Market Watch: Labor Market in the Robotics Era
Technology in the 21st Century is transforming the workplace beyond recognition. From cooking food to counseling veterans about their PTSD disorder, automated robots are revolutionizing efficiency in the workplace and threatening different sectors of the economy at the same time.
With self-driving cars and flying drones delivering the much-awaited Amazon package, technology has made our life easier and comfortable. Yet, the future of labor automation and augmented intelligence (AI) can an explosive mix in the workplace.
With a risk of losing nearly 375 million jobs worldwide by 2030, robot workers have made workplaces iffy long before they even entered it.
A recent study done by the Brookings Institute estimated that a quarter of the US workforce, almost 36 million people, could be highly exposed to automation, and could suffer displacement as a result. The World Economic Forum stated in a recent report that 1.4 million jobs in the U.S. will be lost in just eight years to the new automated class of workers.
A century ago, nearly 40 percent of the population in the US worked as farmers. With the industrial revolution and advanced technological equipment, today, only 2 percent of the US population engages in farming activities.
The US saw a steep decline in farming households after the 1940s while the average size of US farms increased from 150 acres to 450 acres. The industrial shift powered by the Industrial Revolution made it easier for farmers to work on larger lands with better technological equipment, giving more output and productivity with fewer laborers.
While introducing robots and advanced technological equipment can reduce the costs of production and increase the output for many companies, it might a negative spin on the labor market. Robots and advanced technological equipment are usually imagined replacing blue collar labor. Jobs that require low skills and high manual labor are the ones that have the biggest threat of being hit by automation.
Robots, unlike humans, do their tasks with absolute precision without a demand for sick days or union strikes for a pay increase making them the perfect employee for any employer. With plans of investing more than $59 billion by 2020, China is spearheading robotics investment around the globe and is set to be the biggest spender in the automation sector in the coming years.
Despite outranking human workers in every possible way in the workplace, automation has proved to be a boon for companies that are diversifying their workplace with robots. Multi-billion dollar companies like Amazon, Walmart and Tesla are investing heavily in workforce expansion by embracing the new class of workers rather than fearing them. Amazon even bought the warehouse robotics company, Kiva Systems, in 2012 and introduced cashier-less Amazon Go stores in Seattle last year.
Being one of the biggest employers in the country, Amazon has incorporated the robot workforce alongside their human employees. From packaging to delivering, robot workers at Amazon can do it all. Surprisingly, the addition of robots to the Amazon workforce has increased productivity, output and profit, along with an increase in employees.
Employing almost 613,000 people across the globe, Amazon saw a steep rise in its hiring since 2014 after introducing automated robots in their workplace. In 2018, Amazon added 47,000 employees to its global workforce despite increasing the automated workforce. With higher profits collected due to higher sales and efficient working, Amazon became the first multi-billion dollar corporation to increase its minimum pay to $15 an hour.
The automated workforce can drastically increase the productivity growth of the company. Introducing robots in the labor force increases the quality of labor, which in turn, increases Total Factor Productivity (TFP). Higher TFP means that the company is producing more goods and services to meet the rising demand. More sales lead to higher profits, leaving the company with additional capital for expansion.
The tech giant saw an exponential growth since it bought Kiva Systems in 2012 and started incorporating robots in their warehouses. Employing more than 100,000 tin workers in its warehouses, Amazon shipped more than 5 billion products in 2017 alone.
Automation in the labor workforce is not only profitable for companies that employ robots, but may also have a positive impact on the economy. According to a recent study published by Centre for Economics and Business Research (CEBR), investment in the robotic labor workforce has contributed around 10% of GDP per capita growth in OECD countries from 1993 to 2016.
China, being the largest producer of goods and services in the world, is taking the help robots to dominate the world market. Although the Chinese economy was only 61 percent of the US economy in 2018, The ‘Made In China, 2025’ economic plan, which is based largely on automated workers, can help China surpass the US economy by 2050 at its current growth rate.
Getting on the train of an automated workforce can prove to be a boon or a curse for any economy. A delicate mix of metalworking with bones can help improve the slowing down economy, but an overuse of robots can prove to be fatal for the labor market.