As the coronavirus has swept across the globe, the swathes of redundancies that have followed in its wake have relegated the “robots are taking our jobs” narrative into the background.  It was a narrative with a somewhat mixed logic at the best of times.

For instance, research from the London School of Economics (LSE)found that the introduction of industrial robots has actually increased wages for employees while also increasing the number of job opportunities for highly skilled people.

The researchers conducted a comprehensive analysis of the economic impact of industrial robots over 17 countries between 1993 and 2007 across 14 different industries.  The period of analysis corresponded with a huge rise in the use of industrial robots, with the price of such machinery also falling by approximately 80%.  What impact did this have on the human workforce?

“We can see that industrial robots increase employee wages and increase productivity and that the number of jobs for low-skilled employees, and also to some extent for the medium-skilled, decreases, while job opportunities for the highly skilled increase,” the authors say.

Jobs and automation

A second paper from LSE found that there was no real relation to the return of jobs after a recession, and the investment in automated technologies in a particular industry.  A notable exception in their global study was the United States, with this then confirmed in another study, by the National Bureau of Economic Research, which found that those industries investing most in industrial robotics did indeed suffer lower employment levels, with each robot equating to around six human employees.

They are at pains to point out, however, that this is not to be taken as a sign of jobs being destroyed, or indeed that this technological disruption is a new thing.

“The process of machines replacing human labor is not something that is new,” they say. “It’s been going on for 200 years. Why is it the case that we still have so many jobs?”

Speed of deployment

New research from MIT suggests the key to the impact of robots on employment is the speed of their deployment.  The study suggests that when companies add robots quickly, they also tend to add human workers to their payroll too.  When companies are less enthusiastic in their investment in technology, it tends to coincide with job losses.

The study, which was conducted in the French manufacturing sector, highlights the nuances of technology investments, as firms that invested in robots early on tended to grow faster than their competitors because the investment allowed them to reduce costs that were not falling elsewhere in the sector.

Indeed, the data shows that a 20% increase in robot use in the sector between 2010 and 2015 corresponded with a 3.2% fall in employment across the sector.  When looking at individual firms, however, those companies investing heavily in robots actually saw total employee hours rise by 10.9%.

The companies that added robots to their manufacturing processes were able to be both more productive and profitable.  As such, while the share of income going to workers fell by between 4-6%, the growth the companies were able to achieve as a result of the investment meant that they typically added more workers to their workforce.

This is in stark contrast to those firms that didn’t invest in robots, who saw no real change in their labor share of income, but saw their workforces shrink by around 2.5% for every 10% increase in the size of the robotic workforce at their competitors.

“Looking at the result, you might think [at first] it’s the opposite of the U.S. result, where the robot adoption goes hand in hand with destruction of jobs, whereas in France, robot-adopting firms are expanding their employment,” the researchers say. “But that’s only because they’re expanding at the expense of their competitors. What we show is that when we add the indirect effect on those competitors, the overall effect is negative and comparable to what we find the in the U.S.”

Robotic superstardom

The analysis undertaken in France mirrored that of a previous paper from another team at MIT.  It too dispelled the myth that investing in technology leads to job cuts, and also found that it was actually ‘not’ investing that typically led to job cuts.

This is because markets are increasingly structured in a way that sees the lion’s share of the spoils going to a relatively small number of superstar firms that are able to pull away from the pack.  These firms are not technological laggards, but are instead at the vanguard of technology in their industry.

As such, even while these firms typically have a lower labor share of revenue than would previously have been the case, by investing in technology and becoming more productive, they gain a larger market share, which typically results in their overall employment rising.

Spreading technology around

An analysis undertaken of the German market underlines the importance of ensuring digital transformation is not confined to a small number of superstar firms.

It argues that preventing the development and spread of new technologies will do more harm than good, and a more productive approach would be to try and reinvigorate the entrepreneurship of past generations that, they argue, underpinned a more inclusive form of economic growth.

Germany is in many ways a perfect Petri dish, as not only has inequality risen significantly since unification, they have also forgone the shift towards a finance-driven economy seen in Britain and the United States, and have seen few jobs outsourced due to globalization.

It’s also an economy whereby automation has generally created many more jobs than have been displaced.  Yet inequality remains, and the researchers argue that the economy has saved to such an extent that investment in innovation has been strangled.  This reduction in investment has, the researchers suggest, led to the decline in productivity in Germany, which has undermined wage growth.

Thus, the authors believe that far from the future of work being one where technology is something to be feared, it is instead beholden on us to increase our investment in technology to improve the inequality that undermines our confidence about the future.