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DUOBusiness | Observation

DIGITAL DISPLACEMENT The conditions of pre-2014 prosperity are unlikely, therefore, to be readily replicated. The conditions of cheap credit are slowly disappearing. Long-term US bond yields are rising, which will place upward pressures on interest rates. Household indebtedness in Australia continues to rise, and there’s every likelihood that in places like Townsville, a large number of households are invidiously sitting on ‘negative equity’ where borrowings are worth more than the value of the underlying asset. I doubt that we’ll be seeing a credit boom in Townsville any time soon. On the skills composition of work front, the structural dynamics would suggest that we’ve yet to bottom out. These dynamics are underpinned by the supersonic developments in digital technologies that enable automation to further erode ‘routine manual’ employment and algorithms to displace heretofore safe ‘routine cognitive’ administration, compliance and general office work in the private and public sectors. AUTOMATED ADANI In the hopes of recreating the conditions of China Boom Mark 2, but this time off the back of India’s thirst for energy, much hope is placed in the employment prospects of Adani’s proposed Carmichael Coal mine in the Galilee Basin. Claims of 10,000 jobs being created have been countered by references to the 1,450 or so jobs estimated by Adani’s own economic expert in evidence provided, under oath, in a court hearing. Whatever the actual numbers, we can be more certain of the likelihood that the mine and associated logistics activities will be automated wherever possible, and as quickly as possible. Local Adani CEO Jeyakumar Janakaraj was reported in The Chronicle (15 June 2015) as saying: “We will be utilizing at least 45, 400-tonne driverless trucks… All the vehicles will be capable of automation. When we ramp up the mine, everything will be autonomous from mine to port. In our eyes, this is the mine of the future”. This focus on automation is hardly surprising. To make the mine viable, it needs to get cash costs down, way down, to mitigate a likely long-run decline in seaborne coal prices. Removing labour from the production process is the most obvious route. Additionally, as if profit motive wasn’t enough, indeed that’s exactly what Cisco – a global leader in automation – asserts in its latest advertising. Set against a photograph of a dump truck leaving a mine explosion in the background,

we have the words: “There’s never been a better time to automate the world’s most dangerous jobs”. Says it all, really. COUNCIL IN THE CLOUD White collar and pink collar (service sector) jobs aren’t immune either. In Townsville, ‘routine cognitive’ employment occupied around 23% of the workforce in 1999. Over the intervening 17 years, it has fluctuated all the way to around 23% in late 2016; that is, it barely budged. This level is on par with the national situation in percentage terms, but in straight number terms, what we’ve experienced is a rise from just under 20,000 to around 25,000, having peaked at around 32,500 in mid-2011. It’s fallen since. This suggests quite some room to fall, as routine cognitive displacement by algorithms in the cloud is only in its infancy. Government routine administration and compliance is a classic locus of displacement. We’ve seen the tip of the iceberg on this in recent years, but one suspects that the tsunami of cloud-enabled hollowing out hasn’t even hit our shores. To grasp at suggestions that regional employment can be sustainably boosted by relocating bureaucrats to Townsville is short-term folly, and belies a failure to understand the drivers of workforce change. Townsville City Council itself is likely to be a vanguard of digital displacement of routine cognitive employment. Sure, it won’t publicly say so for fear of upsetting the apple cart, but the pressures of a diminishing rates base will drive the Council down a workforce-trimming path. Old models that had ratios of ‘so many Council employees per 1,000 residents’ need to be re-thought. Local authorities simply don’t need as many people per resident as they once did. And of course, that means there’ll be lesser demand for floor space. Cloud-based algorithms simply don’t need the 10sqm per worker demanded by the office workplaces of the 20th century. And you can save on the lunchrooms and staff car parks too. The hollowing out of routine cognitive roles is, on the contrary, likely to see a further concentration of non-routine cognitive roles coalescing in the thick labour markets of larger urban conurbations. Whether a place like Townsville can be connected to this market is a massive challenge.

FLUID, UBER ALLES ‘Fluid, more than anything else’, is how we may translate my final sub-heading. Politicians might not like automation, and instinctively are attracted to a protectionist reaction aimed at preserving the status quo, but this isn’t a strategy to deal with the future that is here today. Some, for instance, may say they don’t like Uber, and stamp their feet and claim that “Uber will only come to Townsville over my dead body” (or words to that effect), but disruption in the transport market is here to stay. And, incidentally, Uber has now arrived in Townsville. If non-routine employment is going to increasingly dominate the work of human beings in the 21st century, then we are entering into a period of considerable fluidity. The certainties of old are no longer, melted into thin air. Hoping for a mining-induced employment boom in the face of a commitment to automation seems like pitching hope up against reality. Similarly, clutching to more government bureaucrats, as a salve for labour force hollowing out, seems like a desperate last-grasp for the 20th century. Regional prosperity depends more than ever on the ability of regions to cultivate a pipeline of non-routine activities that are difficult to replace, either with robots or with cloud-based algorithms. High-touch manual, and highcreative cognitive roles are the touchstone for future prosperity. As for the activities that will be digitally displaced, the real question is how the proceeds of automation will be distributed across our community. What to do with the displaced is, however, the challenge du jour.

Warwick Powell is the founding Chairman of Sister City Partners, a regional not-forprofit investment bank with headquarters in Townsville. He brings almost 20 years of experience in global capital markets and project development and finance to bear on the challenges of creating regional resilience. He is an iconoclast who questions and challenges orthodox thinking. More information about Sister City Partners visit www.sistercitypartners.com.au. Warwick is active on LinkedIn. Search him and hook up.

DUOMagazine April 2017

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DUO Magazine April 2017  

Every month, DUO captures the unique spirit of our region and grabs the attention of our community. We’ve been doing it for a decade, making...

DUO Magazine April 2017  

Every month, DUO captures the unique spirit of our region and grabs the attention of our community. We’ve been doing it for a decade, making...