Business growth: Embrace automation
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Up to 45% of the manufacturing workforce, 37% of retail workers, 25% of the workforce in hospitality, and 10% of the education workforce could be displaced by automation/artificial intelligence in the next six years, according to the McKinsey Global Institute.
The flip side of those sobering statistics is the estimate that for every one job that is eliminated, almost two will be created in the field of automation. While the goal of most robotic and artificial intelligence (AI) firms is to replace work that is traditionally done by humans, the need to service, support, and continue to develop new applications will create an increase in demand for employees in all of the areas of automation, just like it did for the burgeoning “computer technology” industry of the 1960s. McKinsey has dubbed this transition as ‘reskilling’ the labor force.
With overall unemployment levels at all time lows, which means conversely, employment levels are at all time highs, employers are having to find alternative ways to maintain their productivity, irrespective of not having available human workers for available jobs.
In a recent piece by Paul Wiseman of the Associated Press, the state of the United States economy and business productivity are intertwined. “To economists, strong productivity growth provides an almost magical elixir. When companies roll out more efficient technology, their workers can become more productive: They increase their output per hour. A result is that companies can often boost profits and raise pay without having to jack up prices. Inflation can remain in check,” he said.
Even with the overall activity of the Federal Reserve having rapidly increased their lending rate from March of 2022, there has not been much talk of a pending recession. Wiseman went on to say, “The productivity boom marks a shift from the pre-pandemic years, when annual productivity growth averaged a tepid 1.5%. Everything changed as the economy rocketed out of 2020 pandemic recession with unexpected vigor, and businesses struggled to re-hire the many workers they had shed. The resulting worker shortage sent wages surging. Inflation, too, as factories and ports buckled under the strain of rising consumer orders.”
As the short supply of labor and the surge of demand for products and services converged, many firms in manufacturing, retail, hospitality, and education pivoted to embracing automation as part of their business model.
Wiseman cited Reata Engineering & Machine Works of Englewood, Colorado as an example. Grady Cope, the CEO said “efficiency was kind of forced on us.” the company proceeded to embrace the usage of robotics and other types of technology. As Wiseman reported about Reata, “Software allowed it to automate the delivery of price quotes to customers. The process used to require two weeks. Now it can be done in 24 hours.”
Many economists and business people say they’re hopeful that the productivity boom can continue. Artificial intelligence, they note, is only beginning to penetrate factory floors, warehouses, stores and offices and could accelerate efficiency gains.
Automation raises fears that machines will replace human workers, killing jobs. Some workers supplanted by robots do often struggle to find new work and end up settling for lower pay.
Yet, history suggests that in the long run, technological improvements actually create more jobs than they destroy. People are needed to build, upgrade, repair and operate sophisticated machines. Some displaced workers are trained to shift into such jobs. And that transition is likely to be eased this time by the retirement of the vast baby boom generation, which is causing labor shortages.
Recently, Figure, a new company in the artificial intelligence and robotics space, has drawn a $675 million investment from outsiders. The company makes humanoid looking robots, literally, legs with feet, arms, and hands. The human-like machines will be “joining the labor force this year, a trend that’s expected to gain steam,” according to Axios. The objective of the company is to produce the robots for “commercial deployment.” Further, OpenAI will be collaborating with Figure to develop more synergy in the sector. In a company release, Figure announced “OpenAI’s research with Figure’s deep understanding of robotics hardware and software aims to help accelerate Figure’s commercial timeline by enhancing the capabilities of humanoid robots to process and reason from language.” Other robot manufacturers include Agility Robotics, Apptornik, 1X, and Hanson Robotics.
While business automation will have many ups and downs, the general trend of resulting growth for firms that use it will continue well into the foreseeable future.
