The promises of automation

Robots, artificial intelligence and machine learning are coming, and they are coming for our jobs. But automation is a great promise as well.

That robots are coming for our jobs is an old fear, but also a promise. ARK Invest predicts that automation will add 5%, or $1.2 trillion, to US GDP during the next five years. Many, if not most, jobs will be affected or even made obsolete. Nearly half of the workforce will need reskilling. But then again, the normal working-age population is going to shrink in many countries making automation more of a blessing than a curse. Fears of mass unemployment, the rationale for a universal basic income, might be premature.

What’s relatively new is that robots are now coming for Phil in Accounting, as the New York Times put it. White-collar workers no longer can feel safe from automation. Already commonplace in factories, robots are could soon be mingling with humans in our workplaces:

“The trend has a name: so-called ‘collaborative robots’, or ‘cobots’, are those designed for direct interaction with humans. In particular, cobots can come in the form of service robots, which perform tasks that assist humans outside of industrial automation applications, such as customer service, cleaning, delivery or even surgery.”

For decades, productivity growth has been sluggish. Can AI and automation reverse this trend, especially in the service sector? For demographic reasons alone, many of the new jobs will be care jobs, which are hard to automate. But robots have been coming to health care as well. At CES this year we saw a bunch of robots designed to help us with our everyday chores. The pandemic has accelerated many trends, and the trend towards automation is clearly one of them.

The shift from unpaid to paid labour

Since the Industrial Revolution, automation has been a driver of the shift from unpaid to paid labour. Unpaid family workers in agriculture and small enterprises lost their jobs through automation. Washing machines and other household appliances monetised unpaid time and freed up (predominantly) women to enter the world of paid work. Food services and the catering industry are about to spur another round of the shift to paid labour.

Food delivery services and the pandemic have effectively turned many restaurants into cloud kitchens, and some of them will probably stick with this business model. Scaling back on restaurant dining rooms or getting rid of them saves operating costs, and the cloud kitchen model allows for higher geographical reach and more automation, which in turn saves even more money. Thus, food services will be cheaper for the consumer, enabling growth and literally eating into meal preparation at home.

The same is true for groceries. The transition to delivery is harder, since groceries need a completely different logistics chain. But this new model is more efficient than the old one and will eventually replace it, sooner or later. The supermarket model of self-service we are currently stuck with has already been a rationalisation of the older model of small grocery stores without self-service. Grocery delivery is the next logical step, and this new model has been enabled by the internet. Expect more automation down the road.

Drone delivery is taking over

E-Commerce has already automated many parts of the process from order to delivery and continues to do so. On the delivery part, drones are poised to take over from humans. Drone delivery is projected to be both cheaper and faster. More than 20% of parcel shipments could be delivered by drones within the next five years. The resulting speed and price advantage would then become another driver for the shift towards e-commerce and away from traditional retail. Drones would, of course, also accelerate the shift to food delivery.

Automation is perhaps a better analytical framework than robots, artificial intelligence, or machine learning:

“Washing machines are robots, but they’re not ‘intelligent’. They don’t know what water or clothes are. Moreover, they’re not general purpose even in the narrow domain of washing – you can’t put dishes in a washing machine, nor clothes in a dishwasher (or rather, you can, but you won’t get the result you want). They’re just another kind of automation, no different conceptually to a conveyor belt or a pick-and-place machine. Equally, machine learning lets us solve classes of problem that computers could not usefully address before, but each of those problems will require a different implementation, and different data, a different route to market, and often a different company. Each of them is a piece of automation. Each of them is a washing machine.”

Virtuous circles of automation

If and when people lose their jobs due to automation, they are worse off than before. But the economy and society as a whole are better off, because through automation output can grow faster than wages. According to ARK, increased productivity and automation can lead to higher wages (benefiting employees), lower prices (benefiting consumers), higher margins (benefiting companies) and higher investments (creating virtuous cycles). Does this sound too optimistic? Maybe it is.

But then, the whole process of industrial revolutions is a history of automation, and these virtuous circles are the essence of it. Granted, it’s a complex coordination and optimisation problem that can’t be solved by market forces alone. Besides the innovations of automation, we’ll need regulation, social responsibility, smart consumer choices and education to solve the issues and make the promises a reality.

Of course, we can doubt that the shift from unpaid to paid labour and the corresponding expansion of the economy and the markets are a good thing. But then, that’s what many people choose and aspire to, for economic and personal reasons. It corresponds to the seminal shift away from the nuclear family. But that’s another topic.

Last updated on April 29, 2021. Photo by Lukas on Unsplash