The Internet of Things (IoT) is growing impressively. IHS forecasts that the IoT market will explode from an installed base of 15.4 billion devices in 2015 to 30.7 billion devices in 2020 and 75.4 billion in 2025. Bain predicts that by 2020 annual revenues could exceed 470 billion dollars for IoT vendors selling the hardware, software and comprehensive solutions. As the IoT takes automation to new heights, what will be the immediate and long-term effects on the job market?
First, the obvious. Tech companies, as well as large globally operating companies, across many industries, are working hard to create IoT strategies. Many among them do not have the know-how or in-house talent to do so, however. They will need to hire new talent. Circuit designers, microcontroller programmers, hardware designers, CAD designers, app developers, network security developers and electrical engineers will undoubtedly be in high demand.
These companies will also need new ways of gathering data based on newly connected data points, along with algorithm development for improved machine learning so that all those newly connected machines can now teach each other and learn from each other. Employees who can offer data analytics skills and vulnerability analysis experience, in order to gather and extrapolate data for application improvement and enhanced security, will not have trouble finding work in the IoT age.
Less obvious is the effect on the overall job market. The IoT will impact our lives to a degree not felt since the industrial revolution and the rise of assembly line production. The IoT network of connected devices will eventually take on many of the repetitive, mind-numbing work tasks of today. This will surely result in difficult unemployment issues.
But it is important to note that, to date, despite considerable pessimism about the loss of jobs to automation, overall employment has not appeared to decrease. Clearly, change has been very painful for those impacted. But, overall, where jobs were lost, other jobs were created. And by economic law, jobs with little added value that disappeared were replaced with jobs with better added value.
To see how this works, it may be helpful to revisit an example from the distant past. In 1412, the city council of Cologne, Germany prohibited the production of a spinning wheel because it feared unemployment among textile manufacturers that used the hand spindle. The spinning wheel allowed one worker to produce the amount of yarn previously produced by 200 workers.
Yet when the spinning wheel – like many technological innovations – eventually was adopted, it did not induce a long-term rise in unemployment. Why? Two reasons. Firstly, new jobs were created in the technology sector. And secondly, the falling price of textiles allowed consumers to buy more textiles and other goods, thus creating job growth in many sectors of the economy. Thus, it’s crucial to identify a common but incorrect assumption that the amount and composition of work in the economy are fixed. While there is ongoing mechanization of jobs, there is also ongoing creation of new employment opportunities.
It’s also important to note that when machines are doing the grunt work, humans will be able to spend their time solving bigger problems. The next level of post-industrial society, and the increased valuation of knowledge that accompanies it, may well enable the next level of creative culture. The next space race, a new Enlightenment, perhaps?
So, as we can see, technological progress results in two competing effects on employment. As automation increases and replaces manual labor, overall employment is negatively affected – as some workers must find new avenues of employment. On the other hand, there is a capitalization effect, which positively impacts the job market, as more companies enter industries where productivity is high – leading to increased overall employment opportunities.