NCCI's Quarterly Economics Briefing examines the current state of the economy and implications for workers compensation insurance. This edition also focuses on automation. It provides a historical context for automation and explains why automation in the future has the potential to change labor markets more dramatically than in the past.
Among the findings:
The slowdown in employment growth is a consequence of labor market tightness, as the US unemployment rate has recently reached historically low levels below 4.5%.
A further consequence of low unemployment is likely to be an acceleration in wages.
Medical price inflation could accelerate to above 3% annually by 2018. Medical utilization per workers compensation claim, after a surprising drop in 2015, rose in 2016. Taken together, these observations suggest that medical costs in workers compensation may grow faster in the next few years than in the recent past.
With continued low interest rates, investment income is likely to remain muted this year. However, nominal investment returns can be expected to increase as inflation picks up and the Fed continues to tighten credit conditions.
Key takeaways of our review of automation include:
- During the 20th century, automation largely impacted routine tasks, contributing to significant shifts in agriculture and manufacturing employment.
- With recent advances in artificial intelligence and robotics, automation is expanding to nonroutine tasks and impacting all economic sectors. This expansion has the potential to transform the nature of future jobs and the structure of the labor force.
- Two recent studies by McKinsey and Oxford University reached generally similar conclusions as to which types of jobs are most likely to be automated, such as service, manufacturing, transportation, and sales, and which are least likely to be automated, such as education, management, and healthcare. Both found that about half of jobs or tasks in the overall US economy can be automated using current technology.
- How quickly automation will actually be adopted is highly uncertain and will be subject to economic, regulatory, and societal influences.
- A follow-up piece will present scenarios for the potential impact of automation on the US labor market, addressing what might happen to workers in economic sectors impacted by automation, and how the distribution of employment across economic sectors may change as a result of automation.