How to reduce unemployment: automate jobs

Tim Olsen, Intelligent Automation Director at Hays Technology

The Czech word for forced labour is ‘Robota’ – the origin of today’s word, ‘Robot’. It’s not something Automation evangelists such as myself would want to associate with, but the reality is that Robotics has a difficult history surrounded by fear ever since the mills were mechanised and workers replaced.

Even in today’s modern times Robophobia is rife. We regularly hear that 50% of our activities can be automated and we are led to wonder whether our hard-learned skills will shortly become redundant as we are replaced by our robot overlords.

Certainly, the pandemic has accelerated some key aspects of automation, as organisations struggled to cope with lockdown and employees worked from home, manual processes and bottlenecks were brought into sharp focus, exacerbated by sharp increases in demand for some products and services which could not be met in the short run.

Automation and jobs – the research

There has been a considerable shift in labour markets in the UK as a result of Brexit; Transport and Healthcare, for example, have lost large swathes of UK resources. Bar and restaurants are having to close because they can’t find chefs and waiting staff. The National Health Service (NHS), of course, was struggling before the double whammy of Brexit and Covid19.

Automation products and services look set to continue their growth well beyond 2027. Will automation turn out to be the bullet that kills us or the silver bullet that saves us?

There is no doubt that Automation is being adopted at a tremendous rate, but are we seeing unemployment increasing as a result? Many expected that the jobs lost during the pandemic would not return, that humans would be replaced forever in many sectors, but the reality is that employment markets are booming and unemployment levels are now nearing pre-pandemic levels in most countries. Even low-skilled workers are seeing wage increases as demand outstrips supply.

There is a new school of thought, a growing groundswell of opinion, based on recent research, that supports the controversial opinion that the process of automating tasks in an organisation might lead to an increase in employment, rather than the expected alterative.

Philippe Aghion of Harvard, writing with colleagues for an OFCE report, found that “At all levels of analysis — plant, firm, and industry — the estimated impact of automation on employment is positive, even for unskilled industrial workers. We also find that automation leads to higher profits, lower consumer prices, and higher sales. The estimated elasticity of employment to automation is 0.28, compared with elasticities of 0.78 for profits, -0.05 for prices, and 0.37 for sales” and furthermore that “The results indicate that automation can increase labor demand and can generate productivity gains that are broadly shared across workers, consumers and firm owners. In a globalized world, attempts to curb domestic automation in order to protect domestic employment may be self-defeating due to foreign competition.”

Jonas Tuhkuri of MIT draws similar conclusions in his paper: “Our main finding is that advanced technologies, such as CNC machines, welding robots, and laser cutters, did not reduce employment, replace production workers, or increase the share of highly educated workers in industrial and custom manufacturing firms. We find that these technologies led to increases in employment and no change in skill composition”.

Michael Webb of Stanford and Daniel Chandler of LSE concluded in their paper that “automation had a strong positive association with increases in employment” (The Economist Jan 22, 2022)

Our friend Philippe Aghion asserts in another paper “A second approach emphasizes the market size and business stealing effects of automation. Automating firms become more productive, which enables them to lower their quality-adjusted prices, and therefore to increase the demand for their products. The resulting increase in scale translates into higher employment by automating firms (a positive “direct effect”), potentially at the expense of their competitors (a negative “indirect effect” through business stealing). Drawing from our empirical work on French firm-level data and a growing literature covering multiple countries, we provide empirical support for this second view: automation has a positive direct effect on employment at the firm level.”

What does the research into automation tell us?

So what conclusions can we draw from this research?

Firstly, there is an overwhelming consensus that the introduction of robotics will increase productivity and competitiveness – this will lead to growth and a net increase in employment. On a macro societal level this very positive news.

Secondly, a note of caution. Whilst growth does indeed lead to net increases in employment, it does not mean that there will be no disenfranchised employees who become displaced as a result of their tasks being automated. I think it is becoming clear that we will not see the droves of unemployed proposed by the doom-mongers, but some high-risk sectors such as office administration will need to adapt and upskill to remain in demand in our future workplaces.

Is this pure theoretical narrative or does is play out in the real world? In my experience of automating in over 70 different businesses, it is remarkably difficult to reduce existing headcount as a result of automation. Most employees undertake more than one task, and most would still play a valuable role even if that task were removed. By automating, we remove the repetitive tasks and free up the employee to add more value in their other activities as they become more productive. Automation brings a host of other benefits, but most commonly it allows companies accelerating out of the pandemic to grow with a flat headcount in the areas addressed.

Automation’s role in closing the skills gap

Can automation solve the skills gap we are experiencing? Let’s look at the UK’s NHS as a prime example. We’ll never automate the job of a nurse (nor would we want to) but do the nurses add value by rearranging appointments, collating paperwork, preparing outpatients, managing patient transfers – all repetitive, administrative activities? Of course not – if we can automate the drudgery and allow nurses to spend more time caring with patients one to one, we can reduce the critical gap in skills in the market.

Automation becomes more viable when salaries spike as a result of a demand unbalance. As we see some lorry drivers’ salaries near double and retail brought to its knees with supply chain issues, the attractiveness of self-driving lorries suddenly comes to the fore of our imaginations.

If skill shortages are bad now, they’re going to get worse – aging populations and declining birth rates are beginning to create a gaping chasm for economic growth that needs to be bridged. The generational demographics are unlikely to change, so we need other options to grow GDP. Recruitment and training companies will play a critical role in retraining and ensuring fluidity within the labour market, but automation will provide the productivity boost to create growth.

Robots should be a force for good, a tool for growth, a means for balancing supply and adding value.

Automation is not something to be feared as long as we remain adaptable. It will bring many benefits both to society and to us, the employees.

If we want to reduce unemployment, automate jobs. Contentious, but true.

Are you interested in how automation can impact the world of work? Read more insights here.



Tim Olsen
Intelligent Automation Director, Hays Technology

Tim worked in digital transformation for 20 years developing solutions to improve user journeys and experience for blue chip clients. More recently he grew the UK’s largest RPA CoE and went on to specialise in helping organisations overcome their barriers to scaling automation. He is a thought leader and evangelist for Intelligent Automation, and leads the IA Consulting specialism for Hays.