As people give way to machines, many jobs vanish

June 11, 1993|By Chicago Tribune

NEW YORK -- For those wondering why the economic recovery has created so few jobs, there is a message in phone mail.

The no-secretary answering system is one element in a sweeping change in technology by the service industries that provided most of the nation's job growth in the 1980s. Although hard to quantify, estimates of technology's effect on job creation run as high as 700,000 fewer new positions a year.

An operatorless "operator-assisted" telephone call is already available in places. So Maggie Wilson of Youngstown, Ohio, recently became a jobless operator when AT&T began installing machinery that can understand words like "collect" as well as she can.

And it goes much further than telephones. Bar-code scanners linked to automated inventory management systems now do the work of inventory clerks and purchasing agents. Inexpensive computer-aided design systems are assuming draftsmen's tasks in the offices of architects and engineers. And computers perform the data analysis once done by corporate middle managers.

"Technology, as it applies to the whole white-collar world, especially the service sector, has really come into its own in the last two or three years," said Mitchell Fromstein, president and chief executive officer of Manpower Inc., the largest temporary-help agency in the world.

hTC "In many cases, it was paid for in the 1980s, but it didn't deliver until the 1990s. It's delivering with fewer jobs."

That is an important factor in the slow employment rebound during this economic recovery. Other factors are also contributing: the defense build-down, for instance, and the overhang of real estate from the building boom.

Although a Labor Department report last week that showed 209,000 new jobs added to the economy during May was encouraging, the total job growth in this recovery remains disappointing, especially considering that it is officially 27 months old.

Stephen Roach, an economist at Morgan Stanley & Co., said he thinks the trend will last through the 1990s. He estimates that, even with an improved economy, efficiencies from technology and better management of it will lop 700,000 new jobs a year off the service sector's employment growth.

At AT&T, for example, technologies like the voice-recognition system that replaced Maggie Wilson will eliminate 3,500 operator jobs by March. Under AT&T's union contract, many displaced operators will be placed in other open positions; in Ms. Wilson's case, the company is paying for retraining to help her find a new job.

As painful as the impact of these changes are on the unemployed, they amount to improvements in the sector's productivity. And ultimately, productivity growth allows living standards to rise and protects remaining jobs against competitors.

The trend in the service industries has already been experienced by, among other sectors, steel manufacturers and automakers. During the 1980s, these manufacturers used innovations to increase output. They could do so while limiting job growth because of productivity improvements forced upon them by foreign competition.

But during the 1980s, service companies went right on hiring, adding 18 million workers to their payrolls, while productivity languished.

During the 24 months that ended March 31, despite the slow pace of the recovery, productivity growth in the service sector has reached an annualized average of 1.8 percent, well above the 0.7 percent annual growth rate in the 1980s.

Computer work

Since March 1992, a computer system at Federated Department Stores -- the Cincinnati-based conglomerate of nine store chains, including Bloomingdales -- has been automatically reordering merchandise such as Hanes hosiery as stock runs low.

Each time a pair of stockings is purchased, the bar code scanner deducts it from the inventory; when the supply drops, a computer can electronically order more from the vendor without human intervention. The computer can also track shifts in customer tastes.

Federated pressed ahead with a $60 million investment in the system even while it was in bankruptcy reorganization. "Chapter 11 possibly caused us to focus more on technology than we would have," said Lisa Lichtenberg, the 217-store corporation's vice president for merchandise technology.

The experience of a recession that fell harshly on service companies and a newly competitive service industry have been catalysts for the pursuit of productivity gains through technology, said Mr. Roach, the Morgan Stanley economist.

Service companies had collectively invested $862 billion during the 1980s in information technology hardware. That accounted for more than 80 percent of such purchases in the United States, according to Morgan Stanley analyses. Yet there had been no major improvement in measurements of the sector's productivity, an outcome that Mr. Roach calls paradoxical.

Resolving a paradox

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