It is not just low-skill, low-wage jobs that are affected by automation; some high-skill, high-wage jobs too, are susceptible to automation, according to McKinsey Global Institute, the business and economics research arm of consultancy firm McKinsey.
Take for instance, the task of collecting and analysing data. Some of it falls into the category of low-skill, low-wage. But, says Michael Chui, Partner, McKinsey Global Institute, some of the activities that fit into the category of collecting and analysing data are done by those who have MBAs and other graduate degrees and are paid quite well.
McKinsey Global Institute, which has done research on automation and its impact on the economy, has found that some of the activities that have the greatest potential for automation are physical activities that occur in predictable environments. Manufacturing fits that bill. Around 25 per cent of the activities that we pay people to do fit that description, says Chui, who is based in San Francisco and directs research on the impact of long-term disruptive technology trends, such as automation, Big Data and the Internet of Things.
Another chunk of activities fits into the category of collecting and analysing data. That is roughly a third of the activity that we pay people to do, according to him. “One of our observations from looking at the potential for automation across the economy is that there is almost no activity or occupation which does not have a significant opportunity for additional automation beyond what is happening,” says Chui.
Role in manufacturing
Is automation behind the revival of manufacturing in the West, especially in the US? It is certainly happening in manufacturing and it does mean companies can shift their manufacturing footprint. It also means that companies and economies that have based their export competitiveness on labour cost arbitrage need to rethink that source of competitive advantage going forward, according to him.
On what this means for employment generation, Chui says, “our hypothesis was it will be very unlikely that you would be able to just remove a person from a role and replace everything he did with a robot. Or replace everything he did with artificial intelligence.”
MGI’s research has shown that in less than 5 per cent of the occupations could you automate all activities by adopting currently demonstrated technologies. What it found was that almost every occupation had a significant percentage of its activities that could be automated. “Over 60 per cent of occupations had over 30 per cent of their activities that could be automated,” says Chui.
However, adapting currently demonstrated technologies required integrating different capabilities and solutions developed for individual use cases. It could well take a decade for adoption to reach its zenith for any given technology. This was because it was not just the technology that had to be procured, the entire business process had to be transformed.
Chui said historically automation had been going on for a long time. At one point, in the US economy, over 70 per cent of the people who were working were in agriculture; now, it was less than 5 per cent. “We didn’t end up with 65 per cent unemployment because we created new jobs, new activities for these people,” he said.
One of the big opportunities for automation going forward was the efficiency gains that would accrue. There was a need to increase productivity across organisations, particularly in economies where the labour force would start declining in absolute size. Automation did give the potential for being one of the levers you could pull to increase productivity, Chui said.
Chui pointed out that China had become the world’s workshop by achieving manufacturing power substantially through labour cost arbitrage. Now automation and robotics were entering the manufacturing realm in China. What is the largest robotics market in the world now?
It is China, he said, and added that Chinese companies would have to implement automation in manufacturing to be able to compete with onshore western manufacturing. And, relating that to the Indian context, Chui said Indian exports, mostly services, would have to go in for automation to remain competitive.
Chui said competition was a strong motivator for technology adoption. What generally happened was the leading companies would couple technology innovation with management innovation and use that to drive competitive advantage within the sector and then everyone else would run to catch up. The driver for automation or technology adoption was not only lower cost but being able to provide more consistent and reliable products or services with fewer errors, better quality and higher throughput.