and bias have received much attention and scrutiny, and rightly so. Yet there is another more insidious side-effect of our increasingly AI-powered society — the systematic inequality created by the changing nature of work itself. We fear a future where robots take our jobs, but what happens when a significant portion of the workforce ends up in algorithmically managed jobs with little future and few possibilities for advancement?

One of the classic tropes of self-made success is the leader who comes from humble beginnings, working their way up from the mailroom, the cash register, or the factory floor. And while doing that is considerably tougher than Hollywood might suggest, bottom-up mobility was at least possible in traditional organizations. Charlie Bell, former CEO of McDonalds, started as a crew member flipping burgers. Mary Barra, chairman and CEO of General Motors, started on the assembly line. Doug McMillon, CEO of Walmart, started in a distribution center.

By comparison, how many Uber drivers do you think will ever have the chance to attain a managerial position at the company, let alone run the ride-sharing giant? How many future top Amazon executives will start their careers by delivering packages or stacking shelves? The billionaire founder and CEO of Instacart may have personally delivered the company’s first order, but how many others will follow in his footsteps?

Insight Center

Here’s the problem: There’s a “code ceiling” that prevents career advancement — irrespective of gender or race — because, in an AI-powered organization, junior employees and freelancers rarely interact with other human co-workers. Instead, they are managed by algorithms.

In this new era of digitally mediated work, there is typically a hierarchical information flow, in which the company decides the information they choose to share with you. Unlike driving a taxi, where there is open radio communication between drivers and the dispatch operator, and among the drivers themselves, when you work for Uber or Lyft, the content of your interactions is the output of an optimization function designed to maximize efficiency and profit.

To be managed algorithmically is to be subject to constant monitoring and surveillance. If you are one of the millions of food delivery workers in China working for Meituan or Ele.me, an algorithm determines how long it should take you to drop off an order, reducing your pay if you fail to meet your deadline. Similarly, employees in Amazon distribution centers are also carefully tracked by algorithms; they must work at “Amazon pace” — described as “somewhere between walking and jogging.”

When you are a gig economy worker, it is not only your AI bosses that should concern you; your co-workers are often also your competition. For example, Chicago residents who live near Amazon’s distribution points and Whole Foods stores reported the strange appearance of smartphones hanging from trees. The reason? Contract delivery drivers were desperate to trump their rivals for job assignments. They believed that hanging their devices near delivery stations would help them game the work allocation algorithm; a smartphone perched in a tree could be the key to getting a $15 delivery route mere seconds before someone else.

Work has been changing over the last few decades. The labor market has grown increasingly polarized, with middle-skill jobs being eroded relative to entry-level, low-skill work, and high-level employment that requires greater skill levels. The Covid-19 crisis has likely accelerated the process. Since 1990, every U.S. recession has been followed by a jobless recovery. This time, as AI, algorithms, and automation reshape the workforce, we may end up with something worse: a K-shaped recovery — where the prospects of those at the top soar, and everyone else sees their fortunes dive.

The new digital divide is a widening gap between workers with access to higher education, leadership mentoring, and job experience — and those without. In my recent book, The Algorithmic Leader, I explore one particularly dire scenario: a class-based divide between the masses who work for algorithms, a privileged professional class who have the skills and capabilities to design and train algorithmic systems, and a small, ultra-wealthy aristocracy, who own the algorithmic platforms that run the world.

A global, low-paid, algorithmic workforce is already emerging. In Latin America, one of the fastest-growing startups is Rappi, a mix of Uber Eats, Instacart, and TaskRabbit. Customers in cities like Bogotá and Mexico City pay about $1 an order or a flat $7 a month. In return, they can access a vast on-demand network of couriers who deliver food, groceries, and just about anything else you want. Amazon has an informal network of delivery people, called Amazon Flex, ready to drop packages right to your door — and soon even hand them to you in the street, place them in your car trunk, or open the door to your house and store your groceries in your fridge.

In his 1930 lecture Economic Possibilities for Our Grandchildren, John Maynard Keynes predicted that by around 2030, the production problem would be solved, and there would be enough of everything for everyone. The catch, however, is that machines would cause technological unemployment. The scenario that Keynes didn’t fully anticipate was our present case of high technological employment, with an accompanying degree of high inequality.

