The service sector revolution: The automation of services

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0024-6301183 $3.00 + .OO Pergamon Press Ltd.

Long Range Planning, Vol. 16, No. 6, pp. 10 to 20, 1983 Printed in Great Britain

The Service Sector Revolution: The Automation of Services David A. Collier, Virginia

Associate Professor of Business Administration,

This paper describes the service sector revolution in the United States and covers the automation of 70 U.S. service industries. It discusses the implications of the simultaneous automation of goods and services and suggests action required to smooth the transition for the worker as the United States becomes an automated society.

Introduction You are witnessing the end of the Industrial Revolution for developed nations. Consider the following examples: In 1982, Fujitsu Fanu of Japan opened a $50m Automatic Factory that produces 10,000 servo and spindle motors per month with only 30 employees. Yamazaki Machinery opened a new Flexible Manufacturing Factory in 1980 at Oguchi, Japan that produces machine tools with 18 programmable robots, 12 employees, and 300,000 sq ft of floor space. A conventional manufacturing facility would require 64 machines, 215 employees and 103,000 sq ft of floor space. General Motors plans to have 14,000 robots working in its plant by 1990 compared to about 1000 today. This is estimated to replace about 28,000 employees at a rate of 1.7 workers displaced per robot in an assembly plant and 2.7 workers displaced per robot in a job shop plant. The automation of the factory14 exemplified today by robotics and computerized manufacturing control systems signifies the final chapter in the Industrial Revolution.*

The author is Associate Professor, Colgate Darden Graduate School of Business Administration, University of Virginia, Box 6550, Charlottesville, Virginia 22906, U.S.A. ‘For a more comprehensive discussion* see ‘The Automation of the Goods-Producing Industries: Implications for operations managers’, OperationsManagement Review, Spring, 1983.

University

of

The service sector has replaced the goodsproducing sector as the dominant force in the U.S. economy. Today, the service sector of the U.S. economy accounts for 68 per cent of the available jobs and 65 per cent of the Gross National Product. The goods-producing sector accounts for the remaining 32 and 35 per cent, respectively. The industries that constitute the goods-producing and service sectors of the U.S. economy and their relative contribution to the economy in 1980 are shown in Table 1. Table 1. The goods-producing sectors of the U.S. economy

1980 Percentage of civilian workforce

Industry Goods-producing Agriculture’ Manufacturing’ Forestry’ Mining Fishing’ Construction Subtotal

and service

1980 Percentage of GNP

sector

Service sector Financial services Utility/government services Communication/electronic services Transportation services Health care services’ Education services’ Restaurant/food services2 Wholesale/retail trade Hotel/motel services2 Leisure services2 Miscellaneous services’ Subtotal Total

2.0 21 .o 0.8 1 .o 0.4

3.0’ 22.0 1 4.0

1

4.8 30.0

5.0 34.0

7.6 17.7 1.4

14.0 15.0 3.0

3.1 7.1 7.6 7.1

4.0 1 4.02 z 2

13.8 1 .I 1 .I 2.4

16.0 2 2 2

70.0 100.0

66.0 100.0

‘The agriculture, forestry and fishing industries account for about 3 per cent of the GNP in 1980. 2The health care, education, restaurant/food, hotel/motel, leisure and miscellaneous services account for about 14 per cent of the GNP in 1980.

The Service Sector Revolution This shift to a service economy has been called the post-industrial revolution, the technetronic age, the information age, and the service sector revolution. The Service Sector Revolution represents a basic structural change in the U.S. economy. The shift to a service economy began quietly around 1950 when the goods-producing and service sectors of the U.S. economy employed about the same percentage of the workforce. The automation of services is a new component of the Service Sector Revolution. The automation of services is having just as significant an impact on the nature of work in America as the automation of the goods-producing industries. In fact, the goodsproducing and service sectors of the U.S. economy are sim&aneotlsly being automated! This paper defines the goods-producing and service sectors of the U.S. economy, automation, and the Service Sector Revolution. Then the paper surveys the automation of the ten service industries, and assesses the implications of the simultaneous automation of goods and services on work in America.

Defining

Automation

Automation, in this paper, includes any single or multiple functional machine or group of machines that performs a predetermined or reprogrammable sequence of tasks. Six categories of automation used in this paper are defined as follows:* Fixed Sequence Robots (F)-A machine which repetitively performs successive steps of a given operation according to a predetermined sequence, condition, and position, and whose set information cannot be easily changed. Variable Sequence Robots (V)-A machine which repetitively performs successive steps of a given operation according to a predetermined sequence, condition, and position, and whose set information can be easily changed. Playback Robots (P)-A machine which can produce from memory operations originally executed under human control. Numerical Controlled Robots (N)-A machine that can perform a given task according to the sequence, conditions, and position, as commanded by numerical data provided by punched tapes, cards and digital switches. Intelligent Robots (1)-A machine with sensory perception such as visual or tactile that can detect

*The definition of robotics by the Japan Industrial Robot Association (JIRA) includes manual machines or manipulators (such as an overhead crane) that are directly operated by an employee. The American Robot Industry Association’s (WA) definition of robots does not include the manual or fixed sequence categories. Neither the JIRA nor the RIA includes the definition of a totally automated system in their classification schemes.

