Evaluating the Potential Impacts of

AUTOMATION AND THE GIG ECONOMY IN PENNSYLVANIA

OCTOBER 2018

P E N N S Y L V A N I A ’ S S T A T E S Y S T E M O F H I G H E R E D U C A T I O N

2Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

CONTENTS

1. Introduction ....................................................................... 3

2. Risk of Automation ........................................................... 4

3. Gig Economy Occupations ............................................. 10

4. Conclusion ....................................................................... 17

3Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

1. INTRODUCTION

Pennsylvania’s State System of Higher Education recently completed its 2016-2026 Workforce Needs Assessment. As part of the assessment, industry and occupation projections were used to estimate the future demand for workers with postsecondary degrees in the Commonwealth. To add to this analysis, the State System sought to explore two additional labor market analyses: the impacts of automation and the Gig Economy, respectively.

By combining the Workforce Needs Assessment findings with these analyses, data-driven insights can be produced to inform key stakeholders in the Keystone State. A key goal of the Workforce Needs Assessment is to assist university leadership and education planners by providing an infrastructure of resources for internal planning and external engagement with policymakers, businesses, and students. This memo seeks to highlight:

The impacts of automation

• The impact of automation on projected occupational growth in Pennsylvania;

• Industry groups that are most likely to be affected by automation; and

• The alignment of higher education programs in Pennsylvania with occupations that are impacted by automation

The Gig Economy

• The Gig Economy and its alignment with occupations in Pennsylvania;

• Industry groups that are most likely to be involved with the Gig Economy; and

• The alignment of higher education programs in Pennsylvania with occupations that align with the Gig Economy.

• This assessment is intended to further support and clarify the role of higher education in Pennsylvania’s workforce.

4Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

2. RISK OF AUTOMATION

Automation is an emerging and powerful technology with many applications. Recent advances in artificial intelligence (AI) technology have created new opportunities in areas such as transportation, healthcare, and manufacturing. However, economists are still unsure how its impacts will be felt throughout the economy. AI has the potential to put many people out of work while generating new jobs at the same time. The transition will not be distributed evenly across the labor market; many workers will need to retrain and find new jobs as their old jobs are automated.

While it is unlikely that AI will surpass most human abilities in the next decade, it can be expected that AI will continue to exceed human proficiencies on several tasks. A recent report from the White House notes:

“AI-driven automation will continue to create wealth and expand the American economy in the coming years, but, while many will benefit, that growth will not be costless and will be accompanied by changes in the skills that workers need to succeed in the economy, and structural changes in the economy. Aggressive policy action will be needed to help Americans who are disadvantaged by these changes and to ensure that the enormous benefits of AI and automation are developed by and available to all.”1

In which jobs can we expect to see the impacts of automation?

A recent study by Oxford Economics and Cisco estimated that 6.5 million US workers are at risk of losing their jobs to automation in the next 10 years.2 In particular, workers in transportation, manufacturing, and agriculture jobs will be most impacted. On the other hand, they expect new jobs to emerge in other areas, such as computing, management, healthcare, and sales.

1 See “Artificial Intelligence, Automation, and the Economy.” Executive Office of the President, December 2016. <https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/Artificial-Intelligence-Automation-Economy.PDF>.

2 See “The AI Paradox - How Robots Are Making Work More Human.” <https://www.oxfordeconomics.com/recent-releases/the-AI-paradox>.

5Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

Based on estimates from this report, Pennsylvania can expect to add 8,400 new jobs due to the adoption of AI. This would be the result of 503,500 jobs lost due to displacement and 511,900 jobs added due to income gains.3

3 Income effects are incorporated into the Oxford/Cisco study. Income effects are defined as a change in the demand of a good or service that is induced by a change in discretionary income.

