Tuesday, June 2, 2015

How Will Robots Impact Late Industrializers Like India and Pakistan?

Export oriented manufacturing industries have helped a succession of newly industrialized countries like Indonesia, Japan, Hong Kong,  Malaysia, South Korea, Taiwan and China create more and better jobs and rise from low-cost manufacturing base to more advanced, high-end exports.  

As a country's labor gets too expensive to be used to produce low-value products, some poorer country takes over and starts the climb to prosperity.  Will this formula help create more and better jobs in late industrializing countries like Bangladesh, India and Pakistan? Will programs like Indian Prime Minister Narendra Modi's "Make in India" help create more and better manufacturing jobs to bring prosperity to his country? To answer this question, let's look at a recent World Bank report. 

World Bank Report:

A 2015 World Bank report titled "Manufacturing Conundrum" says this formula of creating more manufacturing jobs for greater prosperity is unlikely to continue to work in the future. Here are two reasons it offers:

1. Labor productivity has risen faster in manufacturing than in the wider economy. Higher levels of manufacturing output are now compatible with lower levels of manufacturing employment. the following figure confirms this, showing that peak manufacturing employment shares have fallen over time. Peak output shares have not.

2. Manufacturing activity is now more apt to leave for other countries as labor costs rise. Therefore deindustrialization kicks in at lower income levels. Moreover, this premature deindustrialization is more apparent in employment than in output data. Output can be sustained in the face of rising labor costs by replacing workers with machinery. (Arvind Subramaniam and Amrit Amirapu show similar trends in industrial (manufacturing plus mining, utilities and construction) employment using repeated cross-sections of countries.)

Rise of the Robots:

A key factor this report does not fully acknowledge is the dramatic advance in artificial intelligence (AI) leading to the rise of much more capable robots.

To put this in perspective, let's understand that the industrial revolution in the West moved a lot of jobs and people from farms to factories beginning in the 18th century.  As a lot of low-cost, low-value manufacturing has moved to cheaper locations in the developing countries,  there has been a major transition from manufacturing jobs to service sector jobs in the industrialized nations. Now the application of robots on the factory floors is putting pressure on manufacturing jobs everywhere---in developed as well as developing nations.

Low-Cost Manufacturing Jobs:

Even low-cost manufacturing jobs in garment industry are being challenged by highly capable sewing robots from companies like SoftWear Automation, a textile-equipment manufacturer based in Atlanta in the American state of Georgia. Here's how Economist Magazine describes it: "The company is developing machines which tackle the problems of automated sewing in a number of ways. They use cameras linked to a computer to track the stitching. Researchers have tried using machine vision before, for instance by having cameras detect the edge of a piece of fabric to work out where to stitch".

Service Sector Jobs:

Even the service sector jobs are now threatened with increasing capacity of the robots. Following are examples of robots intended to replace service sector workers that have been described Martin Ford in a recent NPR interview to promote his book "Rise of the Robots":

Loading-Unloading Robot:

There's a company in Silicon Valley called Industrial Perception which is focused specifically on loading and unloading boxes and moving boxes around. This is a job that up until recently would've been beyond the robots because it relies on visual perception often in varied environments where the lighting may not be perfect and so forth, and where the boxes may be stacked haphazardly instead of precisely and it has been very, very difficult for a robot to take that on. But they've actually built a robot that's very sophisticated and may eventually be able to move boxes about one per second and that would compare with about one per every six seconds for a particularly efficient person. So it's dramatically faster and, of course, a robot that moves boxes is never going to get tired. It's never going to get injured. It's never going to file a workers' compensation claim.

Hamburger Making Robot:

Essentially, it's a machine that produces very, very high quality hamburgers. It can produce about 350 to 400 per hour; they come out fully configured on a conveyor belt ready to serve to the customer. ... It's all fresh vegetables and freshly ground meat and so forth; it's not frozen patties like you might find at a fast food joint. These are actually much higher quality hamburgers than you'd find at a typical fast food restaurant. ... They're building a machine that's actually quite compact that could potentially be used not just in fast food restaurants but in convenience stories and also maybe in vending machines.