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changes in the work environment or task by itself and has its own decision-making abilities. Totally Automated Systems (T)-A system of machines that performs all the physical and intellectual tasks required to produce a product or provide a service. Examples of these six automation categories for each of the ten service industries are provided in the next section of this paper.

The Service

Sector Revolution

The Service Sector Revolution includes the shift to a service economy and the automation of the service industries. The shift to a service economy is well documented as indicated by Table 1. However, the automation of services has received scattered attention by the media and government policy makers. This is due, in part, to the difficulty of identifying automation in service industries compared to the product oriented goods-producing industries. A few examples of the automation of services are shown in Table 2. These steel collar robots and electronic collar computers are changing how work is accomplished in America. These examples are also classified as to their ‘automation category’. The relative percentage of the workforce for each service industry is also shown in Table 2. Let us briefly examine the impact of automation on the nature of work in each of these ten service industries.

Financial

Services

Automation in the financial services began in the 1930s with mechanical machines that could sort checks into a series of pockets, each containing checks for a particular bank. This represented a major advance over hand-sorted checks. Today, the IBM 3890 Check Processor Machine6 can read, record and sort up to 2000 magnetic ink character recognition checks per minute into as many as 24 pockets. The repetitive and high-volume nature of most bank transactions and the required updating of each account makes automation ideal for such work. The impact of Automatic Teller Machines (ATMs) on the workforce is best described by Crean6 as follows : In the last few years, U.S. banks have been increasingly viewing ATMs as a way of providing improved customer service as well as a means of cutting costs and not just as a way of reducing the impact of branching restrictions . . . While development and installation of ATMs involve high front-end development costs, once an ATM network reaches these transaction levels (i.e. 5000 to 10,000 transac-

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Planning Vol. 16

Table 2. Examples of automation

Service industry

December

1983

in service industries Percentage of workforce’

Automation category

7.6

I v

Example

V F V

Electronic funds transfer systems Automatic teller machines Master card II-the electronic checkbook IBM 3890 encoded cheque processor machine Pneumatic delivery systems Automated trust portfolio analysis

17.7

F V I V T I

Automated one-man garbage trucks Optical mail scanners Electronic computer-originated mail Mail sorting machines Electric power generating plants Airborne warning and control systems

1.4

P V T T P P V P

Information systems Two-way cable television Teleconferencing/picturephone Telephone switching systems Phone answering machines Word processing Xerox machines Voice-actuated device

Transportation services

3.1

I I F F T F I I I

Air traffic control systems Auto-pilot Boeing 747 Automatic toll booths Space shuttle Containerization France’s RTV trains Ship navigation systems Bay area rapid transit system

Health care services

7.1

V F V I F V I

CAT scanners Pacemakers Fetal monitors Ambulance electronic dispatching systems Electronic beepers Dentists’ chair system Medical information systems

Financial services

v

Utility/government

services

Communication/electronic

services

’ Per cent of total employed civilian U.S. workforce, Economic indicators, Joint Economic Committee, January 1982.

tions per month) the operating costs per transaction are low enough that the total cost per transaction normally falls below the cost of performing these transactions at the teller window. . . . The installation of ATMs has led to an offloading of costs from branch tellers to the ATMs.

The Electronic Financial Institution is past the embryonic stage of development. For example, Electronic Funds Transfer Systems (EFTS) transfer monies electronically among the bank accounts of a myriad of customers-nations, corporations, world banks, department stores, Mr. and Mrs. Joe Public, etc. The SWIFT network is one such electronic communication system that involves over 600 banks in over 15 countries. The CHIPS and Fed Wire EFTSs transferred about $150tn in the U.S. in 1982. Direct payroll deposit services, instant Master Card and VISA credit analysis, and Automatic Teller transactions are all services made available via EFTSs.

Automation of financial services tailored to each customer, such as trusts were thought to be beyond the reach of the computer until recently. But trust administration, cash management and portfolio management services are using computer hardware and software to make or help make these financial decisions. As Hondros’ and others* note, some lower and middle management jobs are in jeopardy as attempts are being made to automate the routine decision-making tasks performed by administrators and investment officers. While our focus has been on the hardware, software and system aspects of the Electronic Financial Institution, a stunning increase in the skill levels required to manage and run these institutions has occurred. Computer and communication specialists, CPAs and data processing auditors, programmers, automatic teller service and maintenance personnel, and lawyers versed in legal analysis

The Service Sector Revolution Table 2. Examples of automation

in service industries (contd.) Percentage of workforce’

Automation category

Education services

7.6

P F V V P T

Personal/home computers Audio-visual machines Speak and spell/speak and read Electronic calculators Languate translation computers Library cataloguing systems

Restaurant/food

services

7.1

V F V F

Optical supermarket checkout scanners Assembly line/rotating service cafeterias Automatic french fryer Vending machines

Wholesale/retail

trade

13.8

T V F V F V T T

Telemarketing Point-of-sale electronic terminals Dry cleaner’s conveyors Automatic window washers Newspaper dispensor Automatic car wash Automated distribution warehouse Automated security systems

1.1

T F F V

Electronic reservation systems Elevators/escalators/conveyors Automatic sprinkler systems Electronic key/lock system

1.1

I P F T

Television games Video-disc machines Movie projectors Disney World (Hall of Presidents, Country Bear Jamboree, Circle-Vision 360) Beach surf rake

Service industry

Hotel/motel

services

Leisure services

F Miscellaneous services Total

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Example

2.4 70.0

1 Per cent of total employed civilian U.S. workforce, Economic Indicators, Joint Economic Committee, January 1982.

by the electronic medium are all in demand. A glance in the classified job advertisements of any major metropolitan newspaper will verify this demand for high skill levels. Total employment as a percentage of the U.S. workforce for financial services is predicted to increase from 7.6 per cent in 1980 to 8.0 per cent by 2000.

