Companion or Substitution? Automation and Digitisation in the Workplace

Introduction

One of the first things I learned as an economics student is a curve called the production possibilities frontier (PPF). This is where I truly got a better understanding of what Nordhaus and Samuelson (1998) called the central themes of the study of economics: scarcity and efficiency. The idea is simple yet significant. We live in a world of limited resources (scarcity) and we must make use of those resources in the best way possible (efficiency) to accommodate our unlimited wants and needs. Figure 1 (thepointsoflife, 2014) shows the PPF of the standard ‘guns and butter’ example. Society must make use of the various resources available—land, labour and capital—to produce the goods guns and butter. Producing a number of units for both gods that lie on the curve, that is, point H and D in Figure 1, is efficient in that it makes the best use of the resources available. Producing a number of units inside the curve is inefficient—that is, point B; and producing a number of units outside the curve is unattainable—that is, point A. An economy would only be able to reach point A if there is a growth in available inputs, that is, more labour, technological progress, among others. That is when there is an economic growth (Nordhaus & Samuelson, 1998), and I think a goal of any reasonable and rational society would be economic growth (which can then become economic development). We all just want a ‘better’ life for ourselves.

This then brings about the question of how to expand an economy’s PPF, and an important aspect of this is technological progress. This refers to finding faster, easier, or cheaper ways to do things or to produce goods (Nordhaus & Samuelson, 1998). One technology that particularly comes to mind is automation and digitisation in the workplace. It is not only workers that are producing goods. They are aided by various machines that assist them in production. This has led to faster production and lower prices (Herrmann, n.d.). The benefits are obvious, yet up to what extent can we automate and digitise production? Will it ever come to a point when we would no longer need any human intervention to produce the things we need? Can the digital and the automated ever substitute human hands? Or should we just look at them as complements to the work that humans do because there are some things which a machine or a program can never replace? These questions are important as they not only reflect the production and economic value of labour, but they also reflect, to a larger extent, the societal viewpoint about the value of labour and the humanity in work.

OPEN IN VIEWER Figure 1.

PPF

This article aims to provide a discussion on the effect, on society, of digitisation in the workforce. Moreover, this article will touch upon a brief history and recent developments of digitisation, specifically that of automation in the workplace; discuss the risks and opportunities associated with these developments; and comment on possible future developments of digitisation.

Automation and Digitisation, and the Labour Market

The world’s labour market is a fast-ever-changing landscape (Diprete & Nonnemaker, 1997). There are multiple factors that affect the labour market and there are also multiple outcomes with winners and losers. One day, one’s job can be in big demand, but another day, barely anyone with that job is hired. Of course, an explanation regarding the various factors affecting the labour market would entail another article altogether, but it cannot be denied that profit and the law of supply and demand are big factors (King & Rueda, 2008). Businesses would aim to maximise profit, thereby increasing production or minimising the cost of inputs (Nordhaus & Samuelson, 1998). A big part of input costs involves labour. This the reason why the ‘demographic dividend’ (UNPF, n.d.), that is, a period when the percentage of the population is of working-age is high resulting in cheap labour, can sometimes lead the way for economic growth in a particular country. However, in a case/country where labour is expensive due low supply, high standard of living, or government regulation on wage, among others, a digital alternative that is not only cheaper but also more efficient could be a viable alternative.

This brings us to automation. According to Acemoglu and Restrepo (2018), automation refers to the use of machines as an alternative to human labour in production activities. Likelier than not, this is to substitute for tasks that are mainly ‘repetitive’ and there is a wide range of tasks that fit into that category, specifically in industrial production (Acemoglu & Restrepo, 2018). Automation can be called a form of digitisation because instructions are coded in a language that the machine understands, and the machine follows these instructions in order to do these repetitive tasks. Hence, it involves the process of translating analogue instructions into digital format, or digitisation (Bloomberg, 2018). Some examples of work being replaced by automated machines from the dawn of the Industrial Revolution ¹ included work in the textile industries, that is, spinning and cleaning of fabric; in the agriculture industry, that is, separating lint from cotton seeds; and the use of tractors (Acemoglu & Restrepo, 2018). However, the more recent machines that we use now show the digital aspect of automation. These include many tasks in wholesale, retail and other business processes, such as inventory handling, taxes and other financial reports handling, among others (Acemoglu & Restrepo, 2018). These processes have all led to cost savings in the production process and, thus, lower prices for the products produced. This, in turn, makes general consumption cheaper and gives business higher profits (Acemoglu & Restrepo, 2018; Nordhaus & Samuelson, 1998).

Another recent aspect of digitisation is the creation of digital talent platforms, that is, Upwork ² , that use a certain algorithm to match workers with jobs. This has led to a rise of ‘digitally-enabled independent work’ or simply freelance work on digital platforms (Manyika, 2017). These are just some examples of the areas where automation and digitisation have changed the way things are done in production. These have inevitably affected our way of life and the labour market in general.

Opportunities and Risks

As mentioned above, automation and digitisation not only induce more savings but also make the production process more efficient, thereby facilitating economic growth, as the theory of the PPF shows. In fact, data shows that automation, on average, improves global gross domestic product by around 1.4 per cent annually (Dautovic, 2019). From this, there is a general improvement in the economy due to low-cost prices and more profits for business, which in turn can also translate to higher purchasing power for the average citizen (Nordhaus & Samuelson, 1998). Coupled with this, there is a diversification of industries and as the world moves towards more digitalisation, there is then demand for jobs and skills that involve the use of these automated types of machinery or the various programs and software that go with them (Manyika, 2017). Data shows that by the year 2022, 54 per cent of workers would require retraining or training in new skills to catch up with the current digitisation trends (Dautovic, 2019). This would mean many opportunities for employment, especially in many high labour supply economies. As countries make a move to keep up with all these changes so that they are not left behind (Manyika, 2017), there is a conscious effort for further education and training (Griffin, 2016). This then keeps the knowledge engine churning and encourages a more skilled and educated workforce, and more innovation and the use of new technology for better opportunities. Additionally, as mentioned above, the digital platforms have allowed more independent work (Manyika, 2017), showing a sway away from the usual 8-to-5 Monday-to-Friday work plan. This flexibility coupled with various support mechanisms put within the system could be beneficial to certain disadvantaged groups in society such as women, stay-at-home parents, or the disabled.