News Writing Robot:

Essentially it looks at the raw data that's provided from some source, in this case from the baseball game, and it translates that into a real narrative. It's quite sophisticated. It doesn't simply take numbers and fill in the blanks in a formulaic report. It has the ability to actually analyze the data and figure out what things are important, what things are most interesting, and then it can actually weave that into a very compelling narrative. ... They're generating thousands and thousands of stories. In fact, the number I heard was about one story every 30 seconds is being generated automatically and that they appear on a number of websites and in the news media. Forbes is one that we know about. Many of the others that use this particular service aren't eager to disclose that. ... Right now it tends to be focused on those areas that you might consider to be a bit more formulaic, for example sports reporting and also financial reporting — things like earnings reports for companies and so forth.

What's Next:

Farm and factory jobs have dramatically declined forcing workers to move into the service sector. So what will happen when the service sector jobs decline? What will people do? Here are some possible answers:

Peer-to-peer economy: In a return to the era of barter economy, people will share what they have for a price. It could be a car, a room, a meal, a basic chore etc. Examples include AirBnB.com, Getaround, Etsy, Lyft, TaskRabbit

Shorter work-week: A shorter work week will alllow more people to be gainfully employed. Example: 35-hour work-week in France

Basic income guaranteed for all: First proposed by Richard Nixon in 1969 as “Family Assistance Plan”. Government will collect taxes and distribute basic assistance to allow people to subsist. If they choose to work, they can earn more money to have a higher standard of living.


People have moved from agriculture to manufacturing to service jobs over the last two centuries. Now highly-capable robots are threatening to replace workers in all sectors. Major disruptions are likely to occur to build a new economic order that offers everyone a dignified existence in future. Such an order could be a combination of peer-to-peer economy, work-sharing through shorter work weeks and basic guaranteed income for all.  French philosopher Voltaire said: “Work saves a man from three great evils: boredom, vice and the need”. Basic guaranteed income only takes care of “the need”, not “boredom, vice”.

Related Links:

Haq's Musings

Robotics in Pakistan

Pakistan-China Industrial Corridor

Industrial Revolution Triggered Major Power Shift From East to West

Pakistan Led South Asian Job Growth 2001-2010

Silicon Valley Pakistani-Americans Enabling 2nd Machine Revolution

Pakistan 2.0: Technology Driving Productivity

3D Printing Revolution Comes to Pakistan

Is Modi's Honeymoon Over?


Majumdar said...

Prof sb,

Then it is very much possible that a robot or a software programme cud search the internet or any other media, dig out all data/reports which prove Pakiland superior to India and then write out an article based on that. Who will read your musings then? You shud be afraid- very, very afraid.


Riaz Haq said...

On Wednesday HSBC released its research for the past month indicating that the Service Sector Business Activity Index in India fell in May to 49.6 from 52.4 in April, showing a contraction in the sector (WSJ). This is the first time the index has fallen below 50 since May 2014. Services sector contributes 60% to India's GDP. The findings follow other recent indicators, such as industrial production, freight traffic, and bank credit, that show India’s economy is struggling to gather momentum, despite recently revamped GDP data showing a robust expansion. HSBC said competitive pressures and natural disasters were to blame for crimping demand. However, businesses are optimistic that a broader improvement in the economy would lead to a pickup in activity over the next year. A similar survey by HSBC released Monday showed manufacturing activity expanded at the fastest pace in four months in May.

A gauge of services activity in India contracted for the first time in 13 months in May amid a decline in new orders, indicating that a recovery in the South Asian economy is likely to remain sluggish.

The seasonally adjusted Service Sector Business Activity Index fell to 49.6 from 52.4 in April, according to HSBC research released Wednesday.

This is the first time since April 2014 that activity in the services sector, which contributes about 60% to India’s gross domestic product, has contracted. A figure above 50 indicates expansion, while a reading below that signals a contraction.

