“We analyze for the first time the economic impact of industrial robots, using new data on a panel of industries in 17 countries from 1993-2007. We find that industrial robots increased both labor productivity and value added.” – Robots at Work
The return of productivity means everything
Global productivity began its long, slow decline after the Millennium. In the sixteen years since, productivity hasn’t even hinted at a recovery, until now.
As late as last May, John Fernald, an economist at the San Francisco Federal Reserve, was bluntly pessimistic with the Financial Times: “In the past decade the U.S. has had terrible productivity growth and other countries have been slipping relative to the U.S.”
The numbers that Fernald was so glum about came from his paper Productivity and Potential Output before, during, and after the Great Recession, that show the “average labor productivity growth in mature economies slowed to 0.6 percent in 2014 from 0.8 percent in 2013.”
Just to be clear, that’s “to 0.6″ percent and not “by 0.6″ percent.
It wasn’t always that way. Fernald’s numbers are in stark contrast to the highly energized decade between 1995 and 2005 when productivity averaged 2.9 percent. The present productivity malaise that’s so central to Fernald’s study didn’t begin its descent to the alarming zone of under one percent until after 2005.
Fernald’s 0.6 percent growth rate for 2014 is mightily important when seen in perspective to this from Tyler Cowen’s recent Foreign Affairs piece, Is Innovation Over?:
“In the medium to long term, even small changes in growth rates have significant consequences for living standards. An economy that grows at one percent doubles its average income approximately every 70 years, whereas an economy that grows at three percent doubles its average income about every 23 years – which, over time, makes a big difference in people’s lives.”
According to Fernald then, the current 0.6 percent growth rate in productivity puts the U.S. above 70 years to double the average income. And if “other countries have been slipping relative to the U.S,” as Fernald contends, then global stagnation is what lies ahead.
Global productivity has been down so long that Robots at Work puts it in a whole new light, so much so that we’ve tabbed this return phase to productivity as the “New” Productivity.
And, although robots have been fixtures in factories and warehouses for decades, Robots at Work, casts a new glow over them as well. Industrial automation, with the influx of the co-robot revolution, is now in a transformative phase of “robot-driven automation” that’s moving headlong into that other brave, new world: the Industrial Internet of Things (IIoT).
Industrial Automation and the “New” Productivity
Three grand movements are simultaneously sweeping through robotics: 1. Robotics as the next General Purpose Technology; 2. Robot-driven automation forging a recovery in global productivity; and 3. Robot automation forming the backbone of the Industrial Internet of Things (IIoT).
The March 24th webcast and research report, Industrial Automation and the “New” Productivity, will trace the origins, destinations and impacts of the three movements. In addition, it will analyze the historical decline in productivity as well as examine the influence of the “New” Productivity on the future of manufacturing and logistics.
Special emphasis and perspective will be given to:
- Automation integrators
- Robotics developers, and
- Supply chains
Industrial Automation and the “New” Productivity looks at the near-term of robotics expanding to critical mass while simultaneously evolving into a greater union with Information Technology 2016-2020; and then at 2020-2035, the 15-year ascent of robot-driven automation into dominance in manufacturing and logistics.
Once again, it’s all about technology
The enabling agent driving this “New” Productivity, as had been suspected all along but elusive to prove until now, is robotics; more specifically robot-driven automation.
Better yet, the evidence is indicating that this reemergence of productivity is not an anomaly or a brief blip upwards on a track trending downward. It’s real, and looks like it has legs enough to sustain itself and to raise productivity to new heights.
ARK Invest reports that because of “incremental productivity from automation, real GDP per U.S. worker will more than double from $113,000 this past year  to $236,000, compounding at an annualized growth rate of 3.4 percent through 2035, and at an accelerated rate of almost 5 percent from 2025 to 2035.
In the absence of automation, productivity would increase at roughly half that rate, or 1.8 percent, and real GDP per worker would reach only $167,000.”
And if ARK’s forecast of 3.4 percent is realized, then Cowen’s “an economy that grows at three percent doubles its average income about every 23 years,” will also be realized. That means the U.S. would return, in theory, back to the good old days when each generation provided each subsequent generation with a far better life, which is one of the cherished values of the middle class.
Imagine that, a machine, a robot! helping to stabilize middle-class values, and just maybe – eventually – the middle class itself.
What a hoot that would be: the thing we fear so much is what saves us.
But first, join us Thursdays@Two for our next webcast. Click the button below, and we’ll meet you there.