In Developing Economies, Robots May Beat Humans to the Good Manufacturing Jobs

In a recent article in the Financial Times, Ben Bland explored the labor market ramifications of China’s growing robot workforce, observing that as Chinese manufacturers invest ever more heavily in automation, the factory jobs that have driven the country’s urbanization, lifted millions out of rural poverty, and fed the expansion of the middle class over the past three decades will inevitably begin to disappear. While the rise of robotic manufacturing is creating new, more valuable and higher-skilled jobs, those are fewer and farther between.

Even more concerning, Bland adds, are countries that are not nearly as far along the path to industrialization and modernization, which stand to suffer from “premature deindustrialisation” as automation reverses the growth in manufacturing jobs before industrialization has had the chance to raise incomes and pull workers out of poverty as it has done in China. Commenting on Bland’s piece at the Verge, James Vincent underlines the reasons why maybe this time, the Luddites are right and those jobs are just not coming back:

Of course, technology has destroyed jobs in the past with only a small effect on net unemployment (jobs are destroyed but new jobs are created), but there’s reason to think things are different this time. Past technology has improved international communication and made trade easier, but robots are obviously being designed to replace humans, not just increase their productivity. As well as automation, there are also new manufacturing processes like 3D printing, which might persuade developed companies to bring factories back to their home nation, say analysts.

Indeed, though you’d never know it from paying attention to the presidential campaign, manufacturing jobs are actually on the rise again in the US, as Craig Guillot recently pointed out at Chief Executive:

Reshoring Initiative’s 2015 Reshoring Report shows that for the second year in a row, the number of jobs returning to the U.S. remains on par or higher than the number of jobs leaving. … According to the report, the top reasons American manufacturers were bringing jobs back home were government incentives, localization, proximity to customers and an increasingly skilled workforce. Companies also cited leading problems offshore at lower quality, supply interruption, and high freight costs.

Deloitte reported in its 2016 Global Manufacturing Competitiveness Index that the sector’s gross exports grew 3.6% to $143 billion in 2015. The index also revealed the United States is now the second most competitive manufacturing economy after China and will surpass the Asian nation by the year 2020.

As in China, the new manufacturing jobs require more skill than the old ones, partly because, as we’ve noted before, humans’ new roles in manufacturing mainly involve doing jobs robots can’t. But industries are constantly discovering new ways to replace people with machines—robots are making their presence felt even in highly skilled, “knowledge economy” sectors like accounting and professional services—so automation is already reshaping the economy in ways nobody could have predicted, and those automation-proof jobs won’t always be so.

For developing countries (and companies looking to do business in them), it looks like the challenge of that transformation will be a particularly acute.