Automation might widen the racial income gap in Chicago

Author: Aizhan Mukhyshbayeva

Program of Study: Master of Science in Computational Analysis and Public Policy (MSCAPP), Harris School of Public Policy (HAR)

Description: Automation could hit black workers in Chicago harder than other groups and further widen the racial income gap.

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Transcript (provided by author):

Welcome to the ELI’s Finding Chicago Global Perspectives Podcast Series for AEPP 2021. I’m your host, Aizhan Mukhyshbayeva, and I’m currently enrolled in the University of Chicago’s Harris School of Public Policy. Today we will explore the effects of automation on the income gap in Chicago.

Background:

When I woke up in the morning in my hometown, in distant Kazakhstan, I saw about 100 messages in the WhatsApp chat of admitted students at UChicago’s Harris School of Public Policy. It turned out that the students were actively discussing employment opportunities in Chicago amid the pandemic. One of my future classmates from Chicago stated that the picture is not entirely rosy in the labor market, and employment opportunities are limited compared to previous years. Moreover, COVID-19 pandemic has accelerated use of robots over human workers due to social distancing directives.

My city is also facing such challenges. When I went to a local bank branch two years ago, I was greeted by a friendly bank consultant. He consulted me in detail, and I could get answers to all my questions. A month ago, when I went to the bank, I did not find those friendly consultants. I was greeted by terminals and machines, and I had to adapt to them.

In my opinion, work is an essential component of people’s well-being. Work is not only making money for a living, but it also helps people build social bonds, develop self-esteem, and gain skills. If robots take this crucial part of our life, then society becomes unstable.  People do not receive income, they may become homeless, the crime rate may rise, and as a result, social tension in society will increase.

As an analyst working at Kazakhstan’s Workforce Development Center, I became interested in how Chicago is handling the challenges of automation.

Broder issues:

“Chicago is a racially diverse but highly segregated city” – reported professors at Loyola University Chicago Richard Melstrom and Cassidy Redding. The researchers associate this segregation with policies such bank redlining, discriminatory lending, and city zoning that limited opportunity for Black residents to secure mortgages and protect private equity.

The professors at Loyola University found that there is a substantial difference in Black and white households’ income in Chicago. So, the average difference in median income between Black and white households is $19,000.

On February 2021, the University of Illinois Chicago’s Institute for Research on Race and Public Policy published a new report documenting how local patterns in racial wealth gaps shape the lives of Chicagoans. In in-depth interviews with 99 Chicago respondents, the researchers found that white Chicagoans receive far more financial support from family members than their black peers. For example, white people usually receive help from parents with paying for college tuition, buying a car and buying a house, traveling, or paying for childcare. As a result, white families tend to have far more assets and far less debt than black families, even if they have similar levels of education and income.

Funded by JPMorgan Chase, the report, Racial Wealth Gap in Chicago, found that 67% of African-American households in Chicago were liquid asset poor — meaning they lack enough savings to get by for three months in the event of a job loss or medical emergency — compared with 28% of white households.

According to McKinsey’s research, black job loss due to automation could further widen the  racial income gap in cities like Chicago. The report ‘The future of work in black America’ published by McKinsey & Co. talks about the high risks of automation in Chicago. To predict the possible risks of automation on the labor market, McKinsey analyzed data from the U.S. Census, Labor Department, and the Internal Revenue Service.

It should be noted that black workers are overrepresented in sectors that are most susceptible to automation. According to McKinsey consultants, black workers in the fast food, retail, and customer tracking sectors are the most likely to lose their jobs due to automation. Cashiers, office clerks, stockroom laborers, and call-center representatives — are most vulnerable to their jobs disappearing.

African Americans are underrepresented in sectors that are less prone to automation risks. These include health professionals, educators, legal professionals, and agricultural workers. In this regard, black women have more opportunities to keep their jobs, as they have a good presence in the education and health care sectors compared to black men.

In the fast-food sector, artificial intelligence has already taken over such tasks as ordering a meal. In June 2021 CNBC reported that McDonald’s is replacing human drive-thru attendants with AI. McDonald’s CEO Chris Kempczinski said that at 10 McDonald’s locations in Chicago, computers are taking down customers’ drive-thru orders for McNuggets and french fries, not human workers. They made it possible using voice-ordering technology. The company is also looking to automate most of the kitchen and grills in the next five years, he said.

Another example is a robot named Flippy that has taken over fry cook duties at a White Castle southeast of Chicago, the 100-year-old purveyor of fast food. Jamie Richardson, the White Castle vice president, in an interview with the Wall Street Journal says that robot Flippy works 23 hours a day and has operated almost continuously for the past year. They are very happy with the robot’s work and are planning to release such robots in their restaurants across the country.