Public and Government

Services

Public and government services constitute a diverse group of services including electric and gas utilities, trash collection, the Veterans Administration, unemployment offices, Medicare, libraries, the Federal Reserve, the Post Office, the Environmental Protection Agency, the Internal Revenue Service, executive and congressional offices, parks, the Social Security Administration, the Interstate Commerce Commission, courts, prisons and the U.S. military services. Automation in the public and government services takes many forms. A few examples include: a fixed sequence robot named Herbie who works as a mechanical messenger in the hallways of the U.S.

Justice Department, totally automated systems used to operate fossil and nuclear power generating plants, and numerically controlled and intelligent robots used to manufacture and operate cruise missiles.’ This paper will focus on three major areas of automation that will have a major impact on government employment and job skill levels. These general areas of automation are the paperless office, electronic mail, and the highly technological military services. The Paperless Officelo,ll involves a wide array of equipment such as electronic switchboards, word processors, high speed printers, teleconferencing, electronic mail and voice-actuated devices. In the United States, a blue collar worker is supported by $40,000 in machinery, whereas a white collar worker has only $4000 in equipment.” But the capital equipment investment per office employee is rapidly increasing in U.S. corporate offices. For example, Atlantic Richfield Co. of Los Angeles cut the ratio of secretaries to administrative personnel from 1: 5 to 1: 19 by installing an integrated central word processing system. Other corporations with experience in office automation and improving

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office productivity include IBM, First National City Bank of New York, Texas Instruments and Avon Corporation. The implications of the Paperless Office for government services are difficult to predict. For example, the federal government employs 171,000 secretaries, stenographers and typists, or 11.5 per cent of all civilian workers in this category.” A similar reduction in employment levels like that of Atlantic Richfield would put 126,000 of these persons out of work. However, many complicated political, legal, economic and security factors influence the adoption of automation for government services. For example, the impact of President Reagan’s ‘New Federalism” 2 on total employment levels is unclear. This program proposes to transfer and decentralize some government services from Washington to state governments. The program could create many duplicate state jobs and raise or lower the job skill levels required, depending on the degree of automation adopted by each state. The U.S. Post Office began its new ‘Electronic Computer-Originated Mail’ (E-COM) system on 4 January 1982.’ 3 Messages are sent electronically to the receiving post office, where they are printed, enclosed in envelopes, and put in the regular mail stream. This service costs 26 cents for a two-page letter. By the end of 1981, over 80 corporations and organizations such as the AFL-CIO, Temple University, Eastern Airlines, Merrill Lynch, and the Moral Majority had signed up for the service. This is only the first step in the development of an electronically based information network for the entire U.S. and world community. Government and private E-COM type systems will eventually be connected to corporate computer and information centers and to any home with cable television. Once mail can be electronically delivered, how many of the current 512,000 mail carriers and postal clerksI will be needed? Will the mailbox by 2050 end up in a museum ? Will people still require a hard copy printout? Will the U.S. Post Office retrain these employees and their supervisors as telecommunications specialists? ‘In Today’s Army-When Artillary Goes to the Field-So Does Technology.’ This statement often appears in the all-volunteer army advertisements. It subtly implies the problems associated with training an automated army. A recent article in the The Washington Post, entitled ‘Military Marvels Also Symbols of Skill Gap’,” discusses the AutomationSkill Gap problem as follows: The Air Force is finding it easier to produce these most complicated of all airplanes (i.e. AWACS) than to keep in the service the men who have mastered and can operate them. This makes AWACS-for Airborne Warning and Control System-symbolic of the larger problem confronting all military services. They are opening up a skill gap by turning to sophisticated weapons to offset the Soviet Union’s edge in quantity.

1983 Statistics show that the Air Force is predominantly technical, with its leaders anticipating it will get ever more so. There are almost as many officers in scientific, engineering and technical billets-17,14&as there are pilots-18,602. There are 223,884 enlisted people in technical jobs.

For the U.S. military, manpower levels will most likely remain about the same over the next 30 years (assuming no major wars). Yet, there is and will continue to be a substantial increase in the skill levels required to run the modern army.

