Robots create more jobs
Companies investing in robots end up creating even more jobs than before automation. On average, they increase the net number of jobs in their company with 10 per cent within just four years and their output with 20-25 per cent. A study from Aarhus BSS at Aarhus University provides surprising new insight into the effect of automation in different companies.
That robots are coming and will steal our jobs has become a popular statement as an increasing number of jobs have undergone automation. And it is partly true, if you settle for a general view of the issue within a short time frame. However, if you look closer, there is much more to it than that.
Companies that adopt robots in their manufacturing process successfully boost their market position so much that they not only end up hiring more workers than before. They also increase their overall productivity and reduce their labour cost share compared to firms that do not adopt robots.
"The myth of robots stealing our jobs is false. But it is still important to be very flexible on the labour market and harness opportunities to move between jobs and to find new ways of working.”
Michael Koch, associate professor at the Department of Economics and Business Economics, Aarhus BSS, Aarhus University.
Unique panel of Spanish firms
The striking result is the outcome of a lot of hours spent on analysis. Researchers from Aarhus BSS at Aarhus University and Europa-Universität Flensburg have analysed data from a panel of Spanish manufacturing firms, Encuesta Sobre Estrategias Empresariales (ESEE). In total, they have processed data from 5,500 Spanish companies between 1990 to 2016. The study has been published in the recognised scientific journal The Economic Journal and won the RES (Royal Economic Society) award for the best paper published in 2021.
The unique thing about this panel of Spanish companies is that the participating manufacturing firms complete a survey each year, and that through the years, the survey has included specific questions on whether the firms adopted robots in their manufacturing process.
This has enabled the researchers to keep track of the companies’ adoption or non-adoption of robots over time and compare this to a series of other parameters, for instance jobs, productivity, costs, etc.
Companies are different
“It was quite a lucky shot that we stumbled upon this set of data, but it gave us the opportunity to do something entirely new within research into the effect of automation: to investigate the microeconomic impact of robots all the way down to the level of individual firms, as opposed to the majority of existing research, which has been preoccupied with the overall macroeconomic effect,” says associate professor Michael Koch from the Department of Economics and Business Economics at Aarhus BSS, Aarhus University, where he works at the Research Centre [IMWV1] for Firms and Industry Dynamics (FIND).
“Companies come in all shapes and sizes and are generally quite different from each other, and if you settle for investigating the impact of automation across industries and over time, it is hard to pinpoint the specific effect,” says Michael Koch.
Listen to a podcast: The robots are coming (in Danish)
Based on these new data, the researchers went looking for answers to two questions in particular: 1) Which firm characteristics prompt firms to adopt robots? 2) What is the impact of robots on adopting firms relative to non-adopting firms?
To begin with the latter, their analyses show that companies adopting robots in their manufacturing process between 1990 and 2016 increased the number of jobs in the company with more than 50% on average, while companies that refrained from adding robots to their manufacturing process at any point during this period on average reduced the number of jobs with more than 20%.
The analyses also show that robot-adopting companies increase their overall output with an average of 20-25% within four years, reduce the labour cost share with 5-7% and experience net job creation at a rate of 10%.
Listen to a podcast: The robots are coming 2 – a future with automation (in Danish)
A myth debunked
According to their analyses, the companies that are most likely to adopt robots in their manufacturing process and thus achieve further gains are larger firms, exporting firms and firms already characterised by a high level of productivity. Conditional on size, skill-intensive companies with a more specialised work process are less likely to introduce automation.
“We had expected the adoption of robots to cause employment to decrease, just like many other macro-level studies have shown. Interestingly, we found a positive effect in robot-adopting companies and a negative effect in non-adopting companies,” Michael Koch says, concluding:
“The myth of robots stealing our jobs is false. But it is still important to be very flexible on the labour market and harness opportunities to move between jobs and to find new ways of working.” This flexibility is even more pronounced in the Danish labour market than in Spain.”
Next, Michael Koch and his colleagues wish to answer precisely how companies succeed in increasing the number of employees while reducing the overall share of labour costs. They also want to investigate how automation impacts the tasks and responsibilities as well as salary of individual workers.
Facts about the study
|We strive to comply with Universities Denmark’s principles for good research communication. For this reason, we provide the following information as a supplement to this article:|
|Type of study|| |
Panel analysis applying different econometric methods using survey data on individual firms in the Spanish manufacturing sector over the years 1990 to 2016, with rich and very detailed information about the firms' manufacturing processes, costs and prices, technological activities, employment and so forth and especially firm-level information on the use of robots in production. The participating firms are representative of the Spanish manufacturing sector across manufacturing industries, locations and sizes, and a high degree of representativeness for the manufacturing sector at large is provided.
|Conflicts of interest||None|
|Link to the scientific article|| |
Michael Koch, Ilya Manuylov and Marcel Smolka. "Robots and firms." The Economic Journal 131, no. 638 (2021): 2553-2584. https://academic.oup.com/ej/article/131/638/2553/6124631
|Contact information|| |
Associate Professor, PhD Michael Koch