Shelley Stewart, a McKinsey partner, argues that ‘it’s good for productivity that companies are looking into this, but the other side is to understand how it impacts workers’. The management consultancy found that automation could hit black workers in Baltimore, Chicago, Detroit, and Washington, D.C. harder than other cities. Because these cities have the highest concentration of black workers, and African American workers often do not attend college. This situation is exacerbated by the fact that Chicago is expected to have the lowest job growth for blacks.

According to the recent report by Century Foundation, since the 2009 global financial crisis, a sharp increase in the adoption of robots has been observed in states such as Michigan, Ohio, Indiana, Illinois, and Wisconsin. As stated in the report, the Chicago metropolitan area is in second place with respect to robot intensity after the Greater Los Angeles area. There are currently 6 robots per every 1,000 human workers in the Chicago metropolitan area, while there are about 0.3 robots per 1,000 employees nationwide. Thus, companies in Chicago are actively investing in robots and other automated machinery to save on labor, which poses a certain threat to the city’s labor market. William Rodgers, co-author of the report and professor at Rutgers University says that robots can have the greatest negative impact on workers in manufacturing, especially those without a college degree. In his opinion, workers need to adapt as the adoption of robots continues to grow.

Thus, automation not only has important material consequences, but also creates levels of stress and anxiety that are affecting the mental health and wellbeing of black families in Chicago.

Andrew Yang, an entrepreneur who was running for U.S. president in the 2020 election, wanted to implement a universal basic income to protect American jobs from automation. With a third of American workers at risk of permanent unemployment from new technologies in the next 12 years, “we have to accelerate both American society and the government to help manage this transition,” he told CNBC.

Conclusion + Music:

So what black workers can do in the face of automation risks? Getting a higher education, moving to a job that is difficult to automate, or moving to states where high job growth is predicted. I think it is not easy to take these steps without the support of the government. The current Chicago job market says the world needs good policies.

Thanks for listening to the ELI’s Finding Chicago Global Perspectives Podcast Series for AEPP 2021. I’m your host Aizhan Mukhyshbayeva and hope you enjoyed my talk. If you want to learn more about the topic, visit the provided websites. Goodbye!

Reference:

Chandran, N. (2018, September 10). US presidential hopeful: Free money can help save the country from jobs lost to robots. CNBC. Retrieved from https://www.cnbc.com/2018/09/10/andrew-yang-universal-basic-income-to-protect-jobs-from-automation.html

Cook, K., Pinder, D., Stewart, S., Uchegbu, A., Wright, J. (2019). The future of work in black America. McKinsey & Company. https://www.mckinsey.com/featured-insights/future-of-work/the-future-of-work-in-black-america

Corporation For Enterprise Development. (2017). The Racial Wealth Divide in Chicago. http://cfed.org/assets/pdfs/Racial_Wealth_Divide_in_Chicago_RWDI.pdf

Lucas, A. (2021, June 2). McDonald’s is testing automated drive-thru ordering at 10 Chicago restaurants. CNBC. Retrieved from https://www.cnbc.com/2021/06/02/mcdonalds-tests-automated-drive-thru-ordering-at-10-chicago-restaurants.html

Melstrom, R., & Redding, C. (2020). Racial Inequality in Chicago: Income and Education. Loyola University Chicago. https://ecommons.luc.edu/cgi/viewcontent.cgi?article=1037&context=ies_facpubs

Mims, C. (2021, August 7). Amid the Labor Shortage, Robots Step in to Make the French Fries. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/restaurant-robots-kitchen-labor-shortage-11628290623

Rogers III, W. M., & Freeman, R. (2019). How Robots Are Beginning to Affect Workers and Their Wages. The Century Foundation. https://tcf.org/content/report/robots-beginning-affect-workers-wages/#:~:text=Specifically%2C%20the%20study%20estimates%20that,by%200.25%20to%200.50%20percent.

University of Illinois Chicago’s Institute for Research on Race and Public Policy. (2021). “Chicago’s Racial Wealth Gap: Legacies of the Past, Challenges in the Present, Uncertain Futures.” https://today.uic.edu/chicagos-racial-wealth-gap-examined-in-new-uic-report

Image: Daniel Acker | Bloomberg | Getty Images. Retrieved from August 26, 2021 from https://www.cnbc.com/2021/06/02/mcdonalds-tests-automated-drive-thru-ordering-at-10-chicago-restaurants.html

Music: timebeing by airtone (c) copyright 2021 Licensed under a Creative Commons Attribution Noncommercial  (3.0) license. http://dig.ccmixter.org/files/airtone/63895