HSBC said competitive pressures and natural disasters were to blame for crimping demand and hurting order flows.

However, businesses are optimistic that a broader improvement in the economy would lead to a pickup in activity over the next year.

“The sector is expected to see a rebound in the coming months,” as the impact of sweltering heat and the earthquake fade, said Pollyanna De Lima, economist at Markit. “An upturn in employment combined with improved business confidence further add to evidence that prospects may brighten.”

The findings follow other recent indicators, such as industrial production, freight traffic and bank credit, that have shown India’s economy struggling to gather momentum, despite recently revamped GDP data showing a robust expansion.

GDP data last week showed that India’s economy grew a solid 7.5% in the three months ended March 31, making it the fastest-growing big economy in the world. But the big revisions and the conflicting signals with other indicators have led economists to question the reliability of the data.

While services activity is still weak, the manufacturing sector gained momentum in May, highlighting that the economic recovery is still patchy.

A similar survey by HSBC released Monday showed manufacturing activity expanded at the fastest pace in four months in May.

HSBC also said Wednesday that input price pressures had intensified. Higher inflation could reduce the space the Reserve Bank of India has to lower interest rates.

The RBI cut it main lending rate by a quarter-percentage-point Tuesday, but cautioned about risks of a rise in inflation, indicating that interest rates may have little room to go down any more.


Rizwan said...

There is no option but to improve education in Pakistan and make it available to everybody. I think other than providing infrastructure, the government needs to increase teachers' salaries to make it an attractive profession for college graduates, and to improve teacher training. Which means the instructors in teacher training programs have to be highly qualified and well paid as well. The faster government moves to close the educational quality and quantity gap, the better off Pakistan will be, with or without robotic manufacturing.

Riaz Haq said...

Robots leave behind Chinese factory workers

According to the International Federation of Robotics, an association of academic and business robotics organizations, China bought approximately 56,000 of the 227,000 industrial robots purchased worldwide in 2014 — a 54 percent increase on 2013. And in all likelihood, China is just getting started. Late last month, the government of Guangdong Province, the heart of China’s manufacturing behemoth, announced a three-year program to subsidize the purchase of robots at nearly 2,000 of the province’s — and thus, the world’s — largest manufacturers. Guangzhou, the provincial capital, aims to have 80 percent of its factories automated by 2020.

The government’s involvement in this process shouldn’t come as a surprise. The Chinese government (nationally, and in Guangdong) has long wanted to shift the country’s manufacturing away from low-quality products that are manually assembled and toward higher-value ones — like automobiles, household appliances and higher-end consumer electronics — that require the precision of automation.

And it’s no secret that demographics aren’t on the side of China’s traditional, labor-driven factories. Urbanization, population control policies, and cultural shifts have pushed China’s average birth rate below those in more developed countries like the United States. Meanwhile, as a result of growing urban affluence, workforce participation rates are in decline, especially among women. Together, these factors are pushing wages upward, with an average annual increase of 12 percent since 2001. That trend offers plenty of incentive to factory owners and government officials to pursue automation.

Of course, what looks sensible from the perspective of the economic planner’s office is more distressing from the factory floor. In March, Caixin, a Chinese business magazine, reported that Midea, a major Chinese manufacturer of air-conditioners and other appliances, plans to cut 6,000 of its 30,000 workers in 2015 to make way for automation. By 2018, it will cut another 4,000. What will happen to those and the millions of other low skill workers who will be displaced by the shift?

The answers offered so far by companies and government officials haven’t been very reassuring. When Foxconn, the contract manufacturer for many Apple products, announced in 2011 that it was beginning a three-year program to replace some of its workers with as many as 1 million robots, the company said it was doing so out of a “desire to move workers from more routine tasks to more value-added positions in manufacturing such as R&D.” But even if those intentions were sincere, Foxconn never gave any indication that it would have enough higher-skilled positions to employ every displaced iPhone assembler.

