Robots and The Economy: The Role of Automation in Productivity Growth

Innovation in manufacturing is crucial to ensuring competitiveness in the global economy. The revolution in robotics is growing, with rapid technological advancements in automation engineering and energy storage and machine learning, and artificial intelligence combined. The profound results will alter the capabilities of robots and their capacity to perform tasks that humans previously carried out.

The rise of robots will boost productivity and enhance economic growth. It will also create jobs in industries that aren’t yet established. It will help increase the economy, but millions of current jobs could disappear. There’s no way to ignore the role of robotic automation in the present time.

Let’s explore the importance of automation for productivity growth.

The Rise of the Machines

Technology has been essential in improving work efficiency for thousands of years, from the most straightforward agricultural tools to modern-day assembly line robots used in factories. Robots can work alongside humans or substitute them altogether. Inc. (NASDAQ: AMZN) uses several robots in its warehouses to stock inventory, collect and pack items. They use products and food packaging automation to increase their working speed and growth.

Tesla Motors Inc. (NASDAQ: TSLA) boasts robotic assembly lines for electric vehicles and batteries. For example, Using waterjet cutting automation boosts Tesla’s productivity and growth significantly.

Robots are being used to help children in therapy. Robots are replacing jobs and pose a significant risk to those with lower skills. Even for workers with middle skills, there are many positive effects that robots can have on the economic system.

Manufacturing and Robots

Automation is a type of technology that automatizes repeating it, thus eliminating the need for human intervention. As you’ve probably guessed, automation can refer to everything from self-checkout lines at the supermarket to an Automated Tellers Machine (ATMs) at banks. It is crucial to research the effects of automation in the workplace and understand how technology can change the fundamental manufacturing processes.

A study from all over the world shows that the industries that have easy automation of labor and the resources to overcome the barriers to cost that are associated with the adoption of industrial robots are the ones that naturally use the most significant number of robots. These industries are automotive and other transportation manufacturing, metal and electrical/electronic manufacturing, chemical manufacturing, food and beverage manufacturing, and wood and paper manufacturing. The construction, education, utilities and mines, quarrying, forestry, agriculture, and fishing industries face many obstacles and use the smallest number of robots.

Although some industries have been slow to adopt robots, there has been a rise in automation worldwide. In the United States, industrial robot installations grew at a 10.28 percent Compound Annual Growth Rate (CAGR) over the last decade, increasing from 15,170 in 2008 up to 40,373 in the year 2018. Most U.S. automation is in manufacturing, and that accounted for 82.3 percent of the industrial robots in the entire U.S. industry in 2018.

Productivity Growth

A higher standard of living can come from more wages, lower prices of goods and services, and a more comprehensive range of services and products. The growth in labor productivity, measured in the output of an hour, is the factor that causes these changes to happen. It combines three elements: improvements in the quality of labor, increases in capital, and the Total Factor Productivity (TFP) is also referred to by the term multi-factor productivity.

The improvement in the quality of work results from more education and training of employees. Capital boosts productivity by investing in computers, robotics, automation, and other output equipment.

Here, for example, keeping the education and efficiency of workers constant regardless of the equipment employing them increases their productivity and efficiency, and the TFP remains elevated. Robots have undoubtedly made the “machine” component more efficient. Although the human element of factories stays the same, the increased efficiency of robotics leads to more productivity increases.

Gross Domestic Product Development

It is not surprising that GDP increases with the increase in productivity. In December 2018, an article by Georg Graetz of Uppsala University and Guy Michaels of the London School of Economics entitled “Robots at work” looked at the effects robotics had on the economy. They examined their study of the United States and 16 other countries and looked at various data over 15 years, which ended in 2007. Graetz and Michaels discovered that, on average, across 17 countries, the growing usage of industrial robots increased the annual GDP growth by 0.36 percent. They compared this significant growth to the rise in productivity from the beginning of the 20th century due to steam technology.

Job Creation

Many people don’t realize that robotics has created new lucrative positions that need skilled people. While it’s fundamental that robotics replace lower-skilled workers and automate tasks they do, robots and automation are creating work that focuses workers on jobs with more excellent value. For instance, robots can do menial tasks like raw material sorting, transporting, and stocking in manufacturing. However, more skilled tasks like quality-related that humans are better adept at can be accomplished by experienced workers.

Although it is the case that robots and automation are removing whole categories of work across various industries, there is never a better time to seek better-paying, more skilled jobs as long as they are competent and educated to fill the roles.

Final Words

With the rapid growth of Artificial Intelligence (AI) technology, robotic automation is expanding and deepening. If the learning capacity of robots is higher than human capital, it will not be steady growth in the economic system. The economy will likely exhibit a sustained growth pattern.

Balancing human and robotic automation, The rate of change in production per capita, wealth per capita, and the number of robots per capita will continue to increase. There is a perfect robot investment ratio that will maximize the growth rate. Manufacturers shouldn’t increase their investments in robots. The way to enhance the ability of robots to learn is equally important.