THE IMPACTS OF AUTOMATION ON MAJOR OCCUPATIONAL EMPLOYMENT, 2016-2026

Source: American Community Survey, PUMS annual estimates 2012-2016

Healthcare Support

Sales and Related

Building and Grounds Cleaning and Maintenance

Food Preparation and Serving Related

Arts, Design, Entertainment, Sports, and Media

Computer and Mathematical

Management

Legal

Personal Care and Service

Healthcare Practitioners and Technical

Community and Social Service

Business and Financial Operations

Education, Training, and Library

Total All Occupations

Office and Administrative Support

Construction and Extraction

Architecture and Engineering

Life, Physical, and Social Science

Protective Service

Installation, Maintenance, and Repair

Production

Farming, Fishing, and Forestry

Transporation and Material Moving

74+65+64+50+33+32+30+21+21+14+11+8+2+10+0+0+0+0+0+0+0+0+0+0+0+0+0+11+19+24+27+55+58+71+73+99

–15% –10% –5% 0% 5% 10%

6Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

Industry impacts due to automation

Industries employing workers in transportation and material moving, production, and protective services can expect to see the largest job losses due to automation. Pennsylvania’s industry concentration indicates that many workers will be impacted by the adoption of automation technologies. For example, the top employing industries for transportation and material moving occupations include:

• Truck transportation, which employs approximately 49,000 transportation and material moving jobs in Pennsylvania;

• Employment services, which employs approximately 27,600 transportation and material moving jobs in Pennsylvania;

• Warehousing and storage, which employs approximately 50,800 transportation and material moving jobs in Pennsylvania; and

• Couriers and express delivery services, which employs approximately 23,000 transportation and material moving jobs in Pennsylvania.

If automation is fully adopted within these industries, potential job losses stemming from transportation and material moving occupations could amount to 15,500.

Similarly, production occupations are primarily employed within the manufacturing sector, which currently employs 559,300 people in Pennsylvania. In fact, production occupations make up over half of the jobs in the manufacturing sector. While the projections indicate a slight decline in Pennsylvania’s manufacturing sector, automation could accelerate those job losses, eliminating an additional 22,400 jobs in the sector over the next 10 years.

Detailed occupations that will be most impacted by automation

There will be an increase in demand for many technical occupations to support the implementation of automation, such as management as well as computer and mathematical jobs. Additionally, certain occupations can expect to see employment gains due to the positive income effects stemming from automation.

Not surprisingly, many of the top job gainers share a common skillset that is difficult to automate. These skills include greeting customers, active listening, negotiation, problem-solving, and making recommendations. The occupations

7Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

expected to gain jobs due to AI are primarily high-skilled jobs (Job Zones 4 and 5). In fact, while there are projected to be only 8,400 net job gains overall due to AI, high-skill jobs are projected to gain 29,900 jobs due to AI.

The following tables display the top job gainers by percentage and the top high-skill job gainers by percentage over the next 10 years.

TOP JOB GAINERS DUE TO AI BY PERCENTAGE

Job Zone Occupation

Automation Impact

Automation Change

3 Physical Therapist Aides 13.5% 298

2 Orderlies 13.3% 336

2 Door-to-door sales workers, news and street vendors, and related workers 12.7% 314

2 Telemarketers 12.4% 796

3 Nursing Assistants 12.3% 9,569

3 Motion Picture Projectionists 12.0% 32

3 Veterinary Assistants and Laboratory Animal Caretakers 11.6% 308

2 Tellers 11.2% 2,675

2 Ushers, lobby attendants, and ticket takers 11.1% 681

2 Ambulance drivers and attendants, except emergency medical technicians 10.8% 252

TOP HIGH-SKILL JOB GAINERS DUE TO AI BY PERCENTAGE

Job Zone Occupation

Automation Impact

Automation Change

4 Insurance Sales Agents 10.5% 2,003

4 Designers, All Other 9.6% 8

5 Internists, General 9.5% 61

5 Pediatricians, General 9.0% 51

4 Multimedia Artists and Animators 8.8% 123

5 Medical and Health Services Managers 8.6% 1,195

4 Health Educators 8.3% 178

4 Marketing Managers 8.0% 519

4 Coaches and Scouts 7.9% 629

5 Financial Managers 7.9% 1,297

8Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

Many of the occupations expected to face job losses due to AI have work tasks that are physical, time-sensitive, and repetitive or routine. A majority of the top job losers are concentrated in low- and middle-skill occupations. In fact, of the 8,400 net job gains overall due to AI, low- and middle-skill jobs are projected to lose 21,600 jobs due to AI. The top 10 occupational job losers due to AI are primarily found in Job Zone 2.

