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October 2019, Volume 25, Number 4

Labor, AI

The US unemployment rate was below four percent in 2019, as steady job growth continued. The unemployment rate hit a 50-year low of 3.5 percent in September 2019.

In August 2019, there were six million unemployed US workers and seven million unfilled jobs across the US. The labor force participation rate, the share of persons 16 and older who are employed or looking for work, topped 63 percent.

Job growth slowed in 2019 compared to 2018. The US added an average 158,000 jobs a month in 2019, compared to 223,000 a month in 2018. Job growth in manufacturing slowed in part due to trade disputes.

Low unemployment rates are forcing adaptations in restaurants and hotels, low wage sectors that have high turnover and had a million job openings in 2018. A third of workers in restaurants and hotels are immigrants, almost double the immigrant share of US workers.

Almost 11 million workers were hired by restaurants and hotels in 2018, while 7.5 million restaurant and hotel workers quit their jobs. Hourly restaurant wages were almost $15 an hour including tips in May 2019, the highest restaurant wage on record. Restaurant wages rose in part because of the $15 an hour wage instituted by Amazon for its employees.

The apps Pared and Instawork allow experienced cooks and other restaurant workers to work shifts at various restaurants on short notice. Restaurants pay the app for each completed shift, the app takes its cut, and the balance is forwarded to the worker. The apps say that experienced restaurant workers earn an average $20 an hour. Pared has over 100,000 workers on its app in the Bay Area and New York, and plans to expand.

Uber Works is a similar app unveiled in October 2019 that matches workers and jobs. Uber will set the wages for the jobs listed on its app, and employers will pay Uber for finding workers for them. A Gallup poll found that a third of US workers held at least one gig job in 2018, but most were considered independent contractors. There are other app based job-employer matchers, including Upwork and Fiverr International, as well as many staffing firms.

The US has almost 56,000 hotels, motels, inns, and has been adding two a day over the past three years. The occupancy rate was 66 percent in 2018, the highest since 2005, leading to a scramble for workers. A typical full-service hotel with 100 rooms has 137 full- and part-time employees.

AB 5. California's AB 5 will convert most gig workers from independent contractors into company employees on January 1, 2020, raising costs by 20 to 30 percent for firms such as Uber and Lyft that must pay taxes on their employees' wages for social security, unemployment insurance, and workers' compensation. There are at least a million independent contractors in California.

AB 5 codifies the 2018 California Supreme Court-Dynamex decision that makes it more difficult for companies to consider their workers to be independent contractors rather than employees. To be considered independent contractors, workers must be "free from control and direction," perform work "outside the usual?course of the hiring person or entity's business," and be "customarily engaged in an independently established trade,?occupation, or business."

Realtors, lawyers, doctors, investment advisers and 50 other professions won exemptions to remain independent contractors. Uber said it would continue to treat its drivers as independent contractors, asserting that it provides "a technology platform for several different types of digital marketplaces" rather than acting as an employer.

Uber, Lyft and DoorDash in August 2019 pledged to spend $90 million on a ballot initiative to create exemptions for workers on their platforms. Uber pledged to offer drivers at least $21 an hour when they had passengers and to support sectoral rather than firm-by-firm bargaining, meaning that any collective bargaining agreement would cover all drivers in the ride-hailing industry.

The size of the gig labor force is unclear. A Federal Reserve study estimated that three percent of US adults used an app-based platform to find work in 2018. However, the number of tax returns that include income from IRS Form 1099 rose only one percent over the decade to 2016. Half of those reporting income to the IRS from gig economy platforms earned less than $2,500 from the app.

H-1B. In FY15, six percent of first-time applications for H-1B visas were denied. In FY18, 24 percent were denied, and in the first half of FY19, a third were denied. Attorneys for firms seeking H-1B visas say that USCIS is carefully scrutinizing applications for H-1B workers from IT consulting firms.

Automation. Artificial intelligence involves machines that can mimic human minds to learn and solve problems and to move and manipulate objects. First-wave machines eliminated difficult work, such as tractors pulling plows or cranes lifting containers. Machines are evolving to do more sophisticated work, as with self-driving tractors and robots in automated warehouses.

Most industrial robots do not use AI. Instead, they perform a repetitive task, such as welding auto parts into cars. Korea had the most industrial robots per 10,000 manufacturing workers in 2016, over 600, followed by 500 per 10,000 workers in Singapore, and 300 per 10,000 in Germany and Japan. The US had about 200 industrial robots per 10,000 manufacturing workers.

AI machines that learn over time by collecting and processing data are doing more of the work in structured and predictable environments such as factories. Intelligent systems that use machine learning to adaptively adjust to new information are spreading due to the explosion of computing power and the increase in data availability.

Supervised AI algorithms examine data to find correlations that best fit the input and output data, while unsupervised algorithms detect patterns in the input data. Reinforcement-learning algorithms use an objective function to respond to the environment, explaining how Google's AlphaZero algorithm became the world's best chess player.

