As Bob Magee, chairman of the Woodbridge Group, walked us through his foam-manufacturing facility just north of Toronto, a familiar story emerged. Automation for this company isn’t a simple calculation of substituting one machine for one worker. Rather, it is one of many incremental steps in a process of continuous improvement that requires engaged employees at each and every step.
At the Woodbridge Group, automation is beneficial for the firm and workers alike. It contributes to improved competitiveness — a necessary precondition for jobs — while making existing jobs easier, more efficient and, from our observations, more enjoyable. Where workers were once required to lift and place heavy sheets of foam, these tasks are now done by machines. Workers are free to do what they do best: oversee processes, ensure quality and work as a team to make the plant more efficient.
Despite many stories like these, concerns over automation decimating the workforce and leaving millions unemployed persist. Is automation driving us toward a jobless future or a more productive and prosperous economy for firms and workers alike? To better understand what’s happening and what’s coming in Ontario, Ontario’s Ministry of Economic Development and Growth and Ministry of Advanced Education and Skills Development commissioned the Brookfield Institute to take a closer look. Our in-depth analysis included systematic reviews of existing literature and data, interviews with over 50 people representing labour, business and developers of technology, and a two-phase citizen engagement process in communities across the province involving roughly 300 individuals. Our work and findings were overseen and reviewed by an expert advisory panel of 14 people with technology, academic and industry expertise.
- Ontario’s problem may be that it doesn’t automate enough.
The extent to which communities and workers are impacted by automation depends on the behaviour of firms — that is, whether they invest in automation technologies. This decision is influenced by a myriad of internal and external factors, including domestic and international competition, changing consumer preferences and the need to maintain output as workers age and retire. The ultimate goal of automation is always to improve productivity, product quality and overall competitiveness.
Given Ontario firm’s track record on technology adoption, large-scale disruption is likely not around the corner. Just as many factors influence tech adoption, others impede it. These include cost barriers and risk aversion, the difficulties associated with integrating new technology in existing legacy systems and — surprisingly — shortages of workers with the skills to properly implement and maintain technology.
For many firms in Ontario these barriers significantly inhibit technological adoption. The gap in information and communications technology (ICT) investment between Ontario and the US is substantial and has grown in recent years. In 2015, Ontario firms’ annual ICT investment was 2.39 percent as a share of GDP, versus 3.15 percent in the US and 2.16 for Canada as a whole. This disparity puts a damper on predictions of an imminent automation-driven jobless future.
- Firms’ and workers’ success are intertwined: if firms fail to automate, everyone will be left behind.
If Ontario firms continue to lag when it comes to tech adoption, the associated decline in competitiveness could spell disaster for them and their workers.
In the Canadian manufacturing sector (to which Ontario manufacturers contributed roughly 47 percent of output in 2016), firms’ ICT investment per worker was 57 percent of that of their US counterparts, as of 2013. Despite this lower rate of investment in technology, Ontario experienced sharper declines in employment (5.5 percent from 2001 to 2011) than both the US (4.2 percent) and Germany (4 percent) — jurisdictions with higher rates of technology adoption. This suggests that while automation has enabled many manufacturers to produce more goods with fewer people, low rates of technology adoption may also be a concern for workers.
- Once a firm decides to automate, it doesn’t mean the end for workers. Firms need workers, just as much as workers need firms.
Without skilled workers, automation simply would not be possible. They are needed at each and every step, to identify inefficiencies and to integrate and oversee technology.
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When new technologies are adopted, the impact on workers is a function of how those specific technologies affect business activities, what new skills are needed as a result and whether these new skills are present in the firm’s existing workforce and in the broader labour market.
Automation can help firms retain existing jobs, albeit with different skill requirements. In some instances, employees can be redeployed, often to more interesting, productive and safe work. Automation can also help existing firms expand and new businesses form. Historically, automation has created more jobs than it eliminates, in the long run.
In Ontario’s finance and insurance sector, for example, automation has contributed to improved efficiency, yet employment continues to rise. Between 2002 and 2016, the number of workers required to generate $1 million in output declined from 5.9 to 5.2, but employment expanded by 35 percent, or 85,350 workers. But automation has also contributed to significant shifts in skill requirements, increasing demand for both soft and technical skills, including those related to client experience, sales, and project and risk management, as well as software development and data analysis. This shift is perhaps best exemplified by the impact of the ATM on bank tellers, whose numbers actually increased after ATMs were introduced.
- Automation is not always a good news story for workers. Many will require assistance to adapt.
Automation can eliminate certain kinds of job tasks and sometimes whole occupations. When new jobs are created, they often require different skill sets and frequently emerge in industries and regions different than those where jobs might have been lost. If workers are unable to move, to acquire new skills to adapt or to change jobs, they may experience a prolonged adjustment period of underemployment or unemployment. This in turn can depress local labour markets and exacerbate the inequitable distribution of wealth among individuals and across regions.
For workers and firms to be successful, Ontario must overcome barriers and embrace automation with an intensity comparable to that of our international peers. This process will require a skilled workforce able to support technological adoption. For many workers, the benefits are clear: jobs will be retained and may even get better. But an increased pace of automation could leave others behind. We need to ensure that workers have the skills and opportunities to adapt to and even drive automation. This will require more than incremental changes, and our public and private sectors will need to rethink and better coordinate existing programs geared toward promoting technological adoption and delivering skills training.
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