The following tables display the top job losers by volume and the top job loser by percentage over the next 10 years.

TOP JOB LOSERS DUE TO AI BY VOLUME

Job Zone Occupation

Automation Impact

Automation Change

2 Laborers and freight, stock, and material movers, hand -21.2% -28,988

3 Heavy and tractor-trailer truck drivers -8.9% -7,539

3 Bookkeeping, Accounting, and Auditing Clerks -11.0% -6,854

2 Office clerks, general -4.2% -5,996

2 Bus drivers, school or special client -17.1% -5,529

2 Team assemblers -13.9% -5,296

3 Maintenance and Repair Workers, General -8.7% -5,016

3 Hairdressers, hairstylists, and cosmetologists -13.2% -4,308

3 Secretaries and Administrative Assistants, Except Legal, Medical, and Executive -3.9% -4,141

2 Postal service mail carriers -28.4% -3,895

TOP JOB LOSERS DUE TO AI BY PERCENTAGE

Job Zone Occupation

Automation Impact

Automation Change

2 Sawing machine setters, operators, and tenders, wood -31.0% -1,197

2 Loading machine operators, underground mining -30.4% -57

2 Heat treating equipment setters, operators, and tenders, metal and plastic -29.6% -437

2 Postal service mail carriers -28.4% -3,895

1 Helpers--painters, paperhangers, plasterers, and stucco masons -26.9% -105

2 Cleaners of vehicles and equipment -26.5% -3,182

2 Agricultural equipment operators -25.4% -147

2 Separating, filtering, clarifying, precipitating, and still machine setters, operators, and tenders -25.0% -603

1 Bridge and lock tenders -24.3% -27

2 Cutters and trimmers, hand -24.3% -43

9Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

Identifying program areas that will be impacted by automation

Inevitably, new occupations will emerge as automation is adopted throughout the economy. Higher education institutions will be tasked with identifying these jobs and developing curriculum to prepare students to meet the new demand. In addition, higher education institutions will also be forced to consider the implications for existing programs, for both positive and negative changes in the demand for occupations in the skilled workforce.

The increase in demand for existing occupations will require that related programs will need to increase graduates in order to support economic growth. For example, Software Developers, Systems Software are currently projected to add 1,000 new jobs in Pennsylvania over the next 10 years. However, that number could increase to 1,800 if automation is adopted. Based on current gap analysis findings, Software Developers, Systems Software exhibit a balance of supply and demand, but with the addition of 800 new jobs in this occupation due to automation, the Commonwealth could see a demand gap for this occupation. Programs related to this occupation include:

• Computer and Information Sciences• Artificial Intelligence• Information Technology • Computer Programming/Programmer• Computer Systems Analysis/Analyst• Web Page, Digital/Multimedia and Information Resources Design• Computer Graphics

Programs that prepare students for occupations facing declines must re-focus in order to align with the changing demands of the labor market. For example, Commercial Pilots are projected to add 90 jobs in Pennsylvania over the next 10 years, but that number could turn negative if automation is adopted, causing the loss of 170 jobs. Based on current gap analysis findings, Commercial Pilots exhibit a demand gap of 14 openings annually, but with the loss of 170 jobs in this occupation due to automation, the Commonwealth could see a surplus for this occupation. Programs related to this occupation include:

