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Is the Automation of the Economy a Danger or an Opportunity?

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We are witnessing a new era, in which robots and computers will be the protagonists of a series of routine activities, replacing physical work, much more efficiently than humans, which will lead to the automation of production processes.

Although many see in this era a threat, automation of much of the activities will increase the levels of productivity, reducing the errors of the human factor and will improve both the quality and the speed in certain assumptions to reach results that go well beyond the capacities of the human being.

automation chart

As has been reflected throughout history with the different industrial revolutions, technological advances have meant a greater degree of productivity and have repercussions on the welfare of a society, which has resulted in fewer hours worked annually. In fact, Germany, the Netherlands, Norway and Denmark – high-productivity countries – are among the OECD countries using fewer hours worked throughout the year.

Within countries, automation will affect different industries and productive activities. Industries such as manufacturing and agriculture include predictable physical activities with a high technical potential for automation.

The automation of the economy

The rise of robotics will change the way in which many sectors have developed their activity to date. Think of predictable and repetitive physical activities such as manufacturing processes, retailing, or data collection and processing Do human beings need to be used?

automation mckinsey chart

The automation will have wide effects, from the geographic point and sectors. Although automation is a global phenomenon, four economies – China, India, Japan and the United States – account for slightly more than half of total wages and almost two-thirds of the number of employees associated with technically automated activities.

Current estimates by a McKinsey & Company report, envisage that the automation of various productive activities would lead to a productivity increase of between 0.8 and 1.4% annually.

The process will be gradual and there are numerous variables that can facilitate or hinder the adoption of automation. Among the factors that will condition automation are: technical feasibility, the dynamics of the labor market and, in particular, the regulatory aspect that will condition the final costs.

Repetitive and low-skilled jobs will be those with the highest risk of automation

Robots seem to have come to stay, but it remains to be seen how companies and workers will adapt to technology in the coming years. Workers should be aware of how robots are already changing the employment landscape and adapt to the new model.

 

All those jobs with a mechanization component or especially repetitive that do not require a great qualification have strong incentives to be automated in the future. The accounts are clear if the salary costs are higher than the amortization of the new technology, will undoubtedly be decided to support or install this type of automation.

For this reason, automation will cause a job displacement that could imply, in the first instance, an increase in the gap between those employees with higher qualifications and those with lower qualifications.

A curious fact is that in the United States, the company Momentum Machines, has created a robot capable of meeting the growing demand of fast food restaurants, while it would end the workforce, as it is capable of making 400 hamburgers hourly.

Former McDonald’s chief executive Edward H. Rensi commented that “it would be cheaper to buy a $35,000 robotic arm than to pay an inefficient cashier $15 an hour.”

According to OECD data, on average, 9% of the work of the 21 OECD countries are potentially automated jobs. However, there are notable differences across the different countries of the group. For example, in South Korea automated work would be 6% and in Austria it would reach 12%.

Worldwide, technically automated activities will be the equivalent of 1.1 billion employees. Four economies – China, India, Japan and the United States – account for slightly more than half of these total employees. However, it should be noted that China and India jointly represent the greatest potential for technically automated employment, with more than 700 million full-time jobs.

The potential is also high in Europe: 54 million full-time employees would be associated with automation risk affecting in the five largest economies: Germany, France, Italy, Spain and the United Kingdom.

Does that mean that my job will be destroyed?

The loss of jobs will be accompanied by ** the creation of new market segments that will allow the reincorporation of all the labor supply ** destroyed by technological advances. These works will be linked to the creativity and not so much to the manufacture of the products. And since knowledge is not limited but expands, business lines act in the same way.

Just think, a few years ago, with the emergence of smartphones, important market segments opened up such as the mobile application environment. At this point, an industry with a large global presence has been developed that seeks to maximize connectivity.

automation world economy

The world of applications has allowed to develop a more collaborative economy between individuals, eliminating the traditional intermediaries. We see it in the monopoly of the taxi with the appearance of Uber or in markets such as the traditional banking oligopoly that faces new avenues of funding such as crowdfunding.

To think that the emergence of a new technology will forever leave unemployed workers without the ability to reintegrate into the labor market is a complete fallacy. As the market develops, new activities are born. The key will be the period of adaptation during the transition process.

Most likely, we are heading to a society in which workers will be required to have creative skills capable of complementing robotics. In particular, this means becoming experts in the functions that a computer simply can not perform such as customer service, care, or other value propositions.

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