The threat of robotization and "Automated socialism" - fantasy or reality?

Robotization of the economy as a threat to employment

Many analysts see the robotization of the economy as a threat to the well-being of society, primarily in the form of impending large-scale job losses. Robotization refers to the development of industrial automation based on industrial robots. Automated machines can work without interruption, vacation, or sick leave. They can perform exact and somewhat monotonous operations over long periods, often more efficiently than humans.

Is robotization threatening skilled labor?

It is not just monotonous conveyorized human labor that machines can replace. Robotization and digitalization are inseparable. Big data and its automatic analysis make it easier for doctors to do their work, make diagnoses, and select medications. Similar trends are beginning to appear in law and education. Electronic courses are replacing teachers to some extent, and big data processing in the field of law is partially replacing a lawyer's work.

But for now, the threat of replacing knowledgeable labor with robotic labor remains more of a theoretical hazard of the future than a real danger of today. The job of a doctor, lawyer, or teacher is not just a routine diagnosis or an equally regular lecture. First and foremost, it is a constantly changing and evolving interaction between people, the ability to listen, answer questions, and sometimes find solutions to quite extraordinary problems together. Existing automatic algorithms cannot even remotely mimic this kind of human behavior.

What professions are threatened by robotization

Nevertheless, robots are gradually freeing people from their jobs. Automation is a natural process that has been going on for many decades. A few centuries ago, people's main occupation was farming. Then machines freed people from hard physical labor - now 1% of the population can easily feed the other 99% with the help of technology.

But if technical modernization was gradual and slow in the past, then at the beginning of the 21st century, the situation is changing much faster. People have much less time to adapt. Perhaps society will not have time to transform itself fast enough to give jobs to millions of people who may lose their positions in the coming years: truck drivers, cab drivers, factory workers, notaries, cashiers, translators, waiters, construction workers, cooks, and many others. There are already fully automated production complexes where robots can perform their functions without human supervision for a long time (30 days and more).

McKinsey estimates that 30% of all professions will be automated by 2030, putting 14% of the world's population out of work. Consequently, the threat of unemployment associated with both the robotization of production and the introduction of new digital technologies is, at first glance, entirely accurate.

Unemployment rates in the leading robotics countries

It is possible to estimate the level of reality by analyzing the actual statistical data, which can eventually confirm or refute the assumed trends.

The prominent world leaders in the robotization of the economy are the USA, Korea, Singapore, Germany, Japan, etc. Suppose the robotization and digitalization of the economy, which began quite a long time ago, pose a fairly serious threat to the number of jobs. In that case, the trends of their reduction and growth of unemployment should be pronounced.

For example, the US unemployment rate fell steadily from 2010 to 2020 and has only been lower for the past 37 years since the early 2000s. In 2020, the rate rose due to the pandemic but returned to its previous level of 3.5 to 4.5% a year later. Despite gloomy predictions that robotization will reduce the number of jobs in the US, the reality is more optimistic.

China's economy is robotizing at an increased pace. In 2019, the rate of annual robot installations in manufacturing in the PRC rose to 160,000 units. A quarter of the world's production of industrial robots is concentrated in China. China's national economic development plan calls for an extensive modernization of Chinese factories until they reach a high level of automation and technological sophistication by 2025. For example, in 2020, China will have an average of 150 robots per 10,000 industrial workers, three times as many as in 2015.

With a significant amount of human resources, China is actively increasing robotization, which should theoretically lead to mass unemployment. At the same time, the rate has been stable over the past 10-15 years, with slight fluctuations in the range of 3.6 to 4.1%.

Thus, the statistical data show that the leading robotizing economies have had no problems with unemployment for the last ten years. These statistics contradict the claims that robotization leads to a reduction in the number of jobs. But this conclusion also cannot be unambiguous. It cannot be extended to all countries of the world, as the impact of the robotization of the economy on the dynamics of states' economic development in the current and medium-term periods is more complex.

The Reasons for Declining Unemployment in Robotics-Leading Countries

The growth of the economies of many developing countries and countries with economies in transition in recent decades is based on several drivers.

  • Cheap labor (including the mass relocation of rural residents to cities and, consequently, their transition from agriculture to industry).
  • Rising prices on commodity markets.
  • A high share of investment in GDP (characteristic of Asian economies), combined with creating the most comfortable conditions for business.

Recently, economic growth in many developing countries has not had a positive trend. It is caused by a complex of reasons, among which is robotization. Cheap labor was an advantage at a time when robots were quite expensive and could not compete in price with workers in Third World countries. But the situation has changed, robots have become cheaper, and labor, on the contrary, has become more expensive.

