Boom Time for Robots, but no one Else?

By: Sheila Moorcroft

Is the current jobless recovery in the USA a foretaste of what the growing capabilities of robots could inflict on the workforce and the economy? Are we seeing the early indicators of the need for an economic rethink?

What is changing?

Robot capabilities continue to increase across a range of intrinsically human capabilities – to walk, see, navigate, manipulate tools, even collaborate – to name but a few. They also increasingly have capabilities that we do not have – to swim at great depths in the ocean or fly in dangerous places such as battlefields or inside manufacturing plant – to inspect, explore and report back.  Recent robot fairs, conferences and exhibitions abound with such examples.

These capabilities are beginning to raise alarm bells that the jobless recovery that is currently underway in the USA is a taste of things to come.  We may be about to see whole swathes of human economic activity replaced by robots or automated systems capable of doing many jobs such as taking food orders in restaurants, searching legal documents for relevant evidence or planting and harvesting. The result, some are predicting is a hollowing out of middle level jobs, so that primarily high skilled and very low skilled remain.

The scale of the potential shift is illustrated by Foxconn, the Taiwanese company that makes iPads and iPhones mostly in China. It currently has a human workforce of 1.2 million, and a robot workforce of 10,000; it plans to ‘hire’ 1 million robots by 2013 with all the attendant benefits of 24 hour working and fewer labour relations problems – Foxconn has been the focus of employee demonstrations and even suicides in recent months. While this example is in relatively conventional robot application territory –manufacturing – the scale and the fact that it is in China, where previously low wages were a major attraction, is perhaps an early indicator of things to come.

Why is this important?

Productivity and competitiveness are the mantras of modern economics. However, if we begin to replace too many jobs, too fast and thus consumer spending and confidence reduce further, the likelihood of a recovery in consumer spending could be on permanent hold for large portions of the population. If, as others are predicting, some jobs will never return after the recovery – in banks, military, government, postal services and others such as pharmacists or prison guards can be done by robots, this will add to the jobless recovery and raise the need for a rethink.

The advent of robots, will, like the arrival of any other new technology, provide new and as yet unimagined opportunities and undoubtedly make workplaces safer for some, and allow us to explore new frontiers in space and on the deep seabed. With aging workforces and growing care needs, looming skill shortages, a war for talent, and reluctance among some workers to take low paid jobs, robots on the other hand may also increasingly be needed.

The question is to what degree new opportunities and filling gaps in the workforce will balance out job replacement. One author predicts 50% unemployment in America as vast numbers of jobs in construction, manufacturing, retail and transportation disappear over the next 20 years or so.

Could we be seeing the beginnings of the need for a shift in economic thinking, that there needs to be a re-balancing between cost cutting – what could be called a race to the bottom – on the one hand and wider economic benefits such as enough disposable income to maintain growth on the other?  Are we seeing the end of what is called Okun’s rule of thumb – that 3% point increase in output resulted in 1% reduction in unemployment? Whether or not such gloomy forecasts are true, what might a world of 50% unemployment look like? What kinds of social systems, new economic mechanisms might be needed? If the middle classes disappeared, what would society look like?

By Sheila Moorcroft