Robots may replace managers in several industries, according to new study

A new Statistics Canada study suggests that since the mid-90s, manager headcounts have decreased more often than not, while non-managerial employee headcounts have increased during the adoption of robots.

The latest StatsCan study examining how employment and organizations have changed in response to robot adoption says Canadian companies that automated certain tasks from 1996 to 2017 had a 15 per cent higher workforce relative to other companies in the same industry. These firms expanded their high- and low-skilled workforce, although not their middle-skilled workforce, after investing in robots, indicating that this has resulted in a change in managerial activities for the newly transformed workforce. 

Automotive sector not alone in robot adoption

According to the study, which scrubbed administrative data sources like employment and performance, and workplace conditions, the aggregate robot capital stock in Canada for each year over the two decades shows that investment has been steadily increasing since the late 1990s. It also shows that there has been a substantial decline in investment growth corresponding roughly to the timeframe of the Great Recession for automotive assembly robots. Since 2008, investment in automotive assembly robots has continued to decline, while investment in nonautomotive robots has increased at an accelerating rate. In 2008, the stock of robots was $1.2 billion, just under half of which was for automotive assembly lines. In 2016, Canada was in 13th place internationally concerning robot density (145 robots in use per 10,000 employees), according to StatsCan. By 2017, less than $400 million of the $1.5 billion in total robot stock was in the automotive sector. 

Today, robots are especially active in the automotive and machinery, electronics and equipment assembly sectors, and the plastics processing and minerals and metals manufacturing industries. Increasingly, enterprises in agriculture, mining, construction, as well as service sectors like health and waste management have invested in robots over this period.

The divergence in investment between the two types of robots is consistent with anecdotal evidence that the types of robots being adopted by firms have evolved, away from highly customized robots for automotive production to more general-purpose robots that can be used by businesses across a wider range of economic sectors.

As a new general-purpose technology, robots have the potential to transform industries and affect employment radically. However, in contrast to previous studies at the industry level that predicted dramatic employment declines, this one finds that investments in robotics are associated with increases in total firm employment but decreases in the total number of managers. It also finds that robot investments are associated with an increase in control span for managers remaining within the organization. 

Reducing labour costs not the main driver of adoption

The StatsCan study shows robot adoption is not motivated by the desire to reduce labour costs but is instead related to improving product and service quality. These findings are consistent with the notion that robots reduce variance in production processes, diminishing managers’ need to monitor workers to ensure product quality. And now, with rapid advances in vision, speech and prediction capabilities, robotics has advanced beyond automating simple routine tasks. Robots have now become capable of performing more cognitively complex work and tasks involving specific types of manual dexterity. Middle-skilled workers, those working in occupations requiring vocational or trades accreditation or an associate degree, are more likely to perform these tasks that robots are becoming more automated, the study points out.

For example, in the healthcare and pharmaceutical industries, robots have been used to handle and prepare materials, follow complex protocols to prepare and analyze samples, and coordinate patient care without human intervention. Companies with significant warehousing and automotive operations have also experienced similar effects.

The study, therefore, presents consistent evidence of a negative and statistically significant relationship with middle-skilled employment, suggesting that robots displace managerial work that in prior waves of technology adoption was considered more difficult to replace. Also, the results are consistent with the notion that, as robots automate a larger proportion of tasks within the organization and reduce variance in the production process, human workers are left to focus on less predictable work in nature.

Simultaneously, the study uses novel firm-level data to show that investments in robotics are associated with increased employee turnover and an increase in total employment within the firm. 

According to a 2018 public engagement initiative ‘“The Impact of Technological Change on Ontario’s Workforce” by Brookfield Institute, which was supported by Ontario’s government, the impact of automation on people and workplaces is not necessarily predictable. Impacts are variable and can be contradictory in different settings. Automation may result in jobs lost through the replacement of human workers by machines, but it may also result in jobs gained through increased productivity. The shift to automation can create new, higher-skilled, higher-paying jobs, the institute determined – but fewer of them.