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Major changes on a scale that could occur only once every half century are taking place quietly but surely. These changes are called “Industry 4.0” or the fourth industrial revolution. It is an industrial revolution that uses artificial intelligence and robots in such a way that manufacturing plants will become unmanned and a majority of office jobs will be made unnecessary.

In March, an AI player of the board game go, developed by Google and named AlphaGo, defeated the world’s leading professional go player 4 games to 1. The pro lost the first three games, and although he won the fourth, he was defeated in the fifth round. The decisive factor that led to the victory for AlphaGo was its “deep learning” capability. The more games it played, the better the AI player’s skills became through the deep learning process.

A large majority of office workers are replaceable, according to research conducted jointly by the Nomura Research Institute and scholars, including Michael Osborne, an associate professor at Oxford University. The main thrust of the research was that 49 percent of Japan’s workforce can be replaced by AI and robots, as it looked into the replaceability by computer-related technologies of human work in 601 job categories.

Medical doctors were classified as “irreplaceable,” but this assumption has now been all but overturned. According to an Aug. 4 NHK news report, the Institute of Medical Science at the University of Tokyo started clinical research on getting artificial intelligence to identify the right kinds of medicine to treat specific types of cancer — by making the IBM-developed AI “Watson” study more than 20 million medical theses and over 17 million pieces of pharmaceutical-related information, and by providing it with information on the genes of cancer patients.

The Watson AI was reportedly fed with information related to the genes of a leukemia patient, on whom chemotherapy using anti-cancer agents had not proved effective. Within a mere 10 minutes, Watson came up with a diagnosis that the patient was suffering from a special type of leukemia that the doctor in charge had never thought of, and even provided him with a prescription of a combination of anti-cancer drugs. After switching to those new medicines, the patient is said to have recovered and been released from the hospital within several months.

If 49 percent of people in the workforce lose their jobs to AI and join the 3.0 percent who are currently unemployed, 52 percent of the working-age population would be unable to find employment even if they wanted to.

What would an unmanned factory be like? It would have no workers except for a handful of controllers, clerical staff and executives. That means mass production would become possible with just capital (i.e., plant and facilities) and a few people.

The value added, which is total sales minus the cost of materials and fuel, is distributed between capital and labor. The distribution to labor takes the form of wages paid to the workers in accordance with individual performance. The value added distributed to capital is used to pay dividends to shareholders, remuneration to board members, and repayment of and interest payments for bank loans.

The labor share (the ratio of the value added distributed to employees as wages) currently stands at slightly more than 70 percent in Japan. With greater roles played by AI and robots, the number of employees will fall, although they will remain less affected in business sectors that offer hospitality such as hotels, restaurants and bars.

As a result, the labor share will dwindle down to around 5 percent. In other words, 95 percent of the value added will be distributed to the capital to be paid out as dividends, remuneration to board members, and payment of interests and principals of bank loans. The lower the labor share falls, the greater the government’s tax revenue will be, because the average tax rate on employees’s income is about 8 percent, that on dividend income 20 percent, and the corporate tax rate a shade less than 30 percent.

Some people may rejoice at being relieved of laborious work chores by the fourth industrial revolution. But such a sentiment is hardly warranted because that means many of the people who wish to work would simply not be able to find jobs. The government would be forced to divert part of the increased revenue from taxes on corporate income and interest and dividend revenue to help such people. Perhaps the only way to do it would be to pay monetary allowances directly to those out of work, but those people would likely feel negative about being paid by the government for doing no work. The most reasonable way would probably be to provide jobless people with work in the public service sector, with the government paying them wages.

At present, there are 890,000 teachers at elementary, junior high and high schools, both public and private, and another 180,000 teaching at public and private colleges and universities in Japan. If these numbers are doubled, more than 1 million new jobs would be created.

Employment should also be doubled for caregivers, child care workers and nurses. Increasing employment opportunities in these and other public service sectors will be the only way to provide jobs to those who are unemployed despite their wish to work.

Enabling workers dismissed from unmanned factories to contribute to the betterment of public services would not only be a step to counter unemployment, but would in all likelihood also help make this country a much nicer place to live as the education service would improve, research projects would be promoted and the socially weak would feel more safe and secure.

Another benefit of doing away with human labor at production facilities is elimination of the inventory cycle, a classic phenomenon of a business cycle. It would be an easy task for a smart AI to make accurate predictions of supply and demand, and that would make unnecessary the troublesome adjustments such as reducing labor hours and laying off temporary workers.

There is absolutely no doubt that AI and robots will bring about dramatic changes in a broad range of workplaces from production to medical service, legal service and education. The crucial issue now facing us humans is how to live in harmony with AI.

Takamitsu Sawa is a distinguished professor at Shiga University.

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