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Robots in the Workplace: The More You Have, The Less You Make?

Robots and Humans
Research from the Frankfurt School of Finance & Management paints a bleak picture regarding the effects of robotics on wealth accumulation
  • Research shows that increased automation in the workplace, through robots leads to a higher degree of wealth inequality
  • In the past decade, the worldwide stock of robots has tripled leading to negative consequences on multiple fronts for the average worker
  • Productivity rates have increased, but at the expense of wages and employment opportunities for individual workers

“When we analyse the effects of robot adoption by education level, increased exposure to robots increases the unemployment risk and significantly decreases the financial risk-taking of less educated households, with no such effects for the better educated.”

Professor Yigitcan Karabulut of the Frankfurt School of Finance & Management

If the negative effects of robot adoption sound like a synopsis for a Black Mirror episode from the creative mind of Charlie Brooker, it is in fact the harsh reality for many. Technological advancements in robotics have been well-documented, with examples such as self-driving cars now close to becoming mainstream. But what are the societal consequences of these advances?

From Back To The Future to Wall-E, we have been offered many fanciful, positive perceptions of the benefits that robots could bring to our everyday lives, but it often seemed like a faraway reality. But that future is now part of our present day.

A panel of AI-enabled humanoid robots which were recently presented to a recent United Nations summit told their audience that they believed their kind could eventually “run the world better than humans”. With such a prospect in mind, should we now be afraid, especially when considering the sheer stock of industrial, domestic, educational, and even surgical robots already in operation?

Or is such scaremongering counterproductive? Research by the International Federation of Robotics (IFR) indicates that the worldwide stock of industrial robots has almost tripled in the past decade, and they project this trend will continue growing at a similar rate over the next 10 years.

With Sweden as its primary focus, the Frankfurt School of Finance & Management has explored this narrative further, studying the monetary effect that changes in exposure to industrial robots can have on the accumulation of wealth amongst 300,000 participant households.

A Robot Revolution?

Films such as Ex-Machina depict robots taking a hyper-realistic human form, but we aren’t quite there just yet when it comes to our mainstream usage of robot assistants. Industrial robots are designed for functionality – to carry out one task to a high level of efficiency and, as such, are not required to look like you and me, but more so shapes and body parts.

Robot arms

According to the manufacturing company Jabil, there are five main types of industrial robots: Cartesian (used in 3D printing), Articulated (resembles a human arm and commonly used in packaging), Delta (spider-like robots commonly used in picking and packaging), Cylindrical (used in simple assembly and machine loading), and finally, the Selective Compliance Articulated Robot Arm (SCARA), which is primarily used in assembly applications.

Such robots are mainly utilised within the secondary sector, in roles which traditionally hold a lower income rate, and qualification requirement in comparison to higher-skilled and educated workers. According to Institute Professor at MIT, Daron Acemoglu, the increasing numbers of robots in such roles will greatly affect human blue-collar workers as their employment becomes tenuous as both technology and time progress. “Middle-aged workers who perform blue-collar tasks are more likely to be replaced by industrial robots relative to older workers who are specialised in non-production,” explains Acemoglu.

The repercussions can manifest on multiple fronts. For instance, workers may face an uphill battle to secure promotions and wage increases when a company can replace their roles with robots that can perform the same tasks without experiencing fatigue, boredom or requiring lengthy breaks.

In addition, as the introduction of such robots carries an element of risk that the traditional human worker doesn’t, this also reduces the willingness of investors to take on any other financial risks. This leads to lower wages and a more cautious financial approach from employers and employees alike.

The Bigger Picture

And this risk-averse perspective extends beyond the workplace. The team at Frankfurt found that whilst increased exposure to robots doesn’t have an impact on household debt, but instead the amount wealth-boosting assets a household possesses. In their paper, “Wealth accumulation and the propensity to plan,” John Ameriks, Ph. D, Professor Andrew Caplin, and John Leahy, Ph.D., argue that returns on wealth are directly affected by households’ willingness to take on financial risk. This reduces stock market participation, and we’ve all seen in the Wolf of Wall Street, that the stock market can definitely make you a lot of money.

To leave no doubt about their study’s robustness, researchers at Frankfurt have considered various factors, including the demographics of the participants. One such factor they considered is the educational level of the households. Through this analysis, they discovered that the negative effects of industrial robots on stock market participation were only operative amongst households with lower levels of education (high school educated or less). The findings of the study suggest that rapid automation can further widen the wealth gap between higher and lower skilled individuals.

Are we witnessing the first steps towards a dystopian world filled with chaos and unemployment? Maybe, and as we edge closer to the world depicted in Alex Proyas’ “I, Robot,” fears that a major mass-unemployment event akin to the ‘Great Depression’ are slowly picking up momentum. A study carried out by Sky in 2015 showed that 30% of participants feared that they will be replaced by robots in the next twenty years. Maybe they are correct. Professor Acemoglu (MIT) and Professor Pascual Restrepo of Boston University’s recent study shows that each industrial robot reduced employment in each commuting area by 3-6 workers.

Technological advancements are made to improve our quality of lives, but the question is what do we do when the same advancements become the source of our problems?

By, Plamedi Mbungu

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