Communication/Electronic

Services

Information-related businesses depend on the communication and electronic industry to provide their service to the customer. Financial services, telephone service, postal service, insurance services, newspaper and television services, travel agencies, education services, leisure activities, real estate services and government services are examples of these information-related businesses. Today, over 50 per cent of the total U.S. workforce is engaged in information-related services. For example, 5000 QUBE cable TV subscribers in Columbus, Ohio, in July of 1980 called all the plays for their Columbus Metros semi-pro football team. l6 By punching a response button on a handheld control unit, each subscriber could vote on the next play out of five choices. Their responses were tallied within 10 seconds and displayed to the stadium fans but out of the players’ view. As the Metros Coach noted, ‘I don’t think I could have called the plays any better’. Another Columbus, Ohio company called CompuServe Inc.17 offers electronic copies of stories in 10 major national newspapers, including The Washington Post and The New York Times on the same day that the newspaper hit the stands. The Source, which is a subsidiary of Reader’s Digest, offers its 12,000 subscribers a wide selection of information services such as electronic mail, airline schedules, video display cataloging from brand name discount stores, and the current status of Wall Street stocks.17 Bell Laboratoriesr8 has developed a computer that can understand 1000 spoken words, and they are working at increasing it to 2000 words, the vocabulary of the average person. These are just a few examples of the future direction of communication and electronic services.17 IBM, GTE, RCA, MCI, Nippon Electric, ITT and the new AT&T18 corporation, are all rushing into the new service industry of integrated computer-based information systems. This revitalized service industry will create new jobs. The design, installation, operation and maintenance of these electronic mediums is a job for the technocrat. However, voice-actuated devices will allow the less skilled person to use these communication systems.

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The Service Sector Revolution Employment and skill levels in the telecommunication industries will increase dramatically over the next 20 years. Total employment for communication and electronic services as a percentage of the workforce is predicted to increase to 6.5 per cent of the workforce by 2000, compared to 1.4 per cent in 1980.

Transportation

Services

The total U.S. freight and passenger transportation bill in 197520 was $318bn or 21 per cent of the nation’s gross national product. These numbers highlight the importance of transportation services to the national economy, not to mention, the contribution to national security and human social activities. The principal modes of transportation are air, pipeline, railroad, water and highway. Air transport is the most automated, as exemplified by fixedsequence robots (baggage conveyors), variablesequence robots (automatic air ticketing machines), intelligent robots (auto-pilot), and totally automated systems (a Boeing 747 making an instrument landing in a snow storm). Pipeline technology is highly sophisticated, as exemplified by modern methods of instrumentation, pumps and computer controlled systems. The pipeline itself can be viewed as a fixed-sequence robot, and a modern pipeline network and management system approaches the definition of a totally automated system. Unit trains, switching terminals, bullet trains and computerized rail car tracking systems are examples of automation in the railroad industry. Ocean liners and cruise ships, electronic navigation systems, loading and unloading equipment, and locks in rivers and canals are examples of automation in the water transport industry. When the Captain of the Kinokawa Maru, a 92,207 ton ore carrier, wants to change speed, he speaks into a microphone to a computerized voice-controlled engine.21 The machine repeats the order in a flat voice, and if no new directions are given by the captain, the command is executed. Overall, passenger cars and trucks are the least automated of the transportation modes. The communication/electronic revolution, as discussed previously, will decrease the demand for transportation services. Likewise, as the U.S. economy shifts more and more toward a service economy, the demand for transportation services will decline. Services generally require less transportation than goods. As noted by the Bureau’s Office of Labor Statistics (p. 19)l” ‘this is the slowest growing industry of the service-producing sector’. Population increases and more leisure time for travel and recreation will increase the demand for transportation services. In 1980, 3.1 per cent of the U.S. workforce was employed in transportation

services, and this figure is assumed to decrease slightly to 3 per cent by 2000.

Health Care Services The automation of health care services is such a serious issue for health officials that considerable attention has been focused on controlling the adoption (and the overuse) of medical technology. The adoption of automation for health services in the U.S. has historically been out of control. There is much evidence to suggest that the automation of health care services is a major cause of raising health care costs. Hospital expenditures receive the most public and regulatory attention since they account for 40 per cent of total U.S. health expenditures.22 Automation in health services takes many-forms as noted in Table 2 and by Rosenthal (pp. 24-38)22 in his discussion of a typology of medical technologies. He defines six types of medical technologies. They are as follows, with associated examples in parentheses: diagnostic (CAT scanner, automated clinical labs, fetal monitor, computerized electrocardiography), survival (cardiopulmonary by-pass machines, iron lung), illness management (pacemaker, renal dialysis machines), system management (hospital and medical information systems, telemedicine), and cure or prevention technologies (organ transplant, diet, vaccine). The first four medical technologies are typically recognized as ‘hard technologies’ for which major expenditures in capital equipment are necessary. Cure and prevention technologies are ‘soft technologies’. The definition of automation used in this paper approximates Rosenthal’s first four categories, that is, hard technologies. Unlike other service industries, the U.S. workforce level for health services has increased as more and more automation has been introduced. There seems to be a positive correlation between medical automation and manpower levels. As Sanders (p. 58)22 notes, Some insight into the effect of technology can be gained by translating the experience at the Massachusetts General Hospital into cost. Although the total number of annual patient days changed little (348,000 vs 351,000) from 1965 to 1975, 1862 new employees were added. This coincided with the introduction of 10 intensive care units spread over 97 beds with costs ranging from $200 to $425 per day (1975 dollars). New roles were needed, including medical systems analysts and programmers and a biomedical engineering department to service much of the equipment embodied in the technology. More highly skilled nursing and technical personnel were secured to administer hyperolimentation solution and to draw and analyze blood for complex new tests, such as radioimmunoassays. Radiation therapists and physicists were needed. . . One

inescapable

conclusion

from

these

data,

incomplete

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though they may be, is that, at least in a tertiary care setting, technology can indeed be ‘blamed’ for a substantial portion of rising hospital costs. Furthermore, the major expense of the technology lies primarily in the cost of personnel to support it rather than in the acquisition cost of equipment itself.

