BLOG: Is automation an opportunity or a threat?
The digital revolution that has transformed whole industries is still gathering pace. It has enabled the globalisation of capital, goods and services, as well as the fluid movement of people, helped businesses to pursue lower input costs and enhanced competitiveness.
Now, as automation continues to advance in leaps and bounds, some commentators are suggesting that the future of work itself is at risk from next generation technologies, including artificial intelligence.
A recent PWC survey suggested that in the next 15 years, 10 million jobs may be under threat from intelligent automation. In aggregate, 30% of jobs were put at risk, but in some sectors as many as half of jobs could disappear.
Clearly technology can foster new opportunities for work and drive the emergence of new skills; however, in reality there could be a large surfeit of excess labour caused by automation, as it is likely to first take hold in industries where there are high numbers of relatively low-skilled, repetitive jobs.
While some employees could learn the skills needed to take advantage of the new types of role created by automation, this will not be the case for all. Given the type of work that is at the forefront of seeing these developments, men are more likely to be affected – 35% compared to 26% for women.
Sectors most and least at risk from intelligent automation
As companies begin to automate, some organisations have suggested there may be a need for a ‘made by humans’ label or human production quotas mandated by law; others more prophetically link growing automation with a breakdown in social cohesion as societal norms built around long-term paid employment break down.
The retail sector is particularly vulnerable to these pressures. As costs from implementing the National Living Wage increase, companies are rapidly reducing their overall number of frontline staff through automation. British retail employs around 1.7 million people close to the National Minimum Wage; even modest increases are therefore likely to distress margins and profitability still further. Online retail has led to new areas of work in warehouses and delivery services – all largely un-regulated through zero-hours contracts.
Sectors where skills are difficult to automate such as education and health may be more secure, while areas of work that have been staples of employment for over a hundred years, such as train drivers, may completely disappear.
Undoubtedly, business models will adapt and others will emerge which will seek to capitalise from developments in automation and artificial intelligence. In cases such as these, it is a question of balancing the demands of the modern workplace, which are becoming ever more advanced and smarter about how work is done, contrasted with the needs of society, where work is central not only to how we survive but also a source of pride, self-value and purpose in our day-to-day lives.
That is the line that we are walking as socially responsible investors – recognising the opportunity to be found in companies that are poised at the cutting edge of automation while ensuring that, as society evolves around the implications of this, we are fully conscientious of a potential ‘world without work’ and be an advocate for change only when it is to the benefit of wider society.
An example of this from our holdings is Blue Prism, a UK-based pioneer of automation software which enables process-driven work tasks to be conducted robotically. Blue Prism is perfectly positioned to benefit from the continuing shift towards automation in the workplace and its recent H1 results show how the company is achieving this momentum.
Despite the company’s founding concept of the creation of a ‘digital workforce’, Blue Prism does not seek fully to replace humans in the value chain – instead it enables the employees it works for to work more effectively and accurately by deploying automation alongside. It inspires a positive development of workplace, being, as a recent ISG Research Report described it, the future of work and not the end of it.
Alphabet, the parent company for tech giant Google, is also shaping the new world of automation. It is the most prominent global player in artificial intelligence to date, having completed several key acquisitions in the space since 2013 and is successfully developing one of the most comprehensive machine-learning systems (“Google Brain”) in existence.
This future of work is also a matter for governments and how they prepare and adapt to the possibilities brought by automation. But it is also hugely important that businesses and investors recognise the extent to which there is a corporate responsibility towards managing a changing world of work in a responsible way. At EdenTree, it is no small concern for us and our clients, and we continue to engage with companies over changes to work practises while actively recognising the opportunities it brings too.
Ultimately, automation may be as significant a disrupter as the shift was from agricultural to industrial and from rural to urban in the 19th century. Considering and addressing these issues at the earliest opportunity will be of vital importance to us all.
Neville White is head of SRI policy and research at EdenTree Investment Management