Friday, 29 April 2016 11:32

Can Robotics Impact Global Labor Markets?

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For any central bank globally, labor market conditions along with inflation outlook is the key consideration for interest rate decisions. Further, good or bad labor market conditions have a huge impact on consumption driven growth, social unrest and pressure on government finances.

After a big slump post the financial crisis of 2008-09, labor market conditions have improved globally (some more than the other). However, there are still challenges ahead for labor markets and I see robotics as one of the key challenges.

This article discusses some key trends in robotics to conclude on the impact of increasing automation on labor markets globally.

To start my discussion, a clear trend has emerged globally in the last few years and the trend indicates increasing adoption of industrial robots. My point is underscored by the chart below that gives the estimated worldwide annual supply of industrial robots from 2004 to 2014.

 

Estimated Worldwide Supply Of Industrial Robots

 

It is clear from the chart that the adoption of robots for industrial use has been accelerating and after the recession driven slump in 2009, the global annual supply of industrial robots has increased 3.8 times (from 2009 levels).

Another important point to consider is the industries that are likely to adopt industrial robots as this puts into perspective the economies or regions that can witness potential labor crisis if the adoption of industrial robots is swift.

The chart below gives the estimated annual shipment of industrial robots by main industries for the period 2010-2012.

 

Estimated Annual Shipment Of Robots By Industry

 

The automotive sector accounts for 40% of the industrial robots shipment followed by the consumer electronics sector, which accounts for 20% of the industrial robots shipment.

For 2013, the top five motor vehicle producing countries included China, United States, Japan, Germany and South Korea.

However, as the chart below shows, the robot density is already significant in Japan, Germany and United States.

 

Robot Density In Automovie And Non Automotive Sector

 

In comparison, robots density is significantly lower in China and even lower in India, which was the sixth largest motor vehicle producer in 2013. The point that I am trying to make is that if industrial robots usage is accelerated significantly in China and India, there can be a potential impact on labor markets. The same is unlikely in advanced economies where industrial robots already have meaningful penetration.

Just to put things into perspective, the report by Oxford Martin School suggests that automation can potentially impact 69% of jobs in India and 77% of jobs in China as compared to 47% of jobs in the United States.

Another point that is worth mentioning here is that the labor crisis due to adoption of robots will arise only if the change from manual labor to robotics is very swift. If the process of automation is gradual and spread over time, it is entirely possible to reallocate labor to a different industry or towards work requiring higher skill-set.

In conclusion, industrial automation is certainly accelerating and is likely to impact certain industries if the pace of automation is very swift. It is also important to note that the research on robots has also accelerated as indicated by the number of patents filed with robot class.

 

Patents With Robot Class 2000 to 2014

 

I am mentioning this because several other industries are likely to witness an increase in industrial robots adoption as new technology takes over in the coming years. Further, research and increased innovation in this field can potentially lower cost of robots adoption and encourage wider use of industrial robots.

Therefore, the industry is still evolving and can serve as a potential thread to labor market globally. The key factor remains the pace of adoption as it gives ample time for labor reallocation. This will however hold true only if industrial robots are not adopted across industries and geographies.

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