Although some attempts are currently being made to control manpower and equipment costs in health services, total health services employment as a percentage of total U.S. employment is expected to increase from 7.1 per cent in 1980 to 8.0 per cent in 2000. Without question, the skill levels required for health service occupations will continue to rise and place severe demands on the U.S. workforce.

Education

Services

Education has historically been an extremely laborintensive service industry. But the introduction of more sophisticated micro-computers is changing the labor-to-capital-equipment ratio in the classroom. Hand-held and desk-top computers are becoming as basic to the classroom as chalk and the blackboard. As Dr. Howard 0. Sullins, superintendent of Chesterfield County schoolsz3 in Virginia notes, ‘We want a child to have some literacy about the computer and how it can affect their chosen professions. We believe that the computer is here to stay. It is not a gadget. It is woven into American society.’ When Texas Instruments introduced Speak and learning began for the Spell in 1978, electronic called general public. In fact, a new magazine Electronic Learning began in 1981 which provides information on what to buy and how to use it. It is being sent free to over 50,000 educators and I7 A new generation of electronic administrators. learning aids are being developed by Children’s Television Workshop of New York City and sold by computer retail shops and by direct mail from library cataApple Computer Inc. l7 Electronic and loguing systemsz4 are increasing in popularity system capabilities. A national electronic library network is developing at a steady pace. Education services represent a new multi-billion dollar market for electronic learning aids. Automation in the classroom and at home (i.e. through personal computers) is changing the way children learn. It allows children to learn at their own pace and free the teacher of many timeconsuming and repetitive tasks. Teachers can focus on individual child development and make better use of theit time. America’s children will confront the Automation-Skill Gap head-on. It is the parents who must struggle through this 20 year transition period as the United States becomes an automated society. Many factors influence the employment levels of education services. Computer

and skill courses in

1983

secondary and technical schools and adult education will increase employment levels, while learning-athome and a decline in the number of children per family will tend to reduce employment opportunities in education services. The employment level for education services is assumed to decline to 7 per cent of the total civilian workforce by 2000, compared to 7.6 per cent in 1980.

Restaurant/Food

Services

The food processing and packaging industryZ5 is highly automated, much like the goods-producing assembly lines. At the other extreme, the flxedsequence vending machine is the simplest form of automation for food services. Vending machines replace people as a means to provide convenient, low cost food to high- or low-demand locations. These simple robots even give you change to complete the service transaction. The continued automation of food services is occurring on several fronts. For example, a Canadian fast-food chain26 plans to install three robot waiters, at a cost of $20,000 each, which will serve nine tables in 72 seconds. Optical supermarket checkout scanners are commonplace today in American supermarkets. Also, it is interesting to note that McDonald’s Corporation subscribes to robotic newsletters. A highly sophisticated and computer-controlled vending machine may become the fast food restaurant of the future. The Automatic Fast Food Restaurant is likely to become a reality during the next 20 years. Changes in the nature of the family, more discretionary monies for eating out, longer operating hours, and the general increase in the population will tend to increase the percentage employed in food services. As a percentage of the total workforce, restaurant and food services are predicted to increase from 7.1 per cent in 1980 to 8.0 per cent in 2000.

Wholesale

and Retail

Services

Automation is changing many of the services of everyday life. Examples of automation include automated warehousing, computer-aided auto dry cleaning conveyors, optical barrepair, scanning equipment, plastic money and point-ofelectronic shopping, electronic sale terminals, controlled flagpoles, theft and burglar systems, car washes, moving sidewalks, memory telephones and electronic appliances. Automated warehousing systems have radically reduced the need for less skilled workers in this part of the physical distribution network. The manual procedures for payroll, pricing, billing and inventory control are being automated even for the smallest of enterprises.

The Service Sector Revolution Total population growth and the diversity of the wholesale and retail industry should tend to stabilize employment in this industry. Therefore, employment in wholesale and retail trade as a per cent of the total U.S. workforce is expected to remain at around 14 per cent over the next 20 years. Higher skill levels will be demanded of the worker in some cases, but the design and maintenance of automation for wholesale and retail services will be done by a specialist. These specialists will come from new retail firms, the manufacturing industries, the communication/electronic industry and the financial industry.

