Each new industrial robot displaces six workers

The world’s workers seem to be in a bad spot: A recent study found that each new industrial robot displaces six employees. Automation is on the rise in fields from radiology to volleyball coaching.

Workers in poorer manufacturing-reliant nations are especially vulnerable, it’s said, because their jobs could soon be done by robots. Yuval Noah Harari, author of the new book Homo Deus, speculates in a recent Bloomberg View column about the rise of a huge, embittered “useless class” living on the dole.

What’s today’s problem?

But if work is being automated out of existence, how do you explain a 2.8 per cent unemployment rate in Japan, one of the world’s most roboticised nations? What accounts for shortages of skilled workers in Brazil, India, Mexico, and Turkey? And why did US employers report 6 million unfilled job openings at the end of April—the most in 16 years of record keeping?

The big problem today is too few workers, not too many. Maine is so short of help that the governor conditionally commuted sentences of 17 state prisoners in May, in part so that they could take jobs. Michael Feroli, the chief US economist of JPMorgan Chase & Co, headlined a research note, “The labor market’s getting tighter than a rusted lug nut.”

On the dark side, those who can’t find work feel worse now because they think or they’re told it must be their fault, even when it’s not. On the bright side, low unemployment rates are putting intense pressure on governments and companies to help people ready themselves for the jobs of the future.

Robots

Robots may yet take over, but we already know how to prepare for that: The measures that cope with today’s worker shortages will also be useful in a world of worker surpluses.

The skills increasing in demand will presumably be even more valuable in coming decades. The good news is that human wants are infinite: The grandchildren of farmers and factory hands are masseurs, speech therapists, and videographers. What their grandchildren will do is utterly unpredictable.

It’s easy to see how the world-without-work narrative has caught on. There are already robot drones, driverless vehicles, and phones that can translate your musings into Afrikaans, Albanian, or Amharic. But David Author, a leading labour economist at the Massachusetts Institute of Technology, says people tend to overestimate how quickly and completely machines will take over.

“The things that are being suggested are so far beyond what we’re capable of right now, it’s almost marketing for venture capital,” agrees Matt Busigin, chief information officer at Hover Networks Inc, a phone systems company in the Buffalo, NY, suburb of West Seneca. At Hover, he says, “We’re thrilled just to get a decent voice transcription.”

Labour productivity

If machines were displacing workers, you’d expect to see evidence in the statistics. It’s not there. Labour productivity is defined by economists as the output of the economy per hour of (human) work.

In theory, it will approach infinity when the last working person in the world turns off the lights in the last office. That’s not how it’s been going. Nonfarm business productivity growth averaged a watery 1.2 per cent a year from 2007 through 2016, down from 2.6 per cent from 2000 to 2007.

The labour shortages caused by weak productivity have been aggravated by demographic forces. Japan has an aging workforce. China’s has begun to shrink, a direct result of its one-child policy.

In the US, baby boomers are retiring in droves, says Gad Levanon, chief economist for North America at the Conference Board, a business-supported research group.

Labour shortages

Labour shortages will continue until around 2030, he predicts. After that? “I can’t talk about the very distant future. Who knows, maybe artificial intelligence will be as big as people say,” he says. “But I think where we are now, even modest employment growth is enough to continue to tighten the labour market.”

Labour shortages manifest themselves as skill shortages because employers don’t just need bodies, they need talents. The US was ninth in skill shortages last year among countries in the Organization for Economic Cooperation and Development, behind Japan, India, Brazil, Turkey, Mexico, Greece, Australia, and Germany, according to a survey by ManpowerGroup Inc, the staffing firm. “In the skill sets needed for the global market, the talent pool is quite small,” says ManpowerGroup Chairman and Chief Executive Jonas Prising.

Life for people, who are unemployed

Life is harsh for people, who are unemployed or underemployed because of what’s blithely labelled a “skills mismatch.” The US lost 8 million manufacturing jobs from 1979 to 2009 and has regained fewer than 1 million since. Coal mining employment has fallen 42 per cent since the end of 2011. While the future lies in knowledge work, many jobs that are open today are for orderlies, burger flippers, security guards, and the like.

For American men, median weekly earnings of wage-and-salary workers are no higher now, adjusted for inflation, than they were in the 1980s. JPMorgan Chase chief executive officer Jamie Dimon points to the “staggering” decline in labour force participation by men of prime working age, 25 to 54. “There’s something wrong,” he said in a conference call with reporters on June 6.

Factory work

Factory work, having gone high tech, is exciting for some but daunting for others. Line workers are being called on to manage complex robotic systems, says Blake Moret, CEO of Rockwell Automation Inc in Milwaukee. For some, he says, “There are going to be severe constraints on what they can do at the tail end of their careers.”

Sense of dislocation

A sense of dislocation prevails. The size of the US’s contingent workforce—temps, on-call workers, contract company workers, independent contractors, freelancers—has almost doubled in 20 years. It’s not a life most workers want, according to a 2016 report by the Shift Commission on Work, Workers, and Technology, a project of Bloomberg LP (the parent of this magazine) and the New America foundation.

A “stable and secure” income topped “making more money” as a priority in all income groups. “Most Americans just want a good job that allows them to provide for their families,” wrote Hillbilly Elegy author JD Vance, a commission member.

Fear of automation

A lot of the fear of automation stems from the idea that it’s a substitute for human labour. Often it is. But it can also be a complement, something that empowers people. Think of a hoe or a drill or one of those laser thingies people use for PowerPoint presentations. In the future, those who turn automation to their advantage will tend to be more educated. They will ride the technology waves better because they’re more adaptable. That’s already the case: For those with doctorate degrees, the unemployment rate in May was a minuscule 0.7 per cent.

Michael Spence, a Nobel Prize-winning economist, who splits his time between Italy and the US, says he’s an optimist about the medium-term.

“The simple, honest truth is, if you’re talking about what the world’s going to be like 10 years from now, it’s hard to know,” he says. “The best focus for people is to make the transitions as effective and painless as possible as opposed to worrying about what the end point is.”

As Spence points out, fears of technology-driven unemployment aren’t new. A committee of scientists and activists sent an open letter to President Lyndon Johnson in 1964 warning that a “cybernation revolution” was creating “a system of almost unlimited productive capacity” that would strand “the poor, the unskilled, the jobless.” Are some people being left behind? Yes, and that’s troubling. But a world without work? Not for a long time.

History of industrial robotics

The earliest known industrial robot, conforming to the ISO definition was completed by “Bill” Griffith Taylor in 1937 and published in Meccano Magazine, March 1938. The crane-like device was built almost entirely using Meccano parts, and powered by a single electric motor. Five axes of movement were possible, including grab and grab rotation.

Automation was achieved using punched paper tape to energise solenoids, which would facilitate the movement of the crane’s control levers. The robot could stack wooden blocks in pre-programmed patterns.

The number of motor revolutions required for each desired movement was first plotted on graph paper. This information was then transferred to the paper tape, which was also driven by the robot’s single motor. Chris Shute built a complete replica of the robot in 1997.

The author is economics editor for Bloomberg Businessweek and covers a wide range of economic issues. He also holds the position of senior writer.