Where Did the Workers Go?

Mercedes Benz factory creates an auto.

You won’t see a person until the car is assembled.  Robotics will displace massive workers in the coming years.  From Robohub http://robohub.org/estimating-the-impact-of-robots-on-productivity-and-employment/:

To discover the impact of robots on the average manufacturing worker, we analysed their effect in 14 industries across 17 developed countries from 1993 to 2007. We found that industrial robots increase labour productivity, total factor productivity and wages. While they don’t significantly change total hours worked, they may be a threat to low- and middle-skilled workers.

Robots’ capacity for autonomous movement and their ability to perform an expanding set of tasks have captured writers imaginations for almost a century. Recently, robots have emerged from the pages of science fiction novels into the real world and discussions of their possible economic effects have become ubiquitous (see e.g. The Economist 2014, Brynjolfsson and McAfee 2014). But a serious problem inhibits these discussions: there has – so far – been no systematic empirical analysis of the effects that robots are already having.

In recent work, we begin to remedy this problem (Graetz and Michaels 2015). We compile a new dataset spanning 14 industries (mainly manufacturing, but also agriculture and utilities) in 17 developed countries (including the European nations, Australia, South Korea, and the US). Uniquely, our dataset includes a measure of the use of industrial robots employed in each industry, in these countries, and how it has changed from 1993-2007. We obtain information on other economic performance indicators from the EUKLEMS database (Timmer et al. 2007).

We find that industrial robots increase labour productivity, total factor productivity and wages. At the same time, while industrial robots had no significant effect on total hours worked, there is some evidence that they reduced the employment of low skilled workers, and, to a lesser extent, middle skilled workers.

What exactly are industrial robots? Our data comes from the International Federation of Robotics (IFR). The IFR considers a machine to be an industrial robot if it can be programmed to perform physical, production-related tasks without the need for a human controller. (The technical definition refers to a “manipulating industrial robot as defined by ISO 8373: An automatically controlled, reprogrammable, multipurpose manipulator programmable in three or more axes, which may be either fixed in place or mobile, for use in industrial automation applications”).

Industrial robots dramatically increase the scope for replacing human labour, compared to older types of machines, since they reduce the need for human intervention in automated processes. Typical applications for industrial robots include assembling, dispensing, handling, processing (cutting, for instance) and welding – all of which are prevalent in manufacturing industries – as well as harvesting (in agriculture) and inspection of equipment and structures (common in power plants).

Rapid technological change reduced the price of industrial robots (adjusted for changes in quality) by around 80 percent during our sample period. Unsurprisingly, robot use grew dramatically: from 1993-2007, the ratio of the number of robots to hours worked increased, on average, by about 150 percent. The rise in robot use was particularly pronounced in Germany, Denmark, and Italy and among producers of transportation equipment, chemical and metal industries.

Will entrepreneurship help solve the huge workforce disruption coming down the road?  Per the World Economic Forum – https://www.weforum.org/agenda/2015/09/can-entrepreneurship-solve-the-youth-unemployment-crisis/

Entrepreneurs play a vital role in job creation and providing opportunities to young people. Our annual Job Creation Survey consistently shows that entrepreneurs’ hiring plans outpace the rest. In 2015, we found that 47% of entrepreneurs (and 77% of world-leading entrepreneurs) plan to increase the size of their workforce, compared to 29% of large corporations. As a result, supporting entrepreneurs to grow their businesses will have an impact on employment rates.

However, it’s in allowing young people to follow their dreams and start their own businesses that we’ll see a significant change in the youth employment statistics. We know the ambition is there. In an EY survey earlier this year, we found that 65% of the 2,800 young people surveyed around the world want to run their own business at some point in their careers – 27% want to do so immediately and 38% after learning from someone else first. These ambitions are particularly strong in developing markets, with Mexico (91%) and China (89%) leading the way.

The challenge now is to provide young people with the support and the environment they need to turn their ambitions into reality.

What can be done? According to the survey, what young people most want is hands-on work experience and mentoring from entrepreneurs. As such, today’s entrepreneurs and business leaders have a clear role to play in nurturing the next generation of wealth and job creators.

Governments play a role too – they need to focus on providing the right environment to enable aspiring and early-stage entrepreneurs to succeed. This includes ensuring that the education system is fit for purpose.  In a paper released at the G20 YEA conference in September entitled From classroom to boardroom: Creating a culture for high impact entrepreneurship, we argue that governments must commit to, and enact, targeted education policies that support future generations of young entrepreneurs and help create a culture that is supportive of entrepreneurship.