Companies Invest In Automation To Plug Gaps In An Aging Workforce

It might seem intuitive to assume that technology is adopted based primarily on the merits of the technology and its impact on things like productivity. That isn't, however, what new research from MIT shows. Instead, it argues that we tend to invest more in robotics and other automation-based technologies when our populations become older as employers strive to plug gaps in an aging workforce.

"Demographic change—aging—is one of the most important factors leading to the adoption of robotics and other automation technologies," the researchers explain.

Indeed, when it comes to the adoption of technologies, such as robotics, the authors argue that the demographics of the population account for up to 35% of the variation between countries. What's more, a similar phenomenon appears to be occurring within countries too, with metro areas in the United States that are aging faster adopting automation technologies faster than areas that are aging more slowly.

"We provide a lot of evidence to bolster the case that this is a causal relationship, and it is driven by precisely the industries that are most affected by aging and have opportunities for automating work," the researchers say.

Labor shortages

We're obviously in the midst of the so-called "great resignation", and reports of unfilled vacancies have prevaricated around the world in the past year. It's also true that most developed countries around the world are aging rapidly, with nations such as Japan, Italy, Finland, and Portugal aging the fastest.

The MIT research examines a range of industry, demographic, and technological data from the 1990s through to the mid-2010s. The data shows a strong relationship between the age of the workforce, which was defined as the ratio of workers aged over 56 and those aged between 21 and 55, and the adoption of robotics in 60 different countries.

The age of the workforce alone was found to account for 35% of the variation in the adoption of robots in a country, as well as around 20% of the variation in the importing of robots into the country. This was especially so in countries like South Korea and Germany, both of whom are aging rapidly. Indeed, the data found that the age of the population accounted for 80% of the variation in robot adoption between Germany and the United States.

"Our findings suggest that quite a bit of investment in robotics is not driven by the fact that this is the next 'amazing frontier," but because some countries have shortages of labor, especially middle-aged labor that would be necessary for blue-collar work," the researchers say.

Encouraging automation

After exploring the adoption of other automation-based technologies across 129 countries, the researchers believe this same narrative holds true for all forms of automation.

"We find the same thing when we look at other automation technologies, such as numerically controlled machinery or automated machine tools," they explain.

Importantly, it's not a trend that is observed for non-automation technologies, such as computers and more standard information technology. There were also some interesting trends in terms of how the adoption of automation technologies impacted the labor market.

For instance, in Germany robots were adopted in large part because of a shortage of workers, so it was not done as a cost-cutting measure but rather to maintain productivity. In the United States, however, this was not so much the case, with automation being used to replace younger workers more often.

"This is a potential explanation for why South Korea, Japan, and Germany—the leaders in robot investment and the most rapidly aging countries in the world—have not seen labor market outcomes [as bad] as those in the U.S.," the researchers explain.

Regional divide

While the findings are interesting from an international perspective, the fact that they also hold up when looking within countries is equally important, especially given the quite evident divides that have arisen in developed countries in recent years, not least between large cities and smaller towns and rural areas.

The researchers used the same techniques used internationally to examine the adoption of robotics and automation in around 700 metropolitan areas across the United States between 1990 and 2015. To make the comparison as fair as possible, they attempted to account for factors such as local labor trends or the industrial composition of the economy.

Generally speaking, the same trends appeared locally as they did globally. The older the workforce was, the greater the adoption of robots and other automated technologies. For every 10 percentage point rise in the age of the local population, there was a 6.45 percentage point rise in the number of firms specializing in industrial robots.

If the "Great Resignation" means the worker shortage gets even more serious, then this study suggests we can look forward to growth in automation without the accompanying fears that the robots will be "taking our jobs".