Demography explains why robots won’t take our jobs

Demography explains why robots won’t take our jobs

This year I opened the debate around the impact of robots and artificial intelligence on jobs and work with a post titled “The places where you don’t expect to meet a robot and the future of work”.

I received a mix of comments, mainly pertaining to two opposite positions. Some say automation, robots and artificial intelligence are going to erase human jobs in the near future. Others embrace positively those technologies, because they can replace humans in boring, repetitive, dangerous or heavy tasks, freeing up valuable time for people. They are both wrong and I’m telling you why.

As I’m an economist, I thought that a supply – demand law type of investigation could help. If the worldwide workforce is shrinking, we need more robots to fill the gaps; if new workforce is coming in the market and robots are competitors for jobs, yes we have a problem. The question (if robots won’t take our jobs) is simple, unfortunately the answer is a bit more complex.

Demography explains why robots won't take our jobsThere are tons of official statistics around the web and sometimes they look after number one. First of all, the labor force is growing. From about 3 bn people in 2005 to 3,3 in 2013. Labor force, according to the International Labour Organization, comprises people aged 15 and older capable to supply labor for the production of goods and services. Do we have an answer now? Not at all. Mainly for three reasons. First, because it includes both the employed and the unemployed. Second because this tells us nothing about the geographic differences. Third because we want to have an outlook of the situation in 10 or 20 year time.

The general consensus is that future demographic trends represent a risk, because there will be regions with chronic labor shortages and other areas with big labor surpluses. Although the global working-age population is expected to grow by 900 million units by 2030, the situation around the world is not uniform and some of the current surpluses will turn into massive shortfall by that time.

31december2099For example, Germany will see a shortage of up to 10 million workers by 2030. Brazil forecast is terrible, reversing from current surplus into potentially more than 40 million workers missing in 2030. Italy and Canada will have moderate shortfalls. Russia is and will be in a deficit position. US and UK may maintain the current moderate surplus. Some can argue that those situations will be more than compensated by China, India and other developing countries. This is only partially true. For example, China current huge surplus, may turn into a shortage of more than 20 million workers in 15 years. Before any consideration on if and how the shortages will be off-set by something else, please keep in mind, the impact on economy is huge. According to some sources, China has reached today in 2015 a point where the surplus of workforce coming from the rural areas is exhausted, so salaries will begin to grow, generating inflation rates capable of slowing down (if not stop) the Chinese growth. The global growth will be driven by Sub-Saharan Africa and South-Central Asia.

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So to make it simple, workforce will grow, but will be in the wrong place. For (western) countries, highly impacted by present and future shortage of labor force, there are mainly two solutions: change immigration policies or increase productivity through technological investment and innovation. I agree that increasing the labor force participation rate of women and the elderly or the number of hours worked per week can help, but I don’t see big examples of successes in those areas. Countries like France reduced the number of weekly hours by law.

Now the last point. Can we really think that opening to immigration can solve the issue? The problem is that labor force is highly differentiated in terms of abilities; western countries need specialized labor force, so unless immigration is coupled with relevant investments in education, this model will be not sufficient anyway. As education is mainly in the hands of governments deep in debt, I’m not really confident this is going to work.

This leaves open the door to automation, robots and artificial intelligence. They are necessary. Robots won’t take our jobs.

 

If you want to find good resources and amazing graphs on this topic follow the links below

BCG on global workforce

https://www.bcgperspectives.com/content/articles/management_two_speed_economy_public_sector_global_workforce_crisis/?chapter=2

Future HR trends

http://futurehrtrends.eiu.com/report-2015/profile-of-the-global-workforce-present-and-future/

Stanford on longevity (.pdf)

http://longevity3.stanford.edu/wp-content/uploads/2014/01/SCL_Pop-Age-Shifts_Work-Force_April-2010_v2_FINALWEB.pdf

 

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2 Comments

  1. Since you are an economist it might be insightful to consider that aspect. In recent years jobs have moved from the US to China not based on relative shortages or surpluses of workers but due to the cost of labor. Robots like Baxter who can work 20+ hours/day without coffee breaks, vacations, or medical insurance offer a financial advantage compared to humans.

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