Robots having a steam engine like effect on productivity but are NOT killing jobs overall so far

Despite ubiquitous discussions of robots’ potential impact, there is almost no systematic empirical evidence on their economic effects. Researchers analyzed for the first time the economic impact of industrial robots, using new data on a panel of industries in 17 countries from 1993-2007. We find that industrial robots increased both labor productivity and value added. Our panel identification is robust to numerous controls, and they found similar results instrumenting increased robot use with a measure of workers’ replaceability by robots, which is based on the tasks prevalent in industries before robots were widely employed. We calculate that the increased use of robots raised countries’ average growth rates by about 0.37 percentage points. We also find that robots increased both wages and total factor productivity. While robots had no significant effect on total hours worked, there is some evidence that they reduced the hours of both low-skilled and middle-skilled workers.

The Harvard Business Review provides a review of the article and additional context.

Assuming more analyses fall into line with Graetz’ and Michael’s work it will be possible to say that robots have become visible in the productivity data — and that the data and observed realities match up and can be useful. In addition, the scale of the robots’ impact — even with technology improvements racing along — suggests that robotics may well be a big thing: a general purpose technology that over time pervades the economy, spawns myriad new innovations, and elevates productivity for years, with major impacts on society. No, we’re not there yet, as Summers notes, but the evidence suggests that day is coming. As to the bots’ impact on employment, that is less clearly visible, and may be positive, negative, or mixed. Yet if the IT experience is any indicator, full adoption of a powerful technology can take a generation, and come after years of delay.

0.37% over 14 years, represents 10% of total GDP growth in the countries studied and 16% of labor productivity growth over that time period.

(H/T Futurepundit)

Steam engine effects were over 60 years. The annual rates of Robotics is similar on an annual basis but have another forty years to run to have the full steam engine effect. Information technology has had a higher annual impact.

More recently, other analysis has shown that the pervasive IT revolution supported 0.60% of labor productivity growth and 1.0% of overall growth in Europe, the U.S., and Japan between 1995 and 2005. That’s about two to three times the amount contributed by robotics thus far but capital investment rates in IT during those years were also five times higher than those in industrial robots during the 1993 to 2007 period.

Robotics are one of 24 major general purpose technologies that have impacted human civilization.

Different Rates in different countries and industries

As of 2007 industrial robots accounted for only around 2.25 percent of the capital stock in affected industries, and they penetrated only a limited part of the developed economies that we examine. If the quality-adjusted prices of robots keep falling at a rate similar to that observed over the past decades, and as new applications are developed, there is every reason to believe that they will continue to increase both labor productivity and value added.

Recently, the development of robots has been increasingly directed towards services. Areas that are experiencing a particularly rapid expansion include medical robots, factory logistic systems, and unmanned aerial vehicles, popularly known as drones. Our analysis focused (due to data limitations) on developed economies. But recent evidence shows that robots are increasingly used also in developing countries, and China may already be the worlds leading buyer of robots. So the contribution of robots to worldwide growth in the upcoming decades can be even larger. At the same time, the evidence suggests that there are congestion effects, marginal returns on increased robot densification seem to diminish fairly rapidly.

The Internet, information technology and robotics still have a long ways to go

GE is developing the industrial internet.

Robotics will be providing self driving cars which will go from introduction to full impact over the next few decades.

The internet and information technology could have eliminated more jobs than they have. However, this would have required more managerial and corporate executive business process redesign than has been implemented.

Going Full Robot involves huge process and regulatory leaps

NBF – Going full robot or full drone in big and far more effective ways requires entirely rethinking how things are done and can also require deploying entirely new infrastructure.

Getting all the way to the massive robot and drone adoption future will likely require
* 5G or better wireless communication globally with 99.999% coverage
* trillion+ sensor networks
* wireless power transmission solutions
* more education and managerial experience with robotic automation and business plans and process redesign
* centimeter or millimeter accurate global positioning

However, you can get big impacts from superwarehouse, factory city or citywide coverage or lesser levels of infrastructure or smaller scale of coverage.

Just like the industrial internet could required decades of focused effort.

Making Netflix and Redbox to mostly replace Blockbuster for movie and entertainment distribution took new business plans and process development and effective execution.

SOURCES – Harvard Business Review, Robots at Work by Georg Graetz (Uppsala University) and Guy Michaels (London School of Economics)