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Supply Chain News: Oxford Economics Says Robots Benefits will Outweigh Cons


20 Million in Job Losses from Robots in Manufacturing, but Increased Productivity will Drive More Economic Growth

July 2, 2019
SCDigest Editorial Staff

We are clearly in new era of robotics.

The number of robots in use worldwide multiplied three-fold over the past two decades, to 2.25 million. Trends suggest the global stock of robots will multiply even faster in the next 20 years, reaching as many as 20 million by 2030.

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Oxford Economics, for example, estimates that only about 260,000 US manufacturing jobs have been lost to robots, or just 2% of the total jobs.

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So says a new report on the impact of robots on jobs, society and more from Oxford Economics.

And it sees a "good news/bad news" scenario. All the robots will actually increase economic growth by boosting productivity, the report says. But with those gains will come costs to some people and industries – especially low skilled workers.

We're seeing that playing out in China, where one of every three new manufacturing robots is being installed, and its share of robot deployments globally is rising. The report says that "If this trajectory of investment continues, by 2030 China could have as many as 14 million industrial robots in use, dwarfing the rest of the world's stock of industrial robots as it reinforces its position as the world's primary manufacturing hub."

Oxford Economics' econometric modelling finds that on average each newly installed robot displaces 1.6 manufacturing workers.

That's a lower figure than many would have guessed. But by 2030, the report estimates that as many as 20 million additional manufacturing jobs worldwide could be displaced due to robotization.

However, Oxford economics believes the fears about permanent job losses from robots appear somewhat exaggerated.

"Our study shows that the current wave of robotization tends to boost productivity and economic growth, generating new employment opportunities at a rate comparable to the pace of job destruction," the report says.

And the more robots, the more the overall positive economic impact. The research, for example, found boosting robot installations to 30% above the baseline forecast by 2030 would lead to an estimated 5.3% boost in global GDP that year.

The key attribute for robotizing a job is the extent to which the work is repetitive. So, "Jobs like warehouse work are in imminent danger, while other jobs in less structured environments will likely be carried out by humans for decades to come," the report observes.

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The report notes that the auto industry has been by far the most aggressive sector in terms of robot deployments in manufacturing. But that is starting to change.

For example, the share of new robot installations in high tech manufacturing grew to 31% in 2016, from 21% in 2000, reflecting rapid growth both in the sector and in the integration of robots into production.

Factors Fueling Robotization in Manufacturing

Why such accelerating growth in robot deployment? The report cites three key factors:

1. Robots are becoming cheaper than humans: The rapid expansion in robot installations is driven in part by the plummeting real costs of the machines. As with other advanced technologies, exponential growth in the processing power of microchips, extended battery lives, and the benefits of ever-larger, smarter networks have all dramatically increased the per-unit value of many technological components, while the average unit price of a robot fell by 11% between 2011 and 2016.

2. Robots are rapidly becoming more capable: As robot technologies improve, they are being used in ever more sophisticated processes in more varied contexts, and can be installed more rapidly. Innovations have made today's robots smaller, more sensitive to their environments, and more collaborative. Thanks to AI, they can learn from their experience and make decisions informed by data from a network of other robots. These development have helped propel robot adoption in sectors beyond the automotive industry.

3. Demand for manufactured goods is rising, and China is investing in robots to position itself as the global manufacturing leader: Much of the growth in robot stock over the past decade can be attributed to rising demand for manufactured goods. China is at the heart of this change: it has become the world's largest automotive manufacturing country, and a major producer of consumer electronic devices, batteries, and semi-conductors - all highly robot-intensive manufacturing sectors.

This trend is set to continue, as China is still only at the beginning of its automation journey. Despite its rapidly growing inventory, China only uses 68 robots per 10,000 workers in general manufacturing, compared with 303 per 10,000 in Japan, and 631 per 10,000 in South Korea.

As noted above, however, Oxford Economics does not see massive job losses in manufacturing from all the robots. It's thinking is like this: By reducing the cost of making goods and thus their prices, it effectively raises the real spending power of consumers. Therefore, the same robots that displace jobs in manufacturing also create employment across the wider economy.

That is not to say, of course, that there will not be impacts. Millions of jobs will be replaced by robots, and in a given local area – say in the factory that current employs thousands in a single town – the impact could be significant.

But the numbers are not as bad as many think. Oxford Economics, for example, estimates that only about 260,000 US manufacturing jobs have been lost to robots, or just 2% of the total jobs. And the 20 million manufacturing jobs Oxford expects to be lost globally to robots by 2030 represents a modest 8.5% of total jobs – many of which will be offset by new jobs created.

But lower income economies will likely see greater proportional job losses than more developed economies, as much of their low skilled work is easier to replace with robots than more complex work. Even worse for those countries, "the regions of a country most likely to shed manufacturing workers will not benefit equally from the "robotics dividend" - the new jobs created from the productivity boost that feed into the wider economy."

The report offers an interesting analysis of what regions of leading countries will see the biggest impact from the rise of robots in manufacturing, including one for the US, as shown below:


Source: Oxford Economics


It is clear there is a strong correlation between the percent of manufacturing in a given state and thus its vulnerability. SCDigest will note, however, that the Oxford study did not consider software robots, which may impact the more service job focused states in similar ways.

In the end, despite some flack likely to result from widespread robot adoption, Oxford recommend that business leaders "Do not hesitate to seek technological solutions to your business challenges; the pace of innovation is increasing, and global competition continues to intensify."

As for governments, the recommendation is that they "identify the areas most vulnerable to dislocation from the rise of robots and develop aggressive, forward-thinking programs to counteract those effects. Explore all policy options, from infrastructure investments to training initiatives and innovative welfare programs (such as universal basic income).

The interesting full report from Oxford Economics can be found here: How Robots Change the World

What do you think of this Oxford Economics study on robots? Too postive on net impact of robots - or right on? Let us know your thoughts at the Feedback section below.


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