• Aerospace, Aeronautical and Astronautical/Space Engineering• Aeronautics/Aviation/Aerospace Science & Technology, General• Airline/Commercial/Professional Pilot & Flight Crew• Aviation/Airway Management and Operations• Flight Instructor • Aircraft Pilot (Private)• Air Transportation, Other

10Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

3. GIG ECONOMY OCCUPATIONS

While there is no official definition of the Gig Economy, a “gig” is typically identified as a short-term task or job for which a contract or contingent worker is hired. As such, the best proxy for the Gig Economy may be to adopt the perspective of the Bureau of Labor Statistics (BLS), which equates the Gig Economy with self-employment:

“Many gig workers fit the Census definition of a nonemployer: in most cases, a self-employed individual operating a very small, unincorporated business with no paid employees.”4

BLS recently estimated the contingent workforce in the US. Its estimates include a range: about 1.3% (1.9 million workers) to 3.8% (5.9 million workers) of the workforce was part of the Gig Economy in 2016. Applying those shares to Pennsylvania, the gig workforce in the Commonwealth is estimated to be approximately 78,700 to 230,000 workers.

To identify specific occupations that may exhibit a strong connection to the Gig Economy, the following methodology was used:

1. Using self-employment data by occupation from BLS, identify all occupations that are above the national average for self-employment (6.1 percent).

‧ For example, about 16.9 percent of legal occupation jobs are self-employed, compared to 2.6 percent for production occupation jobs.

2. Using self-employment projections, evaluate the change in each occupation’s share of jobs that are projected to be self-employed. Occupations with a self-employment share that is rising faster than the national average (0.1 pp increase for all occupations) are interpreted as having a more rapidly growing gig component.

‧ For example, legal occupations indicate a 0.4 pp decrease in the share of self-employed jobs compared to production occupations, which indicate self-employment share growth of 0.3 pp.

4 See BLS Career Outlook’s “Working in a gig economy” https://www.bls.gov/careeroutlook/2016/article/what-is-the-gig-economy.htm

11Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

Using self-employment growth as a proxy for the gig workforce, we estimate that low- and middle-skill occupations will experience larger employment shifts into the Gig Economy than will high-skill occupations.

Which occupations are most prevalent in the Gig Economy?

BLS identifies broad occupational groups in which many gig occupations are likely to be found, such as:

• Arts and design (e.g., musicians)

• Computer and information technology (e.g., web developers)

• Construction and extraction (e.g., carpenters)

• Media and communications (e.g., photographers)

• Transportation and material moving (e.g., drivers for ridesharing apps)

In Pennsylvania, we estimate that arts, design, entertainment, sports, and media occupations have the highest share of workers who are self-employed, with 33.6 percent. That is projected to increase to 34.1 percent by 2026. Other occupation groups that are expected to see growth in the self-employed workforce include transportation and material moving occupations (0.4 pp increase), sales and related occupations (0.4 pp increase), and farming, fishing, and forestry occupations (0.3 pp increase).

On the other hand, some occupation groups are projected to see self-employment shares decline between 2016 and 2026, indicating that the Gig Economy may not be impacting the types of jobs found in those respective groups. These include personal care and service occupations (2.1 pp decrease), construction and extraction occupations (0.8 pp decrease), and management occupations (0.5 pp decrease).

12Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

THE 2016 SELF-EMPLOYMENT RATE AND PROJECTED CHANGE IN THE SELF-EMPLOYMENT RATE BY MAJOR OCCUPATIONAL GROUPS, 2016-2026

Source: American Community Survey, PUMS annual estimates 2012-2016

Arts, Design, Entertainment, Sports, and Media

Transporation and Material Moving

Sales and Related

Farming, Fishing, and Forestry

Production

Life, Physical, and Social Science

Office and Administrative Support

Installation, Maintenance, and Repair

Total All Occupations

Protective Service

Architecture and Engineering

Food Preparation and Serving Related

Education, Training, and Library

Business and Financial Operations

Community and Social Service

Computer and Mathematical

Healthcare Practitioners and Technical

Building and Grounds Cleaning and Maintenance

Healthcare Support

Legal

Management

Construction and Extraction

Personal Care and Service

97+13+25+12+8+15+3+16+19+1+8+1+6+17+8+8+8+41+8+49+72+61+5625+20+19+16+16+7+3+2+1+1+0

