Robotics: The Fourth Industrial Revolution, Facing the realities of the robotic age

Modern information technologies and the advent of machines powered by artificial intelligence (AI) have already strongly influenced the world of work in the 21st century. They really seem to be reaching a point where we are really seeing an acceleration, what you might call an inflection point. Many seem to agree that robots will have a tremendous impact over the following years. The complexity of the situation has been summed up in a recent report by the International Bar Association which asserts that a third of graduate level jobs around the world may eventually be replaced by machines or software. The report further suggests that innovation in artificial intelligence and robotics could force governments to legislate for quotas of human workers, upend traditional working practices and pose novel dilemmas for insuring driverless cars.

Robotics is said to be the next technological revolution. Whether we like it or not, robots armed with the latest technology in artificial intelligence are increasingly making their presence felt in our daily lives. Oxford University researchers recently estimated that 47% of US jobs could be automated within the next two decades. Both blue-collar and white-collar sectors will be affected. The faster the process of the division of labour and the more single working or process steps can be described in detail, the sooner employees can be replaced by intelligent algorithms. One-third of current jobs requiring a bachelor’s degree can be performed by machines or intelligent software in the future. Many scientists and economists are predicting that some robots will be intelligent enough to take over many professional jobs in medicine, law, accounting and banking. In his farewell address in January, former US president Barack Obama warned that “the next wave of economic dislocations … will come from the relentless pace of automation that makes a lot of good middle-class jobs obsolete”.

Potential Losers

For a long time, the BRICS countries (Brazil, Russia, India, China and South Africa) were considered the beacon of hope for the global economy. Owing to an increased mining of raw materials and the outsourcing of numerous Western branches of industry to low-labour-cost countries, investors expect long-term yields. However, demand for raw materials is currently very low, so Brazil and Russia are becoming less attractive. With the technical development of production robots, many companies producing in low-labour-cost countries will relocate their production centres to the countries where they originally came from.

The developing countries in Central and South America will also not profit from the trend of the fourth industrial revolution. It is to be feared that these countries – like the North African countries and Indonesia – are not equipped to face automation and digitalisation due to the lack of education of much of the population, lack of investment in a (digital) infrastructure and lack of legal framework.

Further complicating the matter is the rising birth rate in the North African and Arabic countries, which will lead to high rates of youth unemployment. For every older employee in Uganda, Mali or Nigeria, seven younger employees will enter the badly structured national labour market. In these countries, only 40 percent of the youth is in employment, and most of these jobs are low-paid ones, without social security in the third sector. It does not come as a surprise that many youths – especially those who are better educated – would like to leave their countries to migrate to developed countries in the West. Legal frameworks, less corruption, more social security and a better infrastructure would be necessary to avoid the younger generation’s migration wave. Additionally, better access to higher education and training opportunities, particularly for women, would be necessary to promote the competitiveness of these countries.

Potential Winners

The winners of the digital revolution are, on the other hand, likely to be the highly-developed Asian countries with good education systems, such as Singapore, Hong Kong, Taiwan and South Korea. These countries – together with the Scandinavian countries – have been undertaking research and working to find digital solutions for complex issues for a long time. The digital interconnection of people in these countries is also very far advanced. The share of the population at risk of unemployment is about six percent in these countries. Finally, Western developed countries will profit from the relocation of the companies’ production sectors when robotic production becomes cheaper than human production in low-labour-cost countries. This will create new jobs in these countries and destroy many routine jobs in the low-labour-cost countries.

Another positive trend can be seen for India and China, which are both considered very suitable candidates for participation in the digital revolution due to most of the population having a good command over English and IT skills. IT knowledge is taught in schools as a key qualification. It is, therefore, not surprising that Indian and Chinese professionals have more extensive computer knowledge than their French or English colleagues do. Not only are salaries and wages lower in India, but also the number of better qualified professionals; that’s why 25,000 IT jobs are likely to be outsourced to India from the UK alone.

Like China, India is in the process of developing from simply being a low-labour-cost country into being a Western-orientated society whose population works mainly in the tertiary sector. As the most populated countries in the world, these two countries have a high level of consumer demand. Moreover, because of their rapidly growing cities, these developing countries need highly developed solutions in terms of logistics and environmental technologies, like the smart city, in order to increase the quality of life for city residents over the long term.

The digital world market leaders are based in Silicon Valley, California. In 2015, the top ten Silicon Valley startups created an annual turnover of approximately US$600bn with information and communication services. Additionally, the eight leading digital platforms – Alphabet, Amazon, Facebook, etc. – due to their exponential growth show a significantly higher capital market value than the leading industrial companies (e.g., General Electric, Siemens or Honeywell). The rise of AI in the service sector, especially the gig-economy, can be illustrated by the example of Uber, which saw an increase in its market value from zero to US$40bn in only six years. Even though more than 80 percent of the robots sold each year are deployed in Japan, South Korea, the US and Germany and enhance productivity in the production sector, the new business models in the service sector are the digital future.

With economic growth in this sector, the US will be particularly resistant to future economic crises. It is, therefore, not surprising that innovative countries like Switzerland, Germany, the US or Japan are rated best in the Global Competitiveness Index by the World Economic Forum.

In summary, it can be said that the increase of automation and digitalisation is a global concern that, due to the lack of financial possibilities in many developing countries, will initially be strongly focused on Western developed countries and Southeast Asia. These countries will be considered the winners of Industry 4.0 because of their technological head start and their creative service models.

Future Outlook

In the near future, we will be facing a difficult situation. If we do not arrange for the training of those at risk of losing jobs, we will have to face the menace of unemployment. Training is likely to make sense only in the area of IT. Not only employees, but also companies that have to date had little to do with IT and data processing in the form of big data will have to adapt to the technical innovations to remain competitive.

The new labour market is rapidly approaching. Only the seller who first discovers, develops or even brings the new service model to the market will earn big profits. Moreover, because of the rapid technical development, the new and profitable services will become outdated very quickly as well. They will be replaced by other services, which will be based on the more developed services, and creative solutions will be found to serve the needs of the customers that are not served by the older service.

Experts disagree on when the fundamental effects will become visible. Some economists expect appreciable changes within the next five years, while others emphasise that the phenomenon will be widespread only in 20 to 30 years. However, the technical change is already visible today.

Conclusion

In order to be able to meet the challenge, future employees must learn new key qualifications, but the educational system must also be adapted to these new framework conditions. There was agreement at the World Economic Forum 2016, for instance, that both schools and universities ‘should not teach the world as it was, but as it will be’. New qualification strategies for individual countries are thus needed. They must encourage students’ interest in subjects such as mathematics, information technology, science and technology when they are still in school, and teachers with digital competence must teach students how to think critically when using new media and help them to achieve a fundamental grasp of new digital and information devices.