Automation marginalizes low skilled workers and leads to societal inequality and attendant problems. This, or some version of it, has been a popular perception since the beginning of the Industrial Revolution.
The notion persists because, like so much wrong-thinking, it kind-of sounds right and the discussion has recently been revived by a new generation looking at the introduction of industrial robots.
Much of the academic work on this subject has been carried out in advanced economies but the authors of the paper highlighted today wanted to see if there was something new to add looking at an economy still in transformation i.e. China?
Other studies have been bogged down by a focus on labor employment patterns and end up, in many cases, somewhere near the ‘lump of labor fallacy‘. This is to say they’ve concentrated on how workers have won or lost in the process of automation/robotization without considering the broader benefits that may have accrued, like innovation.
Using 3-million records from 800-firms Huijie Zhang (et al.) from the Zhongnan University of Economics and Law in Wuhan decided to explore the innovation effect more thoroughly, and discovered as follows:
- Firms that use more robots produce more innovation in terms of patents awarded.
- These firms improve their solvency with automation and in turn reduce their financing costs.
- These firms also reshape their labor structure employing less low-skilled workers and more devoted to R+D.
- The effect is more pronounced in firms that rely heavily on external financing (non-SOEs?) and are in higher tech industries.
- The use of robots assists in the transformation of traditional manufacturing industry toward greater production efficiency.
The paper concludes with some practical recommendations for China’s policy makers:
- Speed up incentives, grants and etc. for intelligent manufacturing.
- Promote the domestic robot manufacturing ecosystem.
- Improve the skill level of the workforce with more vocational training.
The paper suggests there’s little room for debate on the benefits of industrial robots. Not only do they promote manufacturing efficiency, a fact in plain sight, but they also allow firms greater scope for innovation; and that, as surely we can all agree, is the source of true long term business and societal competitiveness.
You can read the paper in full by following the link here Robots and Innovation.
Happy Sunday.