However, there are, of course, also certain risks involved particularly with the automation process. In 2019, data shows that an industrial robot is replacing an average of 1.6 human jobs (Dautovic, 2019). Additionally, artificial intelligence and machine learning improvements could make millions of workers superfluous (Hernandez & Robert, 2018). While there is evidence to suggest that these estimates are upward biased (Arntz et al., 2019), they have led to increased fear among workers about losing their jobs (Dautovic, 2019). There is also an inherent inequality effect from automation (Arntz et al., 2019). Low-income countries or, more specifically, low-income groups are more affected by the changes than their high-income counterparts (Dautovic, 2019). This is because most repetitive jobs are done by low-income workers. Thus, while automation and digitisation have been seen to also affect ‘white-collar’ jobs (Hernandez & Robert, 2018), it affects a higher percentage of ‘blue-collar’ jobs and people in those professions are also more vulnerable to unemployment. Moreover, lack of access to the internet is also a major hindrance that prevents everyone from reaping the benefits of digitisation (Hernandez & Robert, 2018).

As mentioned above, the improvements in automation and digitisation, while sacrificing some jobs, should be able to create more opportunities through advancements in new technologies and general improvement in economic performance. However, there is a problem of inequality that who are better off are in a better position to benefit from these improvements. There is generally not a problem of jobs to go around, but there is a problem of allocating all of these jobs to those who need them the most (Autor, 2015).

The Future

As I come to this section, I am not going to pretend to have a crystal ball that will be able to tell us how automation or the labour market will be in the future. However, I am here to give a brief opinion on what I believe the future holds for automation and digitisation in general. Firstly, I believe that we will continue to innovate and find new ways to make our lives better and easier. There will always be something new to be discovered as we do live in a world of never-ending problems and concerns. I see no end in sight for more technological advancements and the ‘digital’ really plays a big role in that.

Equally, I also believe that human labour will continue to flourish. Automation and digitisation may have been going on for decades, but human work still exists because there are aspects of work that cannot just simply be replaced by machines (Autor, 2015). Machines can complement us and help us to do things much better. That, I think, is one of the most important impacts of digitisation in the workplace. It teaches us not only to adapt in terms of using these new technologies but also to adapt in terms of integrating these new ‘tools’ in the way we work. Similar to how early tools helped humans do their work better as a sort of extension of their arms—that is, saws and levers—the new digital technology are extensions of our arms and brain and assist us in the way we work. Sure, some automation technologies have replaced manual labour, but there are still humans behind those machines operating them and there are new jobs that involve more complicated skills with the use of better technology. All of this is made possible by human innovation and will be made continually possible only by seeing the value of human work as well.

That being said, the future would also do better with a little change in mindset and a focus on inherent inequality in the workplace. According to Griffin (2016), at the pace at which technology is moving now, there would be certain currently high in demand professions that would become obsolete in the future. It is because of this that general life skills are also important to learn, such as perseverance or adaptability. This enables future generations to reap benefits from any future technological change. Moreover, a top quality that any company looks for in its prospective employee are those of being an effective worker (Manyika, 2017), and that has very little to do with any specific professional training. In addition, the issue of inequality is one that goes beyond automation and digitisation as it can be seen in various facets of society. Another important thing we should note about digitisation in the workplace is that it highlights an inherent flaw in society, and while there may be some aspects to it that seem to bridge gaps, it cannot be denied that these innovations also affect the most vulnerable. As such, there should also be a conscious effort to address inequalities in general. One way of doing so, that is in line with digitisation, would be to focus on small to medium-sized enterprises and a general encouragement for entrepreneurship from government and larger corporations (Arntz et al., 2019).

Conclusion

This article offers a brief discussion on how digitisation and automation have affected our lives and the way we work. It presented an overview of automation’s history and recent developments from its applications. Moreover, it also discussed the various opportunities and risks associated with these fast improvements. Lastly, an analysis of the possible future of digitisation, and what steps must be done to take full advantage of the opportunities and to curb the risks mentioned. Only a small aspect of digitisation has been covered in this article, but as we have seen, there are various facets and aspects of automation and it has had a profound effect on labour and society in general. Automation has made production faster and this has led to various benefits and opportunities just waiting to be taken advantage off. Yet, the fast movement of automation technologies is also seen as a risk of people losing employment and it also amplifies widening inequality. We can never be sure what the future may hold for digitisation and automation, but there should be a focus on education and on fostering a culture of innovation so that we can be ready to face any changes in the workplace, and there should also be a conscious effort to fight the factors that further inequality in society.

We began this article with the PPF and shall end it by noting that for the PPF to work, the inputs should work together hand in hand and not against each other. That is to say, capital, land, technology and people are all very valuable resources and replacing one with the other, rendering another input useless, would simply be a waste. All these resources are valuable and together they churn an economy that hopefully fulfils the needs of everyone. The system may not always work. We may end up sometimes on some inefficient points. Yet by continuing to innovate while making sure to not leave the disadvantaged behind, we can find a way to not only stay on but also to go beyond our current PPFs to achieve efficient and more equitable economic growth and development for all.