There’s much talk these days about productivity and production. I’ve blogged previously on this topic. US productivity peaked with the “Dot.Com Bubble” and has been very weak since 2010.[i] A possible resurgence, according to many, lies in artificial intelligence and robotics. On the other hand, these very innovations that could increase productivity and competitiveness may displace more workers than the most aggressive critics of globalization think were eliminated by international trade. The implications for logistics are particularly important.
Let’s unpack these issues.
First, what are the implications of automation for manufacturing employment? This week’s Economist has an interesting article reporting on the work of Daron Acemoglu (MIT) and Pascual Restrepo (Boston University).[ii] These economists report on research that suggests that the addition of each industrial robot per 1,000 manufacturing jobs reduces manufacturing employment by 6 workers. At present, the impact is small—between 360,000 and 670,000 jobs. But the application of such high tech manufacturing is everywhere from sneakers[iii] to motorcycles.[iv] It is hard to imagine that the pace of automation will not increase, eliminating the need for many low-skilled manufacturing jobs.
Second, what are the overall implications for US employment? While many individuals including Bill Gates have argued that the implications are dire and that we should respond by taxing robots employed in manufacturing, I think thoughtful planning is a more useful approach. This week’s Economist article notes that the overwhelming majority of employment growth in recent years has been in services and the services depend on a growing labor force. Furthermore, to the extent that high tech manufacturing is able to increase the manufacturing base in the US, this growth will yield new jobs. Unfortunately, as I observed in an earlier blog, these jobs will require significant amounts of education and/or retraining. This will require action at both company and national levels. A tax such as Gates has suggested in combination with a great deal of planning may well be the appropriate strategy.
What are the implications for logistics? The Economist article provides us with a clever example. As the title (“Remember the mane”) implies, there is a comparison to horses. Automobiles and other vehicles virtually eliminated all employment for horses. Horses went from a critical part of agriculture and transportation to a hobby and a minor part of the gaming industry in the blink of the eye. I have recently been reading Jane Smiley’s Some Luck[v], which chronicles Iowa farm life in the early 20th Century. If her insight is correct (and I’ve found her to be an accurate observer of sociology in her previous books), few farmers thought that mechanized farm machinery would ever replace their reliable horses. Driverless vehicles will be the next innovation in logistics. The cars are being tested in cities at the present time. The trucks will be on the highways sooner than you think. And planes could be pilotless (or, at least, co-pilotless) even sooner. It is very difficult to slow progress.
This week’s Economist article challenges us to “respond with more determination and care than horse-owners did a century ago.” I would echo that challenge to the logistics industry. Do not doubt that these changes are coming. Plan and prepare for the industry-wide changes that they will bring. Be on the cutting edge not the cutting floor.
[i][i] Martin Neil Baily & Nicholas Montalbano, “Why is US productivity growth so slow? Possible explanations and policy responses,” Brookings Report, September 1, 2016. www.brookings.edu/research/why-is-us-productivity-growth-so-slow-possible-explanations-and-policy-responses.
[ii] “Remember the mane,” Economist, April 1, 2017, p. 70. http://www.economist.com/news/business-and-finance/21719761-probably-not-humans-have-lot-learn-equine-experience-will-robots
[iii] “The new manufacturing footprint,” Economist, January 14, 2017, p. 60. http://www.economist.com/news/business/21714394-making-trainers-robots-and-3d-printers-adidass-high-tech-factory-brings-production-back
[iv] “Digital rider,” Economist, December 10, 2017, pp. 64-65. http://www.economist.com/news/business/21711506-startup-uses-digital-engineering-enter-market-new-motorcycle-brand-springs
[v] Jane Smiley, Some Luck (Knopf, 2014).