The workforce is changing; so too is the workplace. You will increasingly find a gap between top executives and an outer fringe of transient workers, even within organizations. Whether in retail or financial services, logistics or manufacturing, AI-powered organizations are run by a small cohort of highly paid employees, supported by sophisticated automation and potentially millions of algorithmically managed, low-paid freelancers at the periphery.

Job polarization is only part of the problem. What we should really fear is the algorithmic inequality trap that results from feedback loops. Once you are a gig economy worker reliant on assignments meted out by your smartphone, not only are there few opportunities for promotion or development, but other algorithms may further compound your situation. Think of it as a digital poorhouse. With their earnings and work assignments held hostage by market fluctuations, the new AI underclass may be penalized by automated systems that determine access to welfare, lending, insurance, or health care, or that set custodial sentences.

Nevertheless, it is dangerous to seek quick fixes for a problem that has yet to fully manifest, especially if it means grafting 20th-century worker protections onto 21st-century business models. Already, governments and regulators supported by populist platforms are focused on attacking global digital giants. They seek to prevent them from avoiding tax liabilities and are working to regulate their freelance workforce’s labor conditions, to apply restrictions on their collection of data, and even to tax their robots. Some of these ideas have merit. Others are premature, or worse, just political theater.

The longer-term solution to algorithmic inequality will not lie in just taxation and regulation, but rather in our ability to provide an adequate education system for the 21st century. Rebooting education will not be easy. Rather than looking for ways to use AI in teaching, the real question is: How do we teach people to harness machine intelligence in their careers? And how do we teach people to be prepared for a lifetime of constant learning and retraining?

Business leaders have a crucial role to play. Not only should they carve out channels of communication, feedback, and advancement for freelancers at the edge of their organizations, they need to get serious about retraining and community engagement. For example, AT&T is retraining half of its workforce, while Cisco, IBM, Caterpillar, McKinsey, and JPMorgan are offering internships to high school students and are working with local schools to upgrade their teaching curriculums. These are all good initiatives, but more will be needed — not just for social cohesion, but also to ensure the diversity and agility of tomorrow’s workforce.

We need a better plan for the future. Without one, the algorithmic inequality trap will be a story told not in statistics and wealth ratios, but in distress signals — smartphones hanging from trees, tent cities for the homeless, and human couriers scanning the skies for the delivery drones that spell their impending end.

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Mexico Economy Grows at Record Pace With Long Recovery Ahead – Yahoo Canada Finance

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Chicco Black Friday & Cyber Monday Deals (2020): Best Nextfit Car Seat, Bravo Travel System & More Deals Reviewed by Saver Trends

Review of the latest Chicco deals for Black Friday & Cyber Monday, featuring offers on Keyfit 30 car seat, Bravo Travel System & more Here’s a comparison of the latest Chicco deals for Black Friday & Cyber Monday, including the best sales on convertible car seats, car seat and bases and more. Links to the top deals are listed below.Best Chicco Deals: * Save up to 43% on Chicco travel systems, carriers, sterilizers, and more at Walmart – see the latest discounts on a wide variety of Chicco infant car seats, strollers, food warmers, and modular sterilizers   * Save on Chicco travel systems, portable bassinets, hook-on chairs, and more at Amazon  – click the link to see live prices on top-rated baby safety car seats, travel gear, and more * Save on top-rated Chicco baby safety car seats, travel systems at buybuyBABY.com – check live prices on Chicco KeyFit 30 Infant Car Seat, Chicco Fit 4-in-1 Convertible Car Seat, and more      * Save up to 32% on top-rated Chicco travel systems at Walmart – check the latest deals on travel system models, including Chicco Mini Bravo, Chicco Activ3 Jogging, Chicco Bravo Trio, and more    * Save on best-selling Chicco KeyFit series car seats at Walmart – click the link for the latest deals on Chicco KeyFit series car seats, including the Onyx, Regatta, Q Collection, and more    * Save up to $90 on car seats from the Chicco NextFit series at Walmart – check the latest savings on top-rated Chicco NextFit convertible car seats    Best Baby Deals: * Save up to 40% off on a wide selection of baby gear at Walmart – find the latest deals on car seats, strollers, bassinets, activity centers, bouncers & rockers, carriers, playmats, and more   * Save up to 40% on Graco baby strollers, car seats & more baby gear at GracoBaby.com – click the link to see updated prices on best Pack ‘n Play® playards and other top-rated Graco cribs, strollers, and car seats * Save up to 49% on baby gear including car seats, strollers, clothing & essentials at Amazon – check live prices on clothing, bedding, baby care items and accessories   * Save up to $105 on baby strollers, car seats, cribs & more at buybuyBABY.com – including deals on Fisher Price, Carter’s and Disney    * Save on a wide range of Burt’s Bees baby items at BurtsBees.com – click the link for latest deals on baby ointment, lotion, creams, and bath bundles from Burt’s Bees    * Shop baby swings, bassinets, playards & more at 4moms.com – click the link to see the latest prices on baby stuff like the mamaRoo4, rockaRoo, mamaRoo sleep bassinet, and more   Searching for more deals? We recommend checking Walmart’s Black Friday & Cyber Monday sale and Amazon’s Black Friday & Cyber Monday deals for thousands more live discounts. Saver Trends earns commissions from purchases made using the links provided.About Saver Trends: Saver Trends research and share online sales news. As an Amazon Associate and affiliate Saver Trends earns from qualifying purchases.Contact: Andy Mathews (andy@nicelynetwork.com)

