Automation Trends and COVID- 19

While automation has improved productivity, per capita output, and living standards in general, two crucial aspects of automation raise concerns: its disproportionate impact on low-skill , in terms of drastically reducing the market value for repetitive manual labour, and its overall negative impact with respect to the share of income that goes to labour as opposed to capital. Both of these impacts tend to magnify income inequality. The adoption of automated technology has been accelerated by the COVID-19 pandemic and may serve to magnify the aforementioned effects on lower wage workers and income inequality.

It has to be acknowledged that automation, robotics, modern information and communication technologies, and artificial intelligence have proven incredibly useful in fighting COVID- 19, as well as in alleviating its economic consequences.

Firstly, conferencing applications and ecommerce have allowed firms to operate by facilitating social distancing in the workplace and by enabling remote work from home offices. In general, because better-educated workers with higher incomes can take advantage of these opportunities, but for many less-educated, lower-income workers, automation and related technologies have caused greater social and economic inequality, and have eroded the value of manual labour in repetitive tasks.

Second, the COVID-19 pandemic will likely accelerate the development and implementation of automation technologies due to greater incentives to substitute capital for labour. The reason is that the former is obviously not susceptible to pathogens that affect humans, and can operate day in and day out. In addition, COVID-19 has made remote working mainstream, in stark contrast to the existing status quo of dedicated office spaces.

Third, robots and smart technologies offer great potential in combating,in diagnosing, and in the surveillance of future pathogens. These systems proved immensely useful in tracking and diagnosing COVID-19. The adoption of more advanced systems in disease control, medicine development, and pathogen tracking will only increase in order to combat natural disasters and future pathogens.

Fourth, supply chain disruptions caused by COVID-19 may undermine the integration of economies and encourage self-reliant economic and manufacturing systems, at least in strategically important sectors such as the production of medicines and medical equipment, the production of necessary inputs for assembling sophisticated machines, cars, and planes — the final production of which usually still occurs in high-wage countries. While policymakers hope that the corresponding re-shoring of supply chains will create jobs for low-skilled workers and raise their wages, it can also be argued that this would instead enhance robot adoption and not retrain lower skilled workers in any meaningful way.

While automation is likely to foster overall economic prosperity for businesses, it comes at the price of increasing inequality and may render the value of labour useless in professions that don’t require specialisation. The main challenge here is to retrain lower skilled and unspecialised workers in higher paying disciplines in emerging industries. This is crucial in order to increase human capital and have a population intellectually and educationally equipped for a technological and information economy, and to ensure a more equitable distribution of the value and wealth that will be created by automation.

Sources:

Acemoglu, D and P Restrepo (2018), “The race between man and machine: implications of technology for growth, factor shares, and employment”, American Economic Review 108 (6): 1488–1542

Ford, M (2015), Rise of the robots: technology and the threat of a jobless future, New York: Basic Books

Blake, R (2020), “In coronavirus fight, robots report for disinfection duty”, Forbes, 17 April

David Bloom and Klaus Prettner (2020),” The macroeconomic effects of automation and the role of COVID-19 in reinforcing their dynamics”, Vox, 25 June

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