COVID-19 really accelerated things. One area is in the area of automation.
This really should not come as much of a surprise. Over the last year, we saw a lot of companies announcing they were adding more to their warehouses or implementing RPA system in their offices. Software developers are including more features in their ERP products.
All of this is leading to a pretty dark story for employees.
Of course, this also should not be shocking to most people. Some still believe that we are going to see more jobs created as a result of technology yet the pace of things is going to make this tough. Instead we are going to see massive job eradication.
The combination of automation and digitization is going to make it very difficult for employees.
Manufacturing is obviously an industry that is at the head of the list. We are seeing robots really penetrating this sector.
The latest jobs report shows the manufacturing sector grew at its fastest level since the pandemic began, jumping by 50,000 positions. However, there are still about half a million fewer employed manufacturing workers than there were a year ago. The question is how many of those jobs will come back — and how many have been permanently disrupted by digital processes.
This basically sums it all up. All the jobs lost and maybe 10% have returned. Even if we see these numbers reverse, where 90% return to pre-pandemic levels, that still would be 50K manufacturing jobs lost.
Sadly, from the looks of things, even if things go well, we will still see a reduction of 150K-250K.
What we are seeing is aligning with the stats that people who study this subject are coming up with.
Yet it’s estimated every one automated device replaces six human workers, according to Daron Acemoglu, an MIT professor of economics who studies the effects on labor. While about three of the displaced workers will find other jobs, the other workers "withdraw from the labor force," he said, with the greatest labor force participation happening among prime age males without college degrees.
So for each automated device, we see 3 people permanently out of the labor force. This is a tough situation to confront.
What we are finding is that companies that develop and make these products are seeing their sales increase.
Rockwell Automation, a provider of industrial automation solutions, said growth is up 6 percent for the fiscal year and saw sharply increased orders in November and December.
Orders for automated machines are up 30 percent at Eastman Machine Company, a Buffalo, New York-based manufacturer that produces machines that cut specialty materials like carbon fiber and fiberglass, increasingly in demand for cars, aerospace and wind turbines. The backlog for a new device extends to June, their longest in company history.
Here we are seeing how the automation industry is forging ahead. There is little doubt that companies are seeking to implement technologies in their operations.
As noted, this is not new. We saw this trend in place long before COVID-19. However, the process was accelerated enormously by the pandemic. Companies suddenly found themselves unable to operate since workers were locked down. Social distancing because the norm meaning that warehouse staffs were seriously reduced.
How bad could things get?
Robots could replace as many as 2 million more workers in manufacturing by 2025, Acemoglu found, contributing to wage inequality, a slowdown in labor demand, and an even higher share of GDP going to the owners of capital than labor.
Manufacturing is a sector that started to see job destruction decades ago. Yet the production of the United States has consistently increased in spite of what people believe. It all was not outsourced.
The story in the manufacturing realm is that we are see record production yet the industry is down around 2 million people from the high.
Companies are getting more with less.
Of course, manufacturing is not the only segment that is following this trend. Through advancements in software, we are seeing automation in the office moving ahead full tilt. RPA is shifting tasks done by workers to computers, thus reducing the need for an many people.
Even though complete replacement of all workers is not in the cards anytime soon, we are seeing an evolutionary progression in the direction of less workers.
This all sounds like gloom and doom. However, it is a viewpoint that is grounded in what is taking place with technological advancements. We have a situation where the retraining of personnel is non-existent. People who follow this situation urge governments to step up their attention on this.
Politicians do nothing more pay this lip service, preferring to kick the can down the road. Therefore, we will see nothing done on that front until it is too late. Politicians are ideal in that they are always late to the party.
Corporations are not going to retrain people since they know that labor is usually their biggest expense. Anything to reduce this is welcomed by them.
A labor force that is desperate is ideal for them. This will help to suppress wages since they can cherry pick who they want. Those selected will simply be happy to be employed.
Worst hit are going to be those who are uneducated and do not have the skillset for the 21st century. This means tens of millions could find themselves in a very challenging situation in the not too distant future.
It is a trend that is firmly in place. At this point, it is impossible to deny.