Meanwhile, officials in Guangdong Province and their supporters in the Chinese media argue that the government-subsidized robotics industry will provide plenty of employment opportunities in robot manufacturing. But even if displaced low-skilled workers can be funneled into those jobs as rapidly as the Chinese government suggests, there’s no guarantee that the resulting jobs will pay as well as those they replace. In fact, with so many displaced workers seeking to fill them, they might even pay less, according to a recent study of automation’s impact on labor markets.


Anonymous said...


Riaz Haq said...

Does #narendramodi's #India's new '#makeinindia' campaign mean 'Made by Children?' http://fw.to/4g8maXY

Does India's new 'Make in India' campaign mean 'Made by Children?'

Their hands fly with the speed and precision of veteran assembly-line workers, pausing only to flick sweat from their shiny-smooth foreheads.

They construct box after cardboard box, designed for sari shops in far-off cities, stacking them into multi-hued towers that loom above their small, hunched bodies.

Many of the workers are not yet teenagers, and they fill the dimly lighted corridors of the textile mills and warehouses of this industrial city in western India. Despite a law requiring every child younger than 14 to be in school full time, millions of Indian boys and girls still hold jobs, including more than 50,000 in Surat alone, according to estimates by human rights groups.

India has declared that it wants to end child labor, but advocacy groups argue that a new government proposal could actually push more youngsters into the workforce, jeopardizing their education and putting them at greater risk of exploitation.

Prime Minister Narendra Modi's Cabinet last month approved amendments to a 3-decade-old child labor law that would make it legal to employ children younger than 14 in "family enterprises" not deemed hazardous.

Children would be barred from mining, heavy industry, manufacturing fireworks or other dangerous professions, but could participate in virtually any other sector as long as the work was outside school hours in a business run by relatives, says a government statement on the legislation.

Modi's conservative government said it was seeking to strike "a balance between the need for education for a child and the reality of the socioeconomic condition and social fabric in the country."

In many poor Indian families, boys and girls assist their parents from an early age, and proponents say an outright ban on child labor could harm small farmers, shopkeepers, cooks and others who rely on young hands to help them scrape by.


Critics say the amendments send the wrong signal from Modi's government, which has been trying to revive India's lumbering manufacturing sector and promote foreign investment through a glossy campaign dubbed "Make in India."

"There is a feeling that if children are blocked from working, the garment industry or other industry might suffer," said Prabhat Kumar, child protection manager for the international charity Save the Children.

"But if you really look at the issue, this won't be the case. No one would support the idea of 'Make in India' meaning 'Made by Children.'"


Riaz Haq said...

China tops the list of world's 10 largest industrial producers. It is followed by the US, Japan, Germany and South Korea, according to United Nations Industrial Organization (UNIDO).

India ranks 6th in the world in terms of total manufacturing output in 2013, up from 9th place in 2008,


India's manufacturing value added (MVA) per capita of 161.7 in 2013 is among the lowest in the world. It's up from 131.9 in 2008.

In fact India's 2008 MVA per capita of 131.9 was lower than Pakistan's 141.1. Since 2008, Pakistan's MVA per capita has slipped to 139.1 in 2013 while India's has increased to 161.7 in this period.

Bangladesh's MVA per capita has jumped from 82.2 in 2008 to 118.3 in 2013.

On UNIDO’s industrial competitiveness index, most industrialized countries lost ground in the last three years. Among the five most competitive are four high-income countries (Germany, Japan, the Republic of Korea and the United States), along with China ranking fifth. The four are among the world’s most industrialized countries and, with China, account for 59 percent of world MVA.


Riaz Haq said...

