Will AI Destroy Manufacturing Jobs or Revolutionize Them? Adaptation Guide and Expert Opinions Inside

Mariia Ruzova
Key Takeaways
  • AI may widen the income gap in the US, but in places like Europe, the impact is less severe and depends on local politics and economic situation.
  • While some worry that AI and automation will take away jobs, this technology also creates new types of work that didn't exist before.
  • AI can make manufacturers more efficient and allow workers to focus on more value-creating tasks.
  • For AI to work best in manufacturing, companies should focus on training employees and developing specific soft skills to prepare for the future.
  • Adopting the right mindset towards AI is crucial; see it as a tool that empowers your workforce rather than a threat that replaces it.

Embracing the New Industrial Wave: AI in the Heart of Production

The headlines scream warning, and the numbers back them up: Artificial intelligence (AI) could eliminate as many as 800 million jobs by 2030, according to McKinsey. The air is thick with fear - will factories become ghost towns as machines take over? And it's not just factory floors; Chat Generative Pre-trained Transformers (GPT) can write essays, provide customer service, and even compose emails, while tools like Adobe Firefly reimagine design work.
So, will AI replace humans in manufacturing? Are we on the brink of another economic collapse or the next industrial revolution?

This article dives deep into these concerns, offering a nuanced perspective of AI's impact on the workforce in the manufacturing industry. Here's what you can expect:

  • AI vs Job Debate: Historical Context and the Modern Discussion: Exploring whether AI is the modern equivalent of the steam power revolution or a threat to human existence.
  • Two Main Arguments Against AI:
  • The Income/Productivity Gap
  • AI Outpacing Human Creativity
  • Balancing Productivity and Empowerment with Industrial AI: A Real-World Example: Discover how Industrial AI is both a threat and an enabler, enhancing both workers' potential and business efficiency.
  • Best Practices for Manufacturers to Adopt: Concrete steps for balancing technological advances with social responsibility.

By the end of this article, you'll have a well-rounded understanding of how AI shapes the future of work, specifically in the manufacturing sector. As a strategic manufacturer, how can you leverage new technologies for growth while maintaining ethical working standards?

The AI Job Dilemma: Historical Perspectives and Current Debate

With the increasing hype around new implementations of AI, we might think this problem is unique to our time. But the history of AI began in the 1960s, and even then, there were discussions about replacing humans with machines or artificial intelligence. Some scientists argued, and still argue, that AI won't replace anyone; it will only complement current capabilities. Others, on the other hand, believe that machines will surpass humanity this time or at least cause social problems. Let's take a closer look at both perspectives gathered from a recent study:

Comparison of Historical and Present Perceptions of AI's role in labor.

So, is AI in manufacturing a new Steam Power? Let's talk numbers to determine if the Fourth Industrial Revolution is doing more good or harm.

What are Two Major Concerns About AI as a Job Killer?

The Income/Productivity Gap

As we delve deeper into this debate, let's focus on the more pessimistic perspectives since this concerns people the most. A central critique of this stance is the growing disconnect between productivity and wages in the age of AI and the Fourth Industrial Revolution. The dawn of artificial intelligence has ushered in rapid productivity growth across various sectors. However, this does not always translate to equivalent wage growth for the workforce, leaving a discernable gap between productivity and income.

The US presents a starker picture. Between 1979 and 2021, productivity soared by 64.6%. Yet, hourly pay limped behind with a mere 17.3% increase. Such a discrepancy underlines the fact that while technological advancements bolster efficiency and output, they don't always equate to improved living standards for the workforce.

Adopted from the Economic Policy Institute

MIT economists Daron Acemoglu and Simon Johnson highlight that technology's impact on prosperity has varied throughout history. While post-World War II technology boosted wages and reduced income inequality by creating new jobs and tasks, the recent influx of manufacturing robots in the American Midwest led to significant job losses, pushing the region into a sustained decline.

In contrast, the EU-27 exhibited a more moderate discrepancy from 2009 to 2019 over a decade. According to a report by the International Labor Organization, labor productivity in these countries rose by 12.3%, while real wages grew by 8.4%. Even though productivity still outpaced wages, the gap is less severe than in the US.

Over the past 20 years, France and Germany have seen wages grow with a 1.5% annual rise in productivity, contrasting the US trend. In France, mean wages matched productivity gains. After a slow wage growth from 1995 to 2008, Germany picked up post-recession, echoing France's trajectory. For context, 10th percentile wages fell 10% in Germany but rose 20% in France during that period, underscoring Europe's better alignment between wages and productivity.

Though the US excels in digital technologies, its sharp rise in earnings inequality, possibly from automation, isn't evident in Europe, as some Bruegel experts state. This disparity might be due to European nations distributing automation benefits differently among workers. Factors like collective bargaining in certain European countries, labor-market regulations, and minimum wages could influence this.

AI Outpacing Human Creativity

Another disputable matter: AI will replace humans in creative tasks? While AI systems like generative pre-trained transformers (GPT) have shown promise in boosting productivity—increasing efficiency by approximately 14% in customer support domains —a looming question persists: Are we standing on the brink where AI doesn't just complement but competes with human creativity?

Some researchers have expressed optimistic opinions on adopting the 4IR (the Fourth Industrial Revolution) technologies, including different AI implications. According to the World Economic Forum (2018) report,  4IR technologies will introduce job opportunities in areas like robotics and machine learning. But they may also phase out low-skilled roles.

Erik Brynjolfsson, a Stanford economist, offers a sad perspective. In his piece, "The Turing Trap," he warns against the current trajectory where AI creators obsess over replicating human intelligence. This endeavor might inadvertently lead to machines replacing humans, pushing down wages and amplifying wealth and income inequalities.