0+0+0+0+0+0+0+0+0+0+0+0+1+5+7+7+8+9+19+20+24+41+100

–30 –20 0 40–10 10 20 30

–3.0% –2.0% 0.0% 4.0%–1.0% 1.0% 2.0% 3.0%

Self-employment rate

Projected change in self-employment

13Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

Industry alignment with the Gig Economy

Industries employing workers in arts, design, entertainment, sports, and media occupations; construction and extraction occupations; and personal care and service occupations can expect to see the greatest labor force participation in the Gig Economy. Pennsylvania’s industry concentration indicates that many workers are working in the Gig Economy. For example, the top employing industries for arts, design, entertainment, sports, and media occupations include:

• Motion picture and video industries, which accounts for approximately 1,050 arts, design, entertainment, sports, and media self-employed jobs in Pennsylvania;

• Radio and television broadcasting, which accounts for approximately 1,480 arts, design, entertainment, sports, and media self-employed jobs in Pennsylvania; and

• Advertising, public relations, and related services, which accounts for approximately 1,530 arts, design, entertainment, sports, and media self-employed jobs in Pennsylvania.

Detailed occupations that align with the Gig Economy

Certain occupations are trending towards the Gig Economy within the labor market. Using projected self-employment growth as a proxy for the gig workforce, we estimate that low- and middle-skill occupations will be disproportionately impacted by the Gig Economy. The top occupations projected to trend towards the Gig Economy are identified in the table below.

THE HIGHEST PROJECTED CHANGE IN THE SHARE OF SELF-EMPLOYED JOBS, 2016-2026

Job Zone Occupation

2016 Self-employed share of occupation (%)

2026 Self-employed share of occupation (%)

Change 2016-2026 (pp)

1 Taxi drivers and chauffeurs 36.3 48.3 12.0

3 Photographers 68.2 80.0 11.8

4 Radio and television announcers 29.8 35.9 6.1

2 Sewers, hand 51.7 57.8 6.1

1 Fallers 25.1 30.2 5.1

2 Manufactured building and mobile home installers 26.1 30.8 4.7

2 Logging workers, all other 23.3 27.7 4.4

2 Word processors and typists 7.2 11.5 4.3

3 Tailors, dressmakers, and custom sewers 51.9 55.9 4.0

3 Watch repairers 7.7 11.7 4.0

Total All occupations 6.1 6.2 0.1

14Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

While some occupations are trending towards the Gig Economy, several occupations are trending away from the Gig Economy. Again, using projected self-employment growth as a proxy for the gig workforce, we estimate that high-skill occupations are disproportionately trending away from by the Gig Economy. The top occupations projected to trend away from the Gig Economy are identified in the table below.

Identifying program areas that align with the Gig Economy

Programs that prepare students for occupations that align with the Gig Economy should consider some of the challenges of self-employment. For example, in addition to the typical tasks associated with an occupation, self-employed workers must be knowledgeable in several business areas such as marketing, taxation, project management, and client relations. Programs that have graduates who enter the Gig Economy could consider making certain courses a requirement for graduation.

