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‘Automation’ is the growing phenomenon of human labour being replaced by machinery and robotics. Automation can be positive for businesses by increasing labour productivity, reducing wage costs, increasing profit margins and also filling labour shortages, as has happened in China. On the other hand, it could also be increasing structural unemployment, which may erode consumer confidence and disposable income levels, and ultimately reduce demand for consumer goods.

Labour Productivity in Selected Countries: 2007-2012

Labour Productivity in China Japan and US 2007 versus 2012

Source: Euromonitor International from International Labour Organisation (ILO)/Eurostat/national statistics

  • According to the International Federation of Robotics (IFR), global sales of robotics increased by 38.0% in 2011. China, Germany and the USA are the major drivers of this growth, though the biggest users of robotics are Japan and South Korea;
  • The increased use of robotics in these markets has helped to contribute to a sharp rise in labour productivity in some of them. China saw its labour productivity (defined as GDP per person employed) more than double between 2007 and 2012, rising from US$4,666 to US$10,225.

Implications

  • The use of machinery and robotics is rapidly growing globally, after cutbacks by many companies during the 2009 economic downturn due to reduced production demand and also to maintain cash flow. According to the International Federation of Robotics, in 2011 global sales of robotics grew by 38.0%. Japan and South Korea are the two biggest users in the world of robotics, while Germany, the USA and China are the biggest drivers in the sales growth;
  • The automotive, food and beverages industries are among the key industries using robotics, with the former seeing an increase of robotics purchases of 55.0% in 2011, and 7.0% for the latter. The use of automation is increasing in many aspects of manufacturing and retailing, such as replacing manual labour in factory production, and by replacing checkout staff in stores with machines;
  • Automation can save money on wages paid to staff, and also on labour taxes paid to the government. This can increase profits and competitiveness amongst companies which use them at a time when profit margins are generally being squeezed by rising manufacturing and transportation costs. It can be used to fill labour shortages: China is rapidly increasing its use of automation to counteract the predicted decline in its labour force due to the effects of its one child policy. It can also improve countries’ competitiveness by boosting labour productivity. Japan, one of the key users of automation saw its labour productivity rise from US$67,481 in 2007 to US$94,234 in 2012;
  • On the other hand, the growing use of robotics and automation can contribute to long term structural unemployment, which means unemployment that can often be long term as it is part of a fundamental shift in the skills needed by an economy. This can weaken consumer spending and consumer confidence levels.

Prospects

  • The use of automation and robotics is forecast by the IFR to increase in all regions by 2015. Asia/ Australasia is set to see the biggest increase, from 622,000 robots in 2012 to 841,000 by 2015 according to the IFR. This will primarily be driven by an increase in China, which is set to grow from 26,000 to 35,000 in the same time period as it tries to compensate for its dwindling working age population;

Estimated Operational Stock of Multipurpose Industrial Robots by Region: 2010, 2012, 2015

Estimated Operational Stock of Multipurpose Industrial Robots by Region

Source: The International Federation of Robotics

Note: The Americas is the total for North and South America. Europe is the total for East and West Europe

  • Africa’s robotics use is set to remain the lowest by far of any region at just 3,900 units by 2015, meaning its productivity and competitiveness could be hindered in comparison to other regions that are increasing their use of automation;

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