Hotel/Motel

Services

At first glance, hotel/motel service seems to exhibit little or no automation. However, the operations jbzction of the hotel/motel is dependent on automation to register and check out their guests (electronic reservation system), to wake up guests and allow messages between guests (electronic message and wake-up system), to move people and materials (elevators, escalators and conveyors), to provide access to rooms with a high degree of security but no key losses (electronic key and lock systems), to feed 500 to 3000 guests at a convention at the same time (walk-in and portable ovens, assembly line dish and utensil washing), to launder sheets and towels at a high level of efficiency (automatic washers, automatic ironing machines), to clean carpets (centralized, electric outlet and battery powered vacuum cleaners), and to reduce turnaround time (analogous to set-up time in a manufacturing operation) for large convention halls and rooms (automated clean-up, vacuum, wash and wax machines called ‘Billygoats’). As shown by Table 2, most of these examples of automation for hotel/motel services are fixed or variable sequence robots. Automation of hotel/motel service improves the quality and timeliness of service, minimizes the operating cost of the hotel/motel, increases capacity (guest room, exhibit hall, dining hall) utilization of the hotel/motel, and reduces the number of employees needed to provide the service. Large hotel/motel chains are in the best position to take advantage of automation. The impact of automation on the hotel/motel workforce over the next 20 years will be a slight decrease in the number of low skill level jobs available. Counterbalancing this influence will be an increase in the total population and more time for travel and leisure activities. Hotel/motel services by 2000 are predicted to provide 2 per cent of the U.S. jobs, up from 1.1 per cent in 1980. High skill level jobs will be required to sell, install and maintain the automation used by the hotel/motel industry. However, these jobs will mostly likely shift to the wholesale/retail and communication/ electronic industries of the service sector.

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Leisure Services A visit to Walt Disney World and EPCOT is a preview of how automation can be used to entertain people. The Hall of Presidents, the Jungle Cruise, Country Bear Jamboree, the Haunted Mansion, Circle-Vision 360 and Mission to Mars are all examples of automation in the Magic Kingdom. Atari video games, video-yearbook, the Betamax Portable Videocassette-Recorder and some of the electronic information services discussed in the section on communication/ electronic services are examples of automation’s role in leisure services. How people spend their leisure time is changing because of automation. Leisure services are predicted to increase to 3 per cent of the total available U.S. jobs by 2000, compared to 1.1 per cent in 1980. Technical maintenance personnel and computer specialists will be in demand to service the automated devices used by recreation and amusement centers. Skill levels will not change much for jobs associated with fishing and water sports, parks, camp-grounds, museums, spectator sports, books, arts and craft classes, plays, concerts, sports like golf and tennis and organized tours.

Implications What are the implications of this shift to a service economy, the automation of services, and the simultaneous automation of goods and services? In general, the American Worker is experiencing colossal changes in what type of work is demanded by the U.S. economy and in how this work is accomplished. The type of work that is demanded by the U.S. economy reflects the dominance of the service sector over the goods-producing sector. The service sector, as defined and discussed in this paper, is predicted to account for 80 per cent of the available jobs by 2000. The goods-producing industries of manufacturing, agriculture, mining, forestry, fishing and construction are predicted to account for the remaining 20 per cent. One possible scenario detailing this continued migration to service industries is shown in Table 3. As indicated by Table 3, the communication and electronic service industry is predicted to experience the greatest increase in available jobs with a simultaneous increase in skill levels. Leisure and hotel/motel services are predicted to be the next fastest growing service industries followed by financial, restaurant/food and health care services. Government and wholesale/retail services are predicted to remain close to their historical percentages of the U.S. workforce over the next 20 years. Transportation and education services are expected to decline as a percentage of the total U.S. workforce.

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Table 3. Predicted shift in U.S. employment major industry

Percentage of civilian U.S. workforce 2000 1980 (Forecast) (Actual)

Industry Goods-producing Agriculture Manufacturing Forestry Mining Fishing Construction Subtotal

by

sector

Service sector Financial services Utility/government services Communication/electronic services Transportation services Health care services Education services Restaurant/food services Wholesale/retail trade Hotel/motel services Leisure services Miscellaneous services Subtotal Total

2.0 21 .o 0.8 1 .o 0.4 4.8 30.0

1.5 11.5 0.8 1 .o 0.4 4.8 20.0

7.6 17.7

8.0 18.0

1.4

6.5

3.1 7.1 7.6 7.1 13.8 1.1 1.1 2.4 70.0 100.0

3.0 8.0 7.0 8.0 14.0 2.0 3.0 2.5 80.0 100.0

The automation of services affects how work is accomplished in the service sector of the U.S. economy. In the past, work in the service sector was characterized as being labor-intensive. The assumption that services are labor-intensive is no longer valid. As the examples of automation in Table 2 and our discussion of future trends in automation for the 10 service industries indicate, services are rapidly becoming more capital intensive. In most service industries, the automation of services means less total jobs or at least a significant shift in the types of skills required by the service industries. During the decade of the 197Os, 87 per cent of the new jobs were created in the service sector.” People left the farm and factory for jobs in the service sector. If one assumes the automation of services displaces workers or creates fewer job opportunities, where will workers find the new jobs? The second problem is that the skills of the workforce tend to lag the capabilities and advances of technology. Some segments of the U.S. workforce lack the economic resources or local opportunities or motivation to update or change their job skills. As noted in the introduction, the automatic factory is now a reality. The combined effect of the automation of the goods-producing industries and the automation of services has no historical precedent. The American worker, especially the older worker and the less skilled worker, is facing a major