The Future
of Jobs


Pakistan Working Age Population 82,345,263

Digital skills among active population* WEIGHTED AVERAGE 2019-2020 50.7%

Attainment of basic education 2017 36.4%

Business relevance of basic education* WEIGHTED AVERAGE 2019-2020 45.6%

Attainment of advanced education 2017 8.7%

Business relevance of tertiary education* WEIGHTED AVERAGE 2019-2020 54.9%

Supply of business-relevant skills* WEIGHTED AVERAGE 2019-2020 51.1%

Unempl. rate among workers with adv. educ. 2018 4.5%

Unempl. rate among workers with basic educ. 2018 2.3%

Share of youth not in empl., educ. or training 31.1%

The survey was distributed via an online platform
through three dissemination networks. The primary
distribution route was to the World Economic Forum
partners and constituents in collaboration with
the World Economic Forum Regional and Industry
teams. The survey was further disseminated through
a network of Partner Institutes—local partner
organizations that administered the survey in their
respective economies. Further dissemination through
partner organizations enabled the strengthening of
regional representation by extending the sample to
local companies. As a third dissemination channel,
the New Economy and Society team shared the
survey with the collaborators from the countries in
which the Closing the Skills and Innovation Gap
Accelerators are present (South Africa, UAE, Bahrain,
India, Pakistan). The Accelerator project brings about
tangible change by building a national public-private
collaboration platform to increase employability of
the current workforce and increase work-readiness
and critical skills among the future workforce.

Riaz Haq said...

#Pakistan on brink of inking #industrial accord with #China for industrial cooperation to develop B2B joint ventures, build Special Economic Zones (SEZs) and industrialization under the second phase of #CPEC. #economy #industry #business #manufacturing https://www.thenews.com.pk/print/759243-pakistan-on-brink-of-inking-industrial-accord-with-china

“Prime Minister Imran Khan has already given approval to it. After consultation, both the countries will formally sign this framework agreement,” a senior official said.

On Tuesday, representatives from both the countries held the fifth meeting of Joint Working Group (JWG) on industrial cooperation under CPEC through video conference.

The Chinese side appreciated the efforts undertaken by Pakistan to elevate the MoU (Memorandum of Understanding) on industrial cooperation into a Framework for an increased cooperation under CPEC and agreed to continue consultation for its signing at the earliest. They also hailed the idea of joint industrial diagnostic studies followed by an action plan.

Khashih-ur-Rehman, Additional Secretary/Executive Director General, Board of Investment (BOI) and Ying Xiong, Director General, National Development & Reform Commission (NDRC), China co-chaired the meeting. Representatives from line ministries, provincial governments, and embassies attended the meeting.

Rehman remarked that elevation of the MoU on IC (Industrial Cooperation) between Pakistan and China into a comprehensive framework would create new avenues for strengthening industrial cooperation under CPEC which is also open to third party participation.

Cooperation would likely enhance B2B and project to project (P2P) ties, balance and modernise existing industry, expedite SEZs development and promotion, seek technical and financial assistance from China, increase production capacity, and facilitate businesses with support of financial institutions from both sides, etc, he added.

Asim Ayub, Project Director of Project Management Unit (PMUC-CPEC-ICDP) on Industrial Cooperation of BoI, appreciated the Chinese side for accepting the Draft Framework Agreement shared by the Pakistani side in early November 2020.

Early signing of the Framework Agreement on IC would help both sides achieve maximum objectives of CPEC in line with its long-term Plan, Ayub said, adding that immense efforts had been ensured by Pakistani to devise the Draft Framework, taking all the provinces and other stakeholders on board and final approval of the Honorable Prime Minister was also obtained accordingly.

He stressed a Framework Agreement was the need of the hour for a measurable impact with regards to Industrial Cooperation, SEZs, Business to Business (B2B) and People to People (P2P) collaboration.

Ayub said Pakistan highly regarded the idea of Industrial Diagnosis by the Chinese side and extended its highest support to the group of experts from CIECC for the Textile Industrial Diagnosis last year. However, he was of the view that the Industrial Diagnosis needed to be carried out in a joint manner involving experts from both sides who might submit the Diagnosis Report to the JWG along with an Action Plan that would be imperative for the respective industrial sector.

The meeting also discussed progress made on Rashakai, Dhabeji, Alama Iqbal Industrial City, and Bostan SEZs under the CPEC, the revival project of Pakistan Steel Mill, China Pakistan Young Workers Exchange and Cooperation, and Karachi Coastal Comprehensive Development Zone.