In the news
Most people are aware of the manufacturing industry’s accelerated adoption of automation in the past few years. But to understand how quickly this is happening—and the implications it may have—it helps to look at a recent report by the International Federation of Robotics.
According to that report, 553,052 robots were installed in manufacturing facilities in 2022, breaking the record from the year before of 526,144 units installed. Last year’s additions took the total of industrial robots operating in factories globally to 3.9 million, up from 1.2 million in 2011.
If the manufacturing automation trend seems inexorable, many questions remain about its wider consequences for the economy and jobs markets.
A recent study led by Erik Brynjolfsson, a digital economy expert at Stanford University, sheds light on some of those questions. The team used data from the US Census Bureau Annual Survey of Manufactures, viewing it through the lens of individual factories rather than for companies as a whole. It’s an important distinction, as the method gave researchers a more detailed picture of the situation on the ground, as any given company may have robots in some producing units but not in others.
Brynjolfsson and his colleagues identified common patterns observed in factories with robots. Notably, robots tend to be installed in factories with lower wages and higher capital expenditures (the latter is probably due at least in part to investment in complementary equipment).
Another crucial finding is that manufacturing units using robots tend to be clustered in specific geographic areas. In fact, a factory’s geographic location heavily influences robot adoption even when you control for factors such as industry. (Some industries, such as electronics and automotive, use more robots than others.)
In the US, the top 10% of core-based statistical areas (CBSAs, a classification used by government agencies) account for more than 77% of all industrial robots in the country. Meanwhile, half of CBSAs have almost no industrial robots to speak of.
The scholars designated these as “robot hubs"—areas where the rate of robot adoption was higher than could be expected given their industry mix.
The Cognizant take
While the study focused on US manufacturing, the economic logic very likely applies elsewhere as well.
The surge in robot adoption is great news for a global economy that has long struggled to increase its productivity—and that will need to become far more productive as the population ages.
This is because an older population means a relatively smaller number of working-age people will need to support a larger number of retired people, a challenge the world has not faced before.
However, the apparent link between the adoption of industrial robots and lower wages should flash a warning sign, since it could lead to higher inequality and undermine social, economic and political stability.
Another aspect that business leaders and policymakers will need to manage carefully is how to deal with the concentration of highly automated and productive factories in a reduced number of areas.
This could widen the gap between “winning” and “losing” regions—at least when it comes to manufacturing—leading, in turn, to greater disparities in tax revenue and overall prosperity across different regions of the same country.