1983

change in the nature of work in the United States. The factory and the office, like the blue collar and white collar jobs, are being automated at an unprecedented rate. Society, over the long-term, will change the rules of work. Likewise, the American worker will meet the skills required by the U.S. workplace. But the decades of the 1980s and 1990s represent a turbulent transition period for labor, management, and government. Some implications of the shift to a service economy, the automation of services, and the concurrent automation of goods and services are outlined below. These implications are grouped under the following categories: benefits of automation, consumer expectations, new job skills, unemployment, worker stress and working hours. Benejts

of Automation

Work in the factory and the office becomes more abstract, conceptual and challenging as machines do the mundane physical tasks. The worker has more leisure time to pursue hobbies, family and community interests and self-improvement activities. A major preoccupation of the workforce becomes the use of leisure time. Playing better is equivalent to working harder. Higher productivity of the Automated Factory and Paperless Office will raise the standard of living. Empha SE will shift from full-time employment to full-time productivity. Consumer Expectations fi The Instantaneous Service will become commonplace. Consumer expectations will increase while actual service times decrease. a Americans will emphasize consumption of services as a measure of wealth in lieu of the takenfor-granted consumption of physical goods. New Job Skills * The U.S. economy will demand much greater skills of the American worker to help design, operate and manage these automated systems. * The maintenance function will move up the chart. organization A Viceinstitution’s President of Maintenance will be a job of considerable prestige and require great technical competence. ti The most powerful blue collar unions in the future will consist of maintenance personnel. + Multiple careers and skills over a persons working life will become more dominant. Training and retraining time will constitute a higher portion of total working time.

The Unemployment The assumption of sustained and unlimited growth in jobs is no longer valid. From the mid1960s to the late-1970s, the U.S. labor force growth rate was about 2 per cent per year, double the pre-1965 rates. The 2 per cent per year growth rate will not be maintained in the next two decades. The ability of the service sector to create new jobs and absorb farm, factory and women workers will slow down causing the growth rate to be less than 2 per cent per year. Although automation and new technology most definitely will create new jobs, these jobs will be in new or different industries. Some workers will simply not be able to make the shift to a new or different industry due to economic resources, training opportunities, mobility of family and friends, age, or education level. These workers will be permanently displaced and constitute l-3 per cent of the workforce over the next two decades. Older workers, less-skilled workers and some lower and middle managers are prime candidates for this permanent job loss category. The average unemployment rate in the United States over the next 20 years will be around 8.5 per cent. This unemployment rate reflects a basic structural change in the nature of work in America. The maturing of the service sector economy and the concurrent automation of goods and services are major contributors to this basic structural change in the U.S. economy and workplace. Other important structural changes include women as a significant portion of the workforce, the emerging world economy and stiff foreign competition. Worker

Stress

The rate of change in what, where and how America works will be faster than the natural attrition rate of the workforce. The psychological stress on the factory and office worker will be severe. The automation of goods and services will provide institutions with the capability to more and monitor closely measure employee performance. Working

Hours

‘Around the Clock Work’ will become the norm goods-producing for many industries. Automated Factories are capable of working continuously, so human operators, maintenance personnel, and managers will follow the machines to the workplace. Service firms such as restaurants will also follow this trend of expanded operating hours. A shorter

work

week

is inevitable.

‘Working at Home’ using the electronic medium will become the norm for at least 10 per cent of

Service

Sector

the labor force by 2000. Work decentralized in America.

Conclusion

19

Revolution is becoming

more

and Recommendations

A new era in America of what type of work is deemed important and how this work is accomplished is well underway.28 Automatic Farms and Factories run by an ever smaller percentage of the workforce will produce the vast majority of our physical goods over the next 20 years. The service sector will provide four of every five jobs in the United States by the year 2000. During this transition period, both goods and services will be automated. The shifting of job opportunities to other industries often requiring new or greater job skills places tremendous demands on the American Worker. Institutions must change their policies toward work in America to help the worker through this economic and technological minefield. I offer the following suggestions in formulating policies concerning the U.S. workforce over the next 20 years. Firstly, there must be a general recognition from all types of institutions concerning the magnitude of the changes occurring in the U.S. workplace. Automation and its impact on the workforce is not confined to the factory. The service sector which constitutes over two-thirds of the U.S. economy is also being automated. The basic structure ofwork in America has changed. It is up to the corporate, union and government institutions to change their policies toward work in America. Secondly, a massive effort must be made to retrain displaced workers. For those workers capable of learning new skills, tax credits must be provided to individuals and corporations to encourage the upgrading of skills (job enrichment), more crosstraining (job enlargement), and developing totally new skills (job shift). Training must be viewed as a sound investment in human capital. U.S. corporations spent $30bn on training in 1980, while the federal, state and local governments spent $9bn. More, not less, funds will have to be spent on training to help the American labor force adjust to this new work environment over the next 20 years. Thirdly, a special unemployment category is needed for workers who can prove that they lost theirjob due to automation and who also fail to pass a battery of intelligence and dexterity tests. These American workers are caught in a complex set of social, economic and technological forces beyond their control or ability to rectify and need permanent help from society during this transition period. An alternate approach would provide the worker with job displacement insurance as protection against being automated or skilled-out of a job. Fourthly,

government

legislation

can expedite

a

20

Long Range

Planning Vol. 16

December

shorter work week. For example, overtime could be made more expensive compared to regular time or paying overtime premiums beyond 36 hours in 1900 and 32 hours in 2000. This would give the corporations time to plan their capacities. Another option is to give the employee compensatory time off in lieu of overtime pay.

