Automation and the economy
According to PwC, AI implementation has the potential to boost the global economy by up to $15 trillion by 2030. Meanwhile, a study from JPMorgan Asset Management believes that automation technology could increase global GDP by more than $1.1 trillion in the next 10-15 years.
These forecasts increasingly mirror our lived experiences in the modern workplace. You hear in the news: robots are taking jobs. You see online and at work that automation is boosting productivity.
With both productivity and job disruption rising alongside automation, the technology will inevitably impact the economy in myriad ways. But what does this impact look like, exactly? And will it be as sweeping as studies predict?
Here, we explore the relationship, impacts and discussions surrounding automation and the economy.
Automation describes a vast range of technologies, all geared towards reducing or removing the need for human intervention in everyday processes. For example, automated robots work on factory floors, and automation software handles back office admin.
There are now many different types of automation software, from BPA, to RPA, to IA. Whatever the type, though, the job of automation is to allow computers and machines to take on tasks and free up human time. This time could be used on higher-value work, or simply mean fewer repetitive tasks for humans to complete each day.
Automation’s historical relationship to the economy
This is not the first time a form of automation has shaken up the economy. Historically, past automation — for instance, threshing machines — has caused unrest and disruption in the short term, before things settled into a new, longer-term equilibrium.
See also: Automation and the Swing Riots
Benefits around automation and the economy
- Increased productivity
Automation brings increased productivity. Increased productivity equals more money, which in turn equals more disposable income and more profitable firms. This, in theory, means higher amounts of tax paid. So, automation could lead to more tax revenue to spend on public goods (and to support those displaced — however temporarily — by automation).
- Lower costs of production
Automation can also reduce costs of production — through improved efficiency and (in some cases) reduced labour costs. This means lower prices for consumers, and so more disposable money to spend across a wider range of businesses.
- Greater choice
Automation has brought with it a greater range of goods and services, and more convenient options for consumers. For instance, automated options for consumers, like being able to use an ATM when tellers are unavailable. Or chatbots when customer service reps are busy.
This means more money being spent due to more chances of an option suiting needs.
- New kinds of jobs created
Automation isn’t just taking on repetitive tasks. It’s also creating new jobs — new opportunities for employment that are more creative and more flexible. This means that automation can support economic growth.
The downside of automation and the economy
- Increases inequality – creates ‘winners’ and ‘losers’
Automation is all about reducing lower-skilled tasks. this, in turn, means that those in lower-skilled roles may feel the sting of automation disruption more so than those in higher-skilled or complex fields. In short, some will benefit from automation more than others.
In terms of the economy, this means there may be a larger disparity between the wealthy and those that aren’t.
- Impacts opportunity
The rise of automation has also seen the rise of gig work/zero-hour contracts. That is, work conditions are becoming less stable, with fewer perks/benefits, no sick days etc.
Even when GDP increases, this less stable work environment can make people think the economy is hurting.
- Chance of stagnation
While automation may increase profit for corporations, there’s a chance that median wages or even tax revenue will not rise in kind. Companies earning more but paying fewer people doesn’t help to boost the economy. If automation, in the short term, means fewer people in work, then it means fewer people being paid, and fewer people paying income tax.
Beyond the benefits and potential downfalls of automation and the economy, there are a few additional considerations to make.
Simply, it boosts productivity and creativity. It allows people to spend more time progressing — and so it delivers an economic advantage.
There’s also the need to consider how the impact of automation differs in countries with a higher volume of workers likely to be displaced by automation. How will it affect the economies there and what can be done if help is needed? A higher concentration of unemployed citizens could mean the need for more benefits/ government support, for instance.
The future of automation and the economy
Next is the question of what the future looks like regarding day to day work.
Some call for a universal basic income (UBI) in response to the growing automation disruption. If such a scheme were introduced, it would vastly change the way the economy looks compared to today.
Even more extreme is the idea of automation creating a post-work society. That is, a society where no one works — robots, machines and computers do it all.
Perhaps a bit closer to the modern abilities of automation, the future could see people becoming reskilled into new and different jobs created by automation. This re-skilling could mean a temporary need for extra social support in learning.
It’s important to evaluate the potential wider impact of technologies — particularly those as inevitable as automation. Automation causes job disruption, and by extension, it could also cause disruption to the economy.
Automation stands to offer a substantial boost to GDP. But the onus, as with any tool, lies on careful, measured use, and any required support systems to be ready and in place.