Reuters reported last week that Cisco Systems plans to lay off 14,000-odd employees. Cisco is the company that with its hardware pieces called routers, which route internet traffic from one place to another, played a pivotal role in building the internet. The only trouble is that all smart things these physical box-like routers do are now being done by features in software. And routers and related equipment are in the process of being eliminated just as physical keyboards vanished in the past. And Cisco has to walk away from all the device manufacturing they did and remake themselves as a software company.
The Cisco layoffs come at the same time that Intel, that other icon of the computer age, announced they too were laying off more than 10,000 people. Similar large-scale layoffs from equally iconic computer age companies such as Microsoft, Dell and IBM clearly signal that a tectonic change is afoot.
At one level, the change is one of more and more functionalities in devices being realised through changes in software, as the mobile phone keyboard and Cisco routers illustrate. Microsoft's (and Dell's) troubles come from a related change: All of us increasingly spending time on mobile phones and using our PCs only for narrow, specialised jobs. In the world of mobile phones, Microsoft does not exist for all practical purposes. As a matter of fact, Microsoft's latest round of layoffs comes from a failed attempt to catch up with the mobile world by acquiring Nokia's mobile phone business.
Not all the jobs being eliminated are manufacturing related. Another fundamental shift is underway in today's business: The elimination of middle level, supervisory positions. Now, hold your breath and listen to former Infosys CFO Mohandas Pai's recent prognostication that of the 450,000 middle-level managers in India's 4.5-million strong IT industry in India, half, or nearly a quarter of a million managers, will see their jobs eliminated in the coming decade. These middle managers, it is being discovered, do not do any work directly; that is, they do not write computer code themselves, they merely relay order from bosses to the actual coders. And, are currently making about Rs 50 lakh a year for this. It is very likely that a big part of the layoffs in Cisco, Microsoft and other technology company are also made up of these middle managers, or "office workers", as they are sometimes called.
Automation anxiety is not new. As far back as 1965, watching the advent of these ancient contraptions, the punched card machines, people such as economic historian Robert Heilbroner argued that, "the new technology is threatening a whole new group of skills - the sorting, filing, checking, calculating, remembering, comparing, okaying skills - that are the special preserve of the office worker." Such anxiety was widespread in India as well with bank unions staging long-drawn strikes through those decades.
There is a bigger picture to all this. David Autor, professor of economics at the Massachusetts Institute of Technology, has tried to find a pattern in the types of jobs and how they change with time. He found, for example, that in the United States, the four middle-skill occupations (sales, office and administrative workers, production workers, and operatives) accounted for 60 per cent of employment in 1979, but by 2007, their share had declined to 49 per cent, and by 2012, it was a mere 46 per cent. In other words, employment was splitting into a high-wage group and a low-wage group, with the middle declining. He reports a similar trend in 16 European Union economies as well.
Note another trend: Premier employers are no longer seeing great value in hiring college graduates. The UK office of the accounting firm EY recently announced that they will no longer require new hires to have a college degree - they will be assessed on a number of EY-developed tests and applicants no longer need to have a college degree.
The World Economic Forum has weighed in on this subject with their recent report, The Future of Jobs Employment, Skills and Workforce Strategy for the Fourth Industrial Revolution, and concludes that "Most existing education systems at all levels provide highly siloed training and continue a number of 20th century practices that are hindering progress on today's talent and labour market issues. Two, such legacy issues burdening formal education systems worldwide are the dichotomy between humanities and sciences, and applied and pure training, on the one hand, and the prestige premium attached to tertiary-certified forms of education - rather than the actual content of learning - on the other hand. Businesses should work closely with governments, education providers and others to imagine what a true 21st century curriculum might look like."
Ajit Balakrishnan is the author of The Wave Rider, A Chronicle of the Information Age
ajitb@rediffmail.com
ajitb@rediffmail.com