AI machines and systems are likely to spread, changing jobs that range from tax preparation to medical diagnoses. AI is poised to eliminate jobs but not work, since the increased output made possible by AI should create demands for new services and jobs. However, there may be more labor market churn, with ever-fewer workers employed in one occupation for one employer over a lifetime.

How should governments react to a new wave of AI-infused machines that displace workers and disrupt traditional employer-employee relationships? The ILO's Global Commission on the Future of Work released a report in January 2019 that urged governments to invest more to help workers to adapt to ever-faster labor market changes by promoting lifelong learning that keeps worker skills fresh and relevant to new jobs, invest in mechanisms to ease transitions from school to work and between jobs and to promote gender equality, and ensure there are universal safety net protections for workers who are unable to find jobs and for those who are injured or disabled.

The question is where to find the funds to enable governments to invest more in workers, labor markets, and safety nets when two billion of the world's 3.6 billion workers do not have formal jobs covered by minimum wages, unemployment insurance, and pensions or other safety nets. The ILO's report is aspirational, seeking to alert leaders about the potential for widespread labor displacement and pointing to lifelong learning as a way to help workers to adapt.

Andrew Yang, a candidate for the Democratic presidential nomination, warns audiences about the potential effects of automation on jobs; Yang advocates a universal basic income of $1,000 a month. Yang said he was motivated to run for president by his analysis of manufacturing job losses in Midwestern swing states that voted for Trump in 2016.

Many voters who meet Yang say that his analysis of the fourth industrial revolution is convincing, and that he is the only candidate who offers a thoughtful solution to the potential for widespread labor displacement. Alaska offers residents a permanent dividend fund each October of $1,000 to $3,000 for each person who has been in the state at least a year.

Amazon announced in July 2019 that it would spend $700 million to retrain its 100,000 warehouse workers by 2025 as robots replace humans in its warehouses, an average $7,000 per worker. Amazon forecasts increasing demand for data mapping specialists, data scientists, security engineers and logistics coordinators.

Most adult worker training programs do not increase lifetime earnings. Project Quest in San Antonio does, spending $11,000 per graduate to lift the earnings of mostly Hispanic women over time by sending them to 18-month community college courses to become certified health care workers. Participants must pay part of the tuition and attend weekly VIP (Vision, Initiative and Perseverance) sessions that teach time management and financial literacy and how to interview for jobs. Project Quest, which has an annual budget of $5 million, calls itself a "surrogate parent" for adults whose own parents had little education.

EEOC. The Equal Employment Opportunity Commission requires 70,000 private employers with more than 100 employees to provide data on wages and hours worked for the median employee in a wide range of jobs, including production worker, sales staff and executives. The data on 54 million private-sector workers are aimed at reducing pay gaps by sex and race.

The Supplemental Nutrition Assistance Program (SNAP) provided benefits to 40 million people in 2018. The Trump administration is trying to reduce SNAP rolls, and in July 2019 proposed tightening the automatic enrollment of persons receiving Temporary Assistance to Needy Families (TANF) benefits in SNAP. USDA received some 266,000 comments that mostly opposed ending automatic enrollment in SNSP for TANF recipients, but planned to implement the regulation that denies SNAP benefits to those with incomes over 200 percent of the poverty line or about $50,000 for a family of four to receive SNAP benefits. About three million people may lose benefits.

In 2018, Trump tried and failed to require able-bodied adults to work for their SNAP benefits.

California's version of SNAP is called CalFresh, and the state estimates that only 72 percent of eligible residents enrolled in 2016. The state and some of the counties that administer CalFresh are trying to raise participation rates, but California already spends more than twice the US average cost of $350 per case to administer SNAP, making it hard to launch new efforts to enroll more beneficiaries. Beginning in June 2019, recipients of Supplemental Security Income (SSI) benefits have been eligible for CalFresh.

Colleges and universities complain that the Trump administration is making it harder for foreign students and scholars to obtain visas for US study and exchange. The Department of State says that it approved 74 percent of student visa applications and 92 percent of exchange visitor visa applications in FY18. DOS acknowledges stepped up checks of Chinese and Indian citizens who are coming to the US to study or work in science, engineering and technology, citing national security. Over a million foreign students were in the US in 2018-19, including 360,000 Chinese.

A federal judge in October 2019 ruled that Harvard's process for admitting undergraduates did not discriminate against Asian Americans. Harvard said race is one of many factors it takes into consideration in making admission decisions, but never the sole reason a student is granted or denied admission.

The share of Americans with below-poverty-level incomes fell to 11.8 percent in 2018, the lowest level since 2001 and, down from 15 percent in 2010. Meanwhile, household incomes rose to $63,200. The average cost of a family health care plan was a record $20,000 in 2018, and 27.5 million people lacked health insurance for all of 2018.

CEA. 2019. Economic Report of the President. Chapter 7. Adapting to Technological Change with Artificial Intelligence while Mitigating Cyber Threats.
ILO. Global Commission on the Future of Work. 2019. Work for a brighter future. The