By Frank-Jürgen Richter
In 2013 Carl Frey and Michael Osborne, researchers at Oxford University, predicted that robots would take over nearly half of US jobs. Their finding has been supported in principle by the McKinsey Global Institute, but they say it will take ages, though the near-term effect will be to beneficially transform work. I broadly concur with the institute, and suggest that an open, informed discussion of the effects of robotization should be at the forefront of all governments’ agendas. The nature of globalization, demographics, and how a nation’s elderly population can be supported are to be discussed when more than 400 delegates gather in Cascais, Portugal for the Horasis Global Meeting over the weekend.
Robotization was discussed in this meeting as one solution for the long term, and it was of particular interest to Chinese delegates as they have just heard that Moody’s Investors Service has downgraded China’s credit rating for the first time in almost 30 years. Moody’s cited China’s falling financial strength as its growth slows. Robots in the future will be able to perform tasks as broad as offering social support to the ill, as well as performing surgical procedures guided by a remote specialist: In fact, few tasks are immune from robotic support. Thus I suggest that robotization will have future wide-spread economic benefits based on three inter-connected present-day observations.
First, US President Donald Trump is attempting to renegotiate many US laws; one concerns Corporate Tax. In essence he alleges that too many US firms have profits totaling $2.5 trillion hidden overseas to avoid US tax. He wishes to allow the repatriation of this wealth so the US will gain tax income. If the reform is sensitive, firms will gain additional freedom to reallocate cash, as well as utilize a huge amount of money hidden “under the mattress for a rainy day” located in the US itself. While the IMF notes global growth is resurgent it says the manufacturing and services base remains weak, with low total factor productivity (TFP). They suggest firms are retaining old machines and old-fashioned working methods.
My second consideration notes that the global population may grow to about 11 billion by the end of the century even though many nations have a falling birth rate. In many developed economies unemployment levels are falling below 5 percent – a figure accepted by economists as “full employment” though the details must be carefully considered. In this group are a few who choose not to work or are between jobs, and those who are physically and mentally incapacitated. With low TFP, firms cannot expand output without employing more people or re-engineering the work-place or employing robots.
Interwoven are populist demands in many nations: “Bring back our jobs [from overseas] and return them to our own people! Stop immigration!” This strident message does not heed demographers who tell us we need more immigrants to uphold our work force numbers to maintain the dependency ratio as our populations become more elderly. Globally there are too few suitably qualified migrants to slot into the vacant jobs in our nations. Thus employing more people seems a non-starter, and we must look to re-engineering the work-place and employing robots.
There is a resistance to re-engineering based on new machines as there are many cheap nearly-new machines in scrap-yards, and the current work-force will need little re-training to use them. But old machines remain inefficient – in human and mechanical terms, as they will not increase TFP. Nor would it allow for the dependency ratio to be raised enough to increase income tax and thus create more cash for social welfare schemes to support the elderly.
My third point arises from a re-evaluation of the global population. To raise TFP the working population has to work smarter and use robots. Just as workers used machines to augment their muscle power following the Industrial Revolution we must accept future electro or digital aid by robots. Modern Luddites worry that jobs will be taken away by robots. This is unlikely to be so.
Robotization will not occur overnight. This mode of employing robots will be a gradual process taking perhaps three to six generations: certainly the employment scene will be very different 60 years from now.
In conclusion, there is an imperative for all governments to engage their citizens in open and honest discussions about their demographic needs. What are the economic benefits of more or less immigration? What will occur if there are too few workers? And in much more visionary terms, what will occur when the migrant pool dries up? These are not easy questions to ask when faced with the daily tasks of governing, and when many governments have explicit restrictions on immigrant numbers, or who have promised their electorate to cut immigration. In truth, there are few mobile immigrants – the figure has been stable at about 3 percent of the global population for years, but many citizens are unduly frightened and they forget all nations were built upon immigrant stock.
The author is founder and chairman of Horasis, a Switzerland-based global visions community organization.