A looming job crises

The growing production automation (robotisation) is going to hit Countries that have "imported" manufacturing to serve the Westerns world. Credit: World Bank Development Report 2016

Manufacturing is undergoing a significant change with the displacement of human labour in favour of robots. 

Robots are becoming more and more flexible, hence they can be used in many more manufacturing sectors, the products life cycle is getting shorter and this pushes further more the usage of robots. The payback time for the investment on a robot is decreasing. In China it has almost halved in the last five years, now being close to 1.4 years the return on the investment, in Thailand, where the labour cost is lower than China, the return on investment for a robot has decreased from 5 to 3.2 years over the same period.

Additionally, more and more products are a mixture of "software" and "hardware": whilst the hardware has to be manufactured/assembled in a specific location (and in specific points in the supply/delivery chain) the software can be developed anywhere and is embedded in the product potentially at the end of the delivery chain (and more and more it keeps getting updated on the customer premises).

Developing Countries had the advantage of lower labour cost. That shifted production from the Western World to them, thanks to a very effective supply and delivery chain making the transportation cost a minor part of the product cost. Now this advantage is fading out, both because of the increased salary level in those Countries and because automated manufacturing cost is roughly the same in any Country.

The emergence of software as a fundamental component is also attracting manufacturing in those areas where there is a higher level of education.

The 2016 Report on Technology at Work v2.0 (the Future is not what it used to be) makes for an extremely interesting reading.

This report picks up on previous work by the World Bank (also published at the beginning of 2016) showing that Countries like Thailand, Ethiopia, Nigeria, China and India are facing very high risk of seeing their manufacturing employment slashed by the evolution of the production processes.

This does not apply to developing Countries only. Also US and Western Europe will be affected, although to a lesser degree, also because some of these areas will see a return of manufacturing plants in their territory thanks to a decreased labour cost differential.

The progress in computation power and the huge availability of data is revolutionising  (or advancing ... your pick) artificial intelligence providing machines with learning capabilities and making them a competitor in areas that are considered beyond their scope.

Indeed, one of the most interesting point raised by the report is not the growth of automation, that is ongoing, in manufacturing but the extension of scope of automation. Software programs are starting to be created automatically, and software jobs have been the one counteracting the decline of manufacturing jobs...

Someone is starting to say that journalists may be displaced by bots in creating articles... 
Obviously the reactions are very strong and in a way well articulated. Still, just the fact that someone may consider this as a possibility in the near future is amazing. And I mentioned "journalists" explicitly because it seems to me one of the most unlikely area, an area where some sort of ethical judgement is needed, something that has to be outside of machine capabilities!

Author - Roberto Saracco

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