(5)

1983 D. A. Collier, The automation of the goods-producing industries: implications for operations managers, Operations Management Review, pp. 7-l 2, Spring (1983).

(6) J F Crean, Automation and Canadian banking, The Canadian Banker & ICB Review, 85 (4). July-August (1978). (7) Paul Hondros, Trust automation comes out of the back room, Trusts & Estates, pp. 364-366, June (1978).

(8) John

The four day work week or longer vacation time or flexible working hours are ways to alter working hours. Six weeks of vacation time is common in Western Europe. A 1977 study29 found that 10.3 per cent of all U.S. manufacturing firms use some form of flexitime while 19.3 per cent of financial, insurance and real estate services use flexitime. The survey found 12.8 per cent of all U.S. industries use flexitime. The private sector is slowly taking the initiative on adjusting the working hours of the American workforce but legislation may help expedite the process.

E. SteeleY Jr., When management Datamation, pp. 172-176, July (1979).

is automated,

(9) Cruise

missile enters production at Boeing, American Metal/Market Metal Working News, p. 12. 24 August (1981).

(10) Louis T. Rader, Productivity-requirements

and strategy for office automation, Presented at the 1981 International Word Processing Association Conference, Atlanta, Georgia, June (1981).

(11) Ronald P. Uhlig, David J Farber and James H. Blair, The Office of the Future, North-Holland N.Y. (1979).

Publishing Company, New York,

(12) Gathering gloom for workers, Time, p. 64, December (1981). (13)

Postal service ready to move computer mail, Lexington Herald Leader, Lexington, KY., 29 December (1981).

Finally, the United States must continue to build and maintain a small but highly automated goodsproducing sector to support the larger service economy and to protect our national security. This revitalized goods-producing sector must be capable of competing in the highly competitive world economy.

(14)

Handbookof LaborStatistics, U.S. Department of Labor, Bureau of Labor Statistics, Bulletin 2070, Washington, D.C., December (1980).

(15)

G C Wilson, Military marvels also symbols of ‘skill gap’, The Washington Post, Sunday 3 January (1982).

(16)

When the viewers called the plays, Parade, p. 15, 24 January (1982).

(17)

May the source be with you, Time, p. 63, 26 October (1981).

As Mr. Robert B. Kurtz, senior vice-president of General Electric Company4 stated, ‘my biggest concern is that ifwe are going to change (automate) the factories, we’re going to have to start with the people, and not with the technology’. This is also true for the automation of services!

(18)

Staking new markets, Time, pp. 54-57,

(18)

L. Mitchell Moss (Editor), Telecommunications and Productivity, Addison-Wesley Publishing Company, Reading, Massachusetts (1981).

(26)

D V Harper, Transportation Englewood Cliffs (1978).

(21)

Now hear this: full ahead!, Time, p. 61, 7 June (1982)

The simultaneous automation of goods and services American Worker. overwhelming the is Institutions of all kinds must wake up to the realities of the American workplace. They must formulate policies that will smooth the transition for the American worker as the United States becomes an Automated Society. The American worker could be the victim of their inaction or the beneficiary of their policies.

(22)

Medical Technology: The Culprit Behind Health Care Costs? Proceedings of the 1977 Sun Valley Forum on National Health, U.S. Department of Health Education, and Welfare, Public Health Service, DHEW Publication No. (PHS) 79-3216, Washington, D.C. (1977).

(23)

Schoolsseecomputer 24 January (1981).

(24)

Robert C. Emmett, Automation and its Impact on a Transportation Library, Northwestern University, Transportation Library, Evanston, Ill. 60201, pp. 479486, November (1979).

in

25 January (1982).

America,

Prentice-Hall,

teaching vital, Richmond Times Dispatch,

(25) John E. Ullmann, The Improvement of Productivity: Myths and Realities, Praeger Publishers, New York, N.Y. (1980).

References (1) Automated factory, Industrial Engineering, 13 (II),

(26)

Will it hold the pickles? The Washington Post Magazine, p. 27, 17 January (1982).

(27)

James A. Fitzsimmons Operations Management, York, N.Y. (1982).

(28)

D. A. Collier, Managing a service firm: A different management game, National Productivity Review (forthcoming).

(28)

Stanley D. Nollen and Virginia H. Martin, Alternative Work Schedules, Part 1: Flexitime, New York, AMACOM (1978).

(36)

Economic Report of the President, Superintendent of Documents, US. Government Printing Office, Washington, D.C., Februan/ (1981).

(31)

Exploratory Workshop on the Sociallmpacts of Robotics, Office of Technology Assessment, Congress of the United States, Washington, D.C., 31 July (1981).

November

(1981).

(2)

A view of the United Automobile, Aerospace and Agriculture Implement Workers of American (UAW) stand on industrial robots, Presented at the Robots IV Conference, October (1979).

(3)

Fanuc’s new computer-controlled plant, Modern Shop, pp. 82-91, September (1981).

(4)

General electric: bringing the factory of tomorrow Manufacturing Engineering, October (1981).

Machine to life,

and Robert McGraw-Hill

S. Sullivan, Service Book Company, New