Photographers take pictures of robots that will move products in baskets at Amazon’s new fulfillment center in Sacramento. Some experts predict that artificial intelligence will replace higher-skilled workers as well. Randy Pench Sacramento Bee file
Photographers take pictures of robots that will move products in baskets at Amazon’s new fulfillment center in Sacramento. Some experts predict that artificial intelligence will replace higher-skilled workers as well. Randy Pench Sacramento Bee file

Foon Rhee

Associate editor, editorial writer and Viewpoints editor

Foon Rhee

If Sacramento offers cash for jobs, it better hope automation doesn’t take them away

By Foon Rhee

November 24, 2017 09:41 AM

The prospect of blue-collar workers losing their jobs to robots hasn’t caused nearly enough alarm from the powers that be.

But perhaps the issue will get the attention it deserves now that some experts are predicting that amazing advances in artificial intelligence could make higher-skilled workers expendable as well.

And maybe it’s something that should be considered by Sacramento leaders before signing off next week on an incentive package that could be worth $13.5 million to lure the western U.S. headquarters of Fortune 500 company Centene.

If the City Council talks about automation, it would be a welcome change. Unfortunately, former President Barack Obama didn’t highlight the looming problem until his last months in office. No surprise, it isn’t even on the radar screen for the Trump administration, which is instead trying to bring back jobs in dying industries such as coal. Treasury Secretary Steven Mnuchin says that the threat of automation is likely “50 to 100 more years away.”

Not according to a growing number of experts. They say that within the next few decades it’s possible that entire categories of jobs – mainly in manufacturing, the service industry and transportation – could disappear entirely. Robots can be cheaper and more efficient in the long run, and they don’t need health benefits.

The transformation is already starting. Last year, Foxconn, the Chinese electronics manufacturer that supplies Apple and Samsung, announced it would be replacing 60,000 factory workers with robots. Nonetheless in September, the state of Wisconsin offered $3 billion in incentives to build a new $10 billion flat-screen plant that could employ 13,000. Opponents warn that the deal doesn’t include enough safeguards if workers get laid off.

And just this week, Uber announced it will buy automated vehicles – reportedly 24,000 – from Volvo between 2019 and 2021. With their days possibly numbered, drivers might want to start looking for new gigs. Even scarier for those who lose their jobs to automation, the U.S. doesn’t have a great track record of success in worker retraining programs.

More recently, some analysts are warning that in the not-so-distant future, artificial intelligence could also replace “knowledge” workers who make data-driven decisions – information technology guys, stock traders and the like.

They sound like some of the jobs that could be coming to Sacramento in what Mayor Darrell Steinberg promotes as “the single biggest private sector job recruitment in the city’s modern history.”

Most of the 5,000 jobs at the Centene headquarters would be in accounting, administration, information technology and health care. The company manages Medicaid and other health insurance for more than 12 million members.

Under the city’s proposed incentive package, Centene would get $2.7 million for every 1,000 workers assigned to the headquarters, but only if at least 300 of those positions are new and the new jobs have a median salary of at least $61,515 a year.

There could be as many as five such incentive payments – $9,000 per job – totaling as much as $13.5 million over 12 years. So it’s a good thing that the deal – which is scheduled to go before the City Council on Tuesday – includes provisions that protect the city for as long as 15 years.

Centene, which already employs 3,000 in the Sacramento region after its takeover of Health Net in 2016, only gets cash equal to how many new jobs it creates. The city can get money back for any new jobs not retained for at least two years. And the company must meet the total job goals to keep receiving payments. Still, it’d be better to keep the jobs, which the city estimates would increase its tax revenue by as much as $1.6 million a year and have an overall economic impact of $1.1 billion.

While there is no mention of the impact of automation or artificial intelligence, Centene will be affected like every other major company, says interim Assistant City Manager John Dangberg, who is handling the negotiations. But he says that possible changes to Obamacare are a bigger wild card in the employment numbers and that, in any case, the deal accounts for those variables.

Centene would be a big get for Sacramento. Its headquarters would build on an area of strength – health care – that the region is counting on to generate high-paying jobs. It would expand the job base of Natomas, which took a body blow from the housing crash and was blocked by a building moratorium for more than six years until levees were strengthened. The only thing better would be if the headquarters landed at the site of Sleep Train Arena, which closed last December, but that isn’t happening.

The Centene headquarters wouldn’t be a bad consolation prize since Sacramento’s chances of getting Amazon’s second North American headquarters are slim and none.

But city officials better hope the payoff lasts long enough that it’s worth the investment.

Foon Rhee: 916-321-1913, @foonrhee