Countries with an older workforce are faster to adopt robots and automation.

Robots Replace Aging Workers

Jan 18, 2022

by Jeff O'Heir

If the old horse you lead to water doesn’t drink, find a robotic one that will. That’s pretty much what countries with aging workforce populations are doing.
 
As older workers become less productive in the manual tasks they perform, and industry finds fewer employees willing to do that work, companies are investing in robotics and automation to pick up the slack, according to a new paper published in The Review of Economic Studies. In the past, most research focused on how new technologies, not demographics, drive the adoption of robotics and automation in the workplace. The new research can help countries, employers and workers gain a better understanding of what the future holds and how to prepare for it.
 
“When you look across industries you see there’s a very strong association between demographic change and robot adoption,” said MIT professor and economist Daron Acemoglu, who conducted the research with Pascual Restrepo, an assistant professor of economics at Boston University. “The fastest aging economies are the most rapidly robotizing economies in the world.”

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Aging accounts for about 35 percent of the transition to automation technologies globally, making it a more important factor in adoption than the efficiencies that technology delivers.  During the last 20 years, robotics and automation have taken a greater role in performing manual tasks such as welding, painting, assembly and sorting. The next frontier for automation is transportation, in areas such as trucking and shipping, and the integration of artificial intelligence, Acemoglu said.
 
“Sometimes firms need these technologies because they can't find the right workers to perform the task,” he said, referring to the shortages in some countries of middle-aged workers – typically defined as about 45 years old and up - who historically filled blue-collar jobs.
 
Based on industry data from 129 countries, the economists’ conclusions also apply to non-robotic technologies such as CNC and other automated machines. The same does not apply to productivity tools such as computers and office software.
 
The demographic change has been most prevalent in Japan, South Korea and Germany. Those economies have the highest amount of aging workers and scarcity of replacements. They are also the most rapidly robotized economies and are among the world leaders in manufacturing robots and automation tools.

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The U.S., on the other hand, still has a relatively young workforce that’s aging more slowly than the other three. It lags behind those other countries in adopting robotics and automation, and in the manufacturing of related machinery. Another reason for the low adoption rate is that manufacturing has been in decline in the U.S., which generally discourages investment in some capital-intensive technologies, such as robotics. Even the U.S. car industry, now highly automated, lagged behind South Korea and Germany in adopting the new technologies.
 
The U.S. might lag in its adoption, but it hasn’t ignored them either. The economists studied about 700 metro areas in the U.S. from 1990 to 2015 and found that the global trend applied on some levels in those places. Areas with a 10 percent increase in an aging population saw a 6.5 percent increase in the installation and maintenance of industrial robots. 
 
But too much automation in some sectors and industries has negative effects. Tesla’s attempts to automate every aspect of its production did not work out, while over-automation in customer service leaves many consumers frustrated.
 
“What you need is a very balanced approach,” he said. “Automation should be accompanied with other technologies that help workers. It's really a balancing act. When that balance is lost, automation seems to be associated with bad outcomes for workers.”

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The research uncovered a few other important trends. During the last 20 years, for example, German workers have fared better financially than their U.S. counterparts. That’s mainly because it adopts automation in response to labor shortages, which benefits workers, unlike the U.S., which typically adds robotics that displace younger workers.
 
Germany also does a good job developing programs that help workers adjust to increased automation, achieving the balance that’s essential to a healthy workforce. In his past research, Acemoglu found that labor demand and wage growth were positively affected when companies introduced new labor-intensive tasks to the production process, something that occurs less frequently today in countries such as the U.S.
 
“If you just automate and you don't do anything else, that’s very bad for workers. Although robots are very important for productivity and necessary for industries such as automotive, the adoption of robots has been associated with declines in wages and employment for workers and increasing inequality,” he said. “You have to recognize that automation by itself is not a path to shared prosperity. It has to be part of a portfolio that involves other adjustments to make sure we create more inclusive prosperity.”
 
As parting advice, Acemoglu offered this suggestion to young people looking to start a career: Don’t become a welder.
 
Jeff O’Heir writes on engineering and technology in Huntington, N.Y.
 

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