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Iran economy could rebound to 4.4% growth if U.S. sanctions lifted: IIF – TheChronicleHerald.ca

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By Davide Barbuscia

DUBAI (Reuters) – Iran’s economy could grow 4.4% next year if U.S. President-elect Joe Biden lifts sanctions that have contributed to a deep three-year recession, although the COVID-19 crisis could limit foreign investment, the Institute of International Finance (IIF) said.

Biden’s victory in the Nov. 3 U.S. election has raised chances that the United States could rejoin a deal Iran reached with world powers in 2015, under which sanctions were lifted in return for curbs on Iran’s nuclear programme.

This is unlikely to happen overnight, however, and the prospects remain uncertain as the adversaries would both want additional commitments.

Iran’s rial currency has lost about 50% of its value against the U.S. dollar in 2020, reflecting economic damage from sanctions and the coronavirus pandemic, although it strengthened in late October in anticipation Biden would unseat U.S. President Donald Trump.

Iran has the highest COVID-19 death toll in the Middle East.

Trump abandoned the nuclear deal in 2018, and Tehran responded by scaling down its compliance.

The IIF, a trade body for the global financial industry, said that if United States lifted most of the economic sanctions on Iran by the end of 2021, the economy could expand 4.4% next year after an expected 6.1% contraction in 2020.

It would then grow by 6.9% in 2022 and 6% in 2023, the IIF said, adding that if oil exports increase, Iran could see its foreign reserves rise to $109.4 billion by the end of 2023.

Tehran has spoken optimistically about the return of foreign companies under a new U.S. administration, but lack of financial transparency could still curb interest from firms who had made tentative moves to invest after the 2015 deal was struck.

Garbis Iradian, IIF’s chief economist for the MENA region, told Reuters foreign direct investment inflows would increase progressively from this year’s $890 million to over $6.4 billion in 2025.

Assuming most sanctions could be lifted by late next year, FDI is likely to remain below $2 billion in 2021, with most of the money coming from China, Iradian said, adding: “Moreover, the coronavirus pandemic will limit FDI inflows in 2021.”

The Iranian economy would remain fragile, though “not to the brink of collapse” if most of the sanctions remain in place, the IIF said.

Under such a “pessimistic” scenario, Iran would post 1.8% growth next year and its foreign reserves would steadily decrease from about $80 billion this year to $46.9 billion by the end of 2023.

About 90% of Iran’s official reserves are frozen abroad due to U.S. sanctions.

(Reporting by Davide Barbuscia; Editing by Catherine Evans)

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Picture of US economy is worrisome as virus inflicts damage – Investment Executive

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The number of Americans seeking unemployment aid rose last week for a second straight week to 778,000, evidence that many employers are still slashing jobs more than eight months after the virus hit. Before the pandemic, weekly jobless claims typically amounted to only about 225,000. Layoffs are still historically high, with many businesses unable to fully reopen and some, especially restaurants and bars, facing tightened restrictions.

Consumers increased their spending last month by just 0.5%, the weakest rise since the pandemic erupted. The tepid figure suggested that on the eve of the crucial holiday shopping season, Americans remain anxious with the virus spreading and Congress failing to enact any further aid for struggling individuals, businesses, cities and states. At the same time, the government said Wednesday that income, which provides the fuel for consumer spending, fell 0.7% in October.