Skilled occupations with a high proportion of workers in the Gig Economy and their related programs include:

• Occupation: Multimedia artists and animators, 59 percent self-employment rate in 2016 ‧ Commercial & Advertising Art ‧ Industrial and Product Design ‧ Graphic Design

THE LOWEST PROJECTED CHANGE IN THE SHARE OF SELF-EMPLOYED JOBS, 2016-2026

Job Zone Occupation

2016 Self-employed share of occupation (%)

2026 Self-employed share of occupation (%)

Change 2016-2026 (pp)

2 Solar photovoltaic installers 20.3 10.6 -9.7

3 Wind turbine service technicians 16.9 9.2 -7.7

3 Massage therapists 39.4 34.2 -5.2

1 Nonfarm animal caretakers 18.3 16.2 -2.1

4 Interpreters and translators 21.6 19.9 -1.7

5 Dentists, general 19.6 17.9 -1.7

5 Oral and maxillofacial surgeons 19.8 18.1 -1.7

5 Dentists 19.3 17.7 -1.6

5 Audiologists 15.0 13.4 -1.6

5 Orthodontists 19.9 18.3 -1.6

Total All occupations 6.1 6.2 0.1

15Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

‧ Illustration ‧ Intermedia/Multimedia

• Occupation: Writers and authors, 64 percent self-employment rate in 2016 ‧ Journalism ‧ English Language and Literature, General ‧ Creative Writing ‧ Rhetoric & Composition ‧ Playwriting & Screenwriting

• Occupation: Art directors, 59 percent self-employment rate in 2016 ‧ Visual & Performing Arts, General ‧ Design & Applied Arts, Other ‧ Art/Art Studies, General ‧ Fine/Studio Arts, General ‧ Fine & Studio Arts Management

• Occupation: Real estate brokers, 57 percent self-employment rate in 2016 ‧ Real Estate Development ‧ Business/Commerce, General ‧ Real Estate ‧ Selling Skills & Sales Operations

Skilled occupations trending towards the Gig Economy and their related programs include:

• Occupation: Photographers, 68 percent self-employment rate in 2016, projected 80 percent in 2026 ‧ Photojournalism ‧ Digital Arts ‧ Design & Visual Communications, General ‧ Photography ‧ Film/Video & Photographic Arts, Other ‧ Occupation: Radio and television announcers, 30 percent self-

employment rate in 2016, projected 36 percent in 2026 ‧ Speech Communication & Rhetoric ‧ Mass Communication/Media Studies ‧ Broadcast Journalism ‧ Radio, Television & Digital Communication, Other ‧ Sports Communication

16Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

• Occupation: Jewelers and precious stone and metal workers in 2016, 30 percent self-employment rate, projected 34 percent in 2026 ‧ Watchmaking & Jewelry making ‧ Precision Production Trades, General ‧ Metal and Jewelry Arts

17Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

4. CONCLUSION

The goal of the Workforce Needs Assessment is to serve as a key tool to improve program planning, increase return on investment to learners and Pennsylvania, and to increase the efficiency and productivity of higher education and training institutions. This updated content can be found on the State System Workforce Needs Assessment landing page and will help to inform and guide the development of the State System’s Workforce Needs Assessment. The landing page provides greater detail of the Workforce Needs Assessment analysis and findings, including information on:

• Top skilled occupations showing the highest excess demand gaps;

• Middle-skilled occupation gaps;

• Top STEM-H occupations with highest levels of excess employer demand;

• Business and financial occupation gaps;

• Healthcare practitioners and technical occupation gaps; and

• Top skilled occupation supply surpluses.

In addition to the gap findings, the results will be presented with new resources that help to contextualize the changing economic landscape in The Center City Region. These resources include:

• Risk of automation;

• Alignment with the Gig economy;

• Identification of high priority and STEM-H occupations;

• Education and experience requirements; and

• Average annual pay.

To see the detailed gap results for all skilled occupations and view all resources, visit the State System’s EdHub at https://analytics.oei.passhe.edu/StateSystemEdHub/#!/

18Evaluating the Potential Impacts of Automation and the Gig Economy in Pennsylvania

Collaboration

Thanks to the collaboration among all of the contributors to Pennsylvania’s Workforce Needs Assessment, the analysis has allowed for several engagements that contributed to:

• Governor Wolf’s Middle-Class Taskforce

• Inter-sector data team: PA Departments of Education, Community & Economic Development, Governor’s Policy Office, Labor & Industry