The second worst economic news this year was reported on the front pages, or the first business pages, depending on the newspaper. That was the May jobs report showing that employers had added only 38,000 jobs for the month. This was a significant drop from the 116,000 average monthly gain of the previous three months.
The worst news was buried in the back of the paper, if it was carried at all. Foxconn, the Chinese electronics giant that assembles iPhones and other consumer electronics, is laying off 60,000 humans and replacing them with robots. According to Fortune.com, the company representative said, “More companies are likely to follow suit.”
In another report, Foxcomm said “Across all of our facilities today, we are applying robotics engineering and other innovative manufacturing technologies to replace repetitive tasks previously done by employees.”
The significance is not that the company is trying to replace repetitive tasks with robotics, everybody is doing that, but that these workers were working for the equivalent of $320 a month.
When China was growing to become the second largest economy in the world, it was on the basis of of an almost unlimited supply of low-cost labor, but the nation has now found a supply of labor even less expensive than that. On June 6, US Treasury Secretary Jacob J. Lew complained the China had built so many factories that it had huge surpluses, being sold so cheaply on international markets that they were distorting the world economy.
Other countries and industries are also moving towards robotization. Walmart has been reported as being six-to-nine months from using drones to check its warehouse inventories. According to Reuters, Walmart’s Vice President of Last Mile and Emerging Sciences Shekar Natarajan said that in their studies, drones could review inventory levels in one day, compared to a full month under current systems. According to the International Federation of Robotics, “in 2014, robot sales increased by 29% to 229,261 units, by far the highest level ever recorded for one year. Sales of industrial robots to all industries increased compared to 2013. The automotive parts suppliers and the electrical/electronics industry were the main drivers of the growth.”
Historically, technologic gains have resulted in increased efficiencies and overall increases in quality of life, and it’s quite possible that over time the current advances in robotics will lead to the science fiction society where humans devote their time to personal interests, whether sciences or the arts, and robots, presumably humanoid robots, do all the work that no human wants to do.
The challenge is the rate of change and the ability to assimilate robots into the economy. According to the Bureau of Labor Statistics, unemployment among persons with a doctoral degree was 1.7% in 2015, 1.5% with a professional degree (MD, DDS JD) and 2.5% with a four-year college degree, but for people with no more than a high school diploma, unemployment was 5.4% and for those without a high school diploma, unemployment was 8%. These people, with lower levels of education, are holding the jobs most easily replaced by robots.
The current extreme seems to be a McDonald’s in Phoenix, Ariz., run entirely by robots. According to the NewsExaminer, “Visitors to the restaurant will see these new robots working in harmony at a speed of 50 times faster than the average McDonald’s employee, with no chance of error.”
For now, the United States has the capability of absorbing robots into the economy, subject to the outcome of the election. The United States his a tremendous need for infrastructure rebuilding and repair – roads and bridges to fix building recharging stations for electric cars to replace gas stations, building wind farms and water purification facilities. These projects might be approved with a Democratic administration and Congress – in contrast, a Republican Congress would focus on cutting the budget because increased unemployment would mean lower tax revenues.
Even with this buffer to maintain employment levels during the transition to an increasingly robotic economy, it’s not clear how the rest of the world would fare. The Third World doesn’t have the resources for this transition, and the income of these nations largely depends on workers willing to accept extremely low salaries. If Foxconn can replace its current staff with machines that work for less, it’s not clear what options are available for Malawi, Burundi and the Central African Republic.
The transition from horse to automobile and gas to electricity were slow compared to what we’re facing now, and less dependent on politics. In a March 2015 paper, “Robots at Work,” Georg Graetz of Uppsala University in Sweden and Guy Michaels of the London School of Economics studied the growth of robotics in 17 nations. Among their findings were some that were totally predictable. As more robots came into use, the cost of the robots declined, and while thee robots had no effect on the hours worked by high skilled workers, there were reductions in the need for low skilled, and to a lesser extent middle-skilled workers.
It’s not clear that as a society we’re ready for the next step in technology. It is clear that there are questions we should be asking now, because we’ll need the answers within the next four years.
Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email sdu01@outlook.com.
From The Progressive Populist, July 1-15, 2016
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