The spike in virus cases is heightening pressure on companies and individuals, with fear growing that the economy could suffer a “double-dip” recession as states and cities reimpose curbs on businesses. The economy, as measured by the gross domestic product, is expected to eke out a modest gain this quarter before weakening — and perhaps shrinking — early next year. Mark Zandi, chief economist at Moody’s Analytics, predicts annual GDP growth of around 2% in the October-December quarter, with the possibility of GDP turning negative in the first quarter of 2021.

Economists at JPMorgan Chase have slashed their forecast for the first quarter to a negative 1% annual GDP rate.

“This winter will be grim,” they wrote in a research note.

Zandi warned that until Congress agrees on a new stimulus plan to replace a now-expired multi-trillion-dollar aid package enacted in the spring, the threat to the economy will grow.

“The economy is going to be very uncomfortable between now and when we get the next fiscal rescue package,” Zandi said. “If lawmakers can’t get it together, it will be very difficult for the economy to avoid going back into a recession.”

Some corners of the economy still show strength, or at least resilience. Manufacturing is one. The government said Wednesday that orders for durable goods rose 1.3% in October, a sign that purchases of goods remain solid even while the economy’s much larger service sector — everything from restaurants, hotels and airlines to gyms, hair salons and entertainment venues — is still struggling. But economists caution that factories, too, remain at risk from the surge in coronavirus cases, which could throttle demand in coming months.

And sales of new homes remained steady in October, the latest sign that ultra-low mortgage rates and a paucity of properties for sale have spurred demand and made the housing market a rare economic bright spot.

But at the heart of the economy are the job market and consumer spending, which remain especially vulnerable to the spike in virus cases. Most economists say the distribution of an effective vaccine would likely reinvigorate growth next year. Yet they warn that any sustained recovery will also hinge on whether Congress can agree soon on a sizable aid package to carry the economy through what could be a bleak winter.

“With infections continuing to rise at an elevated pace and curbs on business operations widening, layoffs are likely to pick up over coming weeks,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

The government said he total number of people who are continuing to receive traditional state unemployment benefits dropped to 6.1 million from 6.4 million the previous week. That figure has been declining for months. It shows that more Americans are finding jobs and no longer receiving unemployment aid. But it also indicates that many jobless people have used up their state unemployment aid — which typically expires after six months.

More Americans are collecting benefits under programs that were set up to cushion the economic pain from the pandemic. For the week of Nov. 7, the number of people collecting benefits under the Pandemic Unemployment Assistance program — which offers coverage to gig workers and others who don’t qualify for traditional aid — rose by 466,000 to 9.1 million.

And the number of people receiving aid under the Pandemic Emergency Unemployment Compensation program — which offers 13 weeks of federal benefits to those who have exhausted state jobless aid — rose by 132,000 to 4.5 million.

The data firm Womply says that 21% of small businesses were shuttered at the start of this month, reflecting a steady increase from June’s 16% rate. Consumer spending at local businesses is down 27% this month from a year ago, marking a deterioration from a 20% year-over-year drop in October, Womply found.

The heart of the problem is an untamed virus: the number of confirmed infections in the United States has shot up to more than 170,000 a day, from fewer than 35,000 in early September. The arrival of cold weather in much of the country could further worsen the health crisis.

Meanwhile, another economic threat looms: the impending expiration of the two supplemental federal unemployment programs the day after Christmas could end benefits completely for 9.1 million jobless people. Congress has failed for months to agree on any new stimulus aid for jobless individuals and struggling businesses after the expiration of a multi-trillion dollar rescue package it enacted in March.

The expiration of benefits will make it harder for the unemployed to make rent payments, afford food or keep up with utility bills. Most economists agree that because unemployed people tend to quickly spend their benefits, such aid is effective in boosting the economy.

When the viral outbreak struck in early spring, employers slashed 22 million jobs in March and April, sending the unemployment rate rocketing to 14.7%, the highest rate since the Great Depression. Since then, the economy has regained more than 12 million jobs. Yet the nation still has about 10 million fewer jobs than it did before the pandemic erupted.

All of which has left many Americans anxious and uncertain. The Conference Board, a business research group, reported Tuesday that consumer confidence weakened in November, pulled down by lowered expectations for the next six months.

And the University of Michigan’s Surveys of Consumers reported Wednesday that sentiment declined slightly this month, and remained far below where it was before the pandemic struck. With the resurgence of the virus depressing the outlook of consumers, the sentiment index fell to its lowest point since August.

“Gloomier consumer expectations will weigh on spending as the holidays approach,” cautioned Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.

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