Also, there is a decrease in population growth and an aging population in developing countries, which makes labor more expensive. This process collides with a reduction in the cost of automating production and an increase in the productivity of industrial robots. The result is the transfer of production with its automation from developing countries back to developed countries. As a result, the robotization of the economy is creating new jobs in developed countries.

All of the above are the first wave of results of the robotization of the economy, unfolding in the current and medium-term. In the medium term, we can conclude that robotization is not a threat to the labor market in developed countries. It will change its structure, reducing the number of jobs in some industries but increasing them in others (simultaneously adapting the need to future long-term changes). The first wave of robotization results will strengthen the economies of developed countries and set back the economies of developing countries.

Implications of robotization in the long term

Further development of intelligent robotics and improvements in data processing technology will lead to the fact that the labor of several professionals may be replaced by the work of one person using remote presence and artificial intelligence technologies. All this will harm employment in developed countries.

It will undoubtedly lead to a reduction of jobs, primarily in the service sector. Many specialists believe that the released specialists will be able to retrain and master new types of professions in the future. But will these industries and occupations be able to provide enough jobs for people? Suppose the problem in the field of artificial intelligence is solved. In that case, the economy of the developed countries will face a strong stratification of society in the long term, the smallest part of which will have a job or own capital and thus will have access to good education, medicine, and, most importantly, to their development and plans for the future. The most significant part of society will face unemployment, the need to find niches in which humans can still compete with machines, falling incomes, and a lack of prospects.

Further options for the development of the situation

  1. Government intervention would limit robotization by legally reserving some professions for people and establishing quotas for robotic labor. It is also possible to impose taxes on robot labor, which, on the one hand, would reduce the profitability of robotization and, on the other hand, give developed countries the resources to pay people an unconditional basic income. The latter is not a solution to the problem of wealth stratification since a basic income would meet the minimum needs of the recipient. In contrast, a person's payment with a job in a robotic economy would be disproportionately higher.

Basic income is a periodic unconditional payment to every citizen of the country, whether working or not. This income has the following characteristics.

Frequency: It is paid regularly (for example, once a month) and not a one-time payment.

Monetary form: it is paid in cash, which allows the recipient to decide how to use the money received. It is not an in-kind benefit, such as food stamps or free medical services, or a voucher for a specific purpose.

Individual: It is paid to each person, not, for example, a household.

Universality: paid to everyone without a means test.

Unconditional: paid to all, regardless of whether the person works or not, demonstrates a desire to work or not.

Many variants of the basic income payment are discussed. They differ in the size of the cost, the source of the price, the basis for reducing the amount, the size of such reductions, and other parameters.

In particular, many business people and politicians, including Bill Gates, support the idea of taxing robots. In his opinion, such a "tax on automation" should be imposed on the software that performs the work of a laid-off person.

The government could use the money for "humanitarian purposes," including employing the unemployed. For example, to increase the hiring of social workers who would help the elderly, the homeless, and the dying and take care of children in kindergartens and schools. If this way increases schools' staff, various social and health facilities, etc., society will become more humane, says Bill Gates. A tax on automation will help fund this process.

Bill Gates supports automation and the widespread introduction of robots. It really is more cost-effective - they don't have to pay wages, and they often do their job better than a human. However, this does not exempt the corporation from paying taxes that it would have paid if there were people working here.

For example, a tax could be imposed on the company's extra profits after the automation was implemented and or fixed tax rates for each robot model, based on its technical characteristics. The more efficient, more powerful, and more productive the model, the higher the fixed tax. Bill Gates believes that robot manufacturers would not oppose such a tax. Many understand its necessity to relieve tension in society and solve social problems.

An optimistic but unlikely scenario discussed above is the emergence of new professions and new industries in which machines cannot compete with humans. The labor resources freed up by robotization will be absorbed by these industries.

  1. A shrinking population in developed countries, partly solving the problem of the shortage of jobs. A policy of unconditional basic income that encourages a portion of the people to be idle and irresponsible, including voluntarily giving up starting a family, may well contribute to this.
  2. Robotization of developed economies will lead to shorter working hours, resulting in more time for creativity and self-development.
  3. The expected pace of development of the digital economy, as well as the desired results of this development in the long term, is somewhat exaggerated. For example, data must be structured, reliable, compatible with other data, suitable for algorithmic processing, and useful for analytical tasks to process big data successfully.

The possible consequences of robotization are today based primarily on assumptions and predictions. Given current progress toward AI improvements, this seems a distant future.

Artificial intelligence cannot learn itself, and neural networks are incapable of making logical inferences. Consequently, the automation of the economy does not present a danger to intelligent professions at the moment.

But at the same time, it is necessary to think about how robotization will affect people and society as a whole. At present, the threats of robotization are somewhat exaggerated.

It allows us to examine and consider various possibilities for mitigating or preventing long-term negative consequences.