So, while some are concerned that the AI-driven industrial revolution, unlike previous ones, will destroy more jobs than it creates and contribute to social inequality, the truth is more complicated. According to a forecast by Golden Sachs, AI will automate some jobs and replace positions: Generative AI poses potential disruption to the labor market, with about two-thirds of current jobs in the US and Europe susceptible to AI automation. This could equate to the automation exposure of 300 million full-time jobs globally.

But, this tendency will be leveled out. Responding to concerns about AI leading to job losses, the Future of Jobs report highlights that the evolving job landscape may balance out. Several factors are anticipated to boost job creation:

  • Green Initiatives & Local Supply Chains: Investments in environmental sustainability and localized supply chains are expected to drive significant job growth.
  • Tech & Digital Access: Technological advancements will boost job opportunities in many sectors, but some losses are also anticipated. However, the net effect leans towards growth.
  • Climate and Demographic Shifts: Adapting to climate changes and demographic trends in emerging economies will open new job avenues.

In advanced manufacturing, new technologies may boost job growth by up to 27%.

The real 'culprit' threatening jobs isn't AI but a slowdown in global economic growth.

Adopted from: World Economic Forum Report.

Additional factors, such as global geopolitics, economic trends, and the ongoing impact of COVID-19, also play a role in shaping the job market. These complexities contribute to a balanced landscape, ensuring that while some jobs may be lost, the overall job market is unlikely to see a net decline.

A Real-world Example: Industrial AI Boosting Workers' Potential and Business Efficiency.

How can AI help in manufacturing, both for businesses and their employees? Let's consider Vacom, a leading German custom vacuum parts manufacturer. Even with a devoted team, the challenges of manual planning became evident while trying to efficiently handle 2,000 custom orders per month. The challenge was not the team's commitment but instead the system's restrictions: despite their best efforts, they struggled to handle this amount of monthly orders due to the high complexity of the production process.

Then, Vacom turned to industrial AI. They added Vernaio's AI technology into their planning system. This AI took over the heavy lifting. Each night, it checked all the orders, made plans, and set up machine schedules for the next day. The AI quickly adjusted the plans when surprises came up, like a broken machine or unplanned sick leave.

With AI-driven planning, the Vacom team had a significant change. They no longer had to worry about the day-to-day schedule. Instead, these skilled workers had more time to take on important roles like project management.

Thanks to AI, Vacom saw a significant boost in their work. They had a 25% jump in productivity, and 10% of that came directly from the new AI planning. With better planning and more time for more value–creating tasks, the team at Vacom was back on track, showing the power of AI in business.

Beyond just task management, AI was a valuable tool in recognizing the unique strengths of individual team members. It pinpointed who excelled at specific activities, allowing Vacom to delegate more effectively and foster knowledge sharing. This newfound understanding led to more personalized and efficient workforce planning.

Kevin Mahler, Vacom's COO, emphasized the transformative power of AI:

“Industrial AI has elevated our work efficiency and given us insights into individual talents. We're far from done, still exploring ways to further optimize our processes"

Practices For Manufacturers to Adopt

As we navigate the nuanced terrains of technology adoption and its subsequent impact on the job market, it's essential to address and validate certain genuine concerns that arise.

According to the World Economic Forum's Jobs of the Future report, 44 percent of the workforce's skills will change in the next five years. The report emphasizes cognitive skills, suggesting the importance of complex problem-solving.Furthermore, a significant workforce segment— 60% — will need retraining by 2027. However, only half of the workforce can access the necessary training platforms. This gap highlights an impending challenge: While new opportunities emerge, not everyone can grasp them.

“ 60% of the world workforce will need retraining by 2027.” – World Economic Forum.

The rapid integration of AI in manufacturing isn't just about tech evolution; it's reshaping the very fabric of the workforce. But as Asi Klein of Deloitte Consulting aptly notes,

“You can teach AI to do X. You can teach AI to do Y. [However,] combining the two may be really difficult for AI, while a human can do it better. You’re going to continue to see humans in roles that center on making decisions and telling stories.”

This underlines an essential truth: the irreplaceable value of human expertise.

Drawing from insights from the Manufacturing Leadership Council's discussions and the "Jobs of the Future" report, here are actionable steps for manufacturers:

  1. Prioritize Upskilling:
  2. Key Roles on the Rise: AI and Machine Learning Specialists, Project Managers, and Business Development Professionals are seeing considerable growth, indicating sectors where human-AI collaboration can prove most fruitful.
  3. Training and Upskilling: Embrace initiatives like employer-sponsored apprenticeships, on-the-job training, and collaborating with universities and online learning platforms. By doing so, you cater to roles like Sales Representatives, Assembly and Factory Workers, and Mechanics, creating a balanced workforce.
  4. Revise Job Roles:
  5. While roles like Data Entry Clerks are facing considerable churn, others, like AI Specialists and Managing Directors, see net growth. Ensure that job descriptions and training modules align with these dynamics.
  6. Encourage Adaptive Skills:
  7. To address the changing landscape, emphasize developing leadership, analytical thinking, and AI proficiency. Enhancing creative thinking, resilience, and agility will mold a workforce ready to tackle challenges head-on.
  8. Strengthen Ties with Educational Institutions:
  9. With roles like Technical Specialists and Industrial Engineers growing, partnerships with educational bodies can shape curricula that produce graduates who fit seamlessly into these roles.
  10. Promote Human-AI Collaboration and Business Practices:
  11. AI will seamlessly handle roles, but positions like Business Development Professionals and Project Managers will pivot around human expertise.
  12. Business Practices for Talent Enhancement: Improving talent progression, offering better wages, and enhancing work conditions, such as promoting remote and hybrid work opportunities, can attract and retain top talent.
  13. Holistic Employee Development:
  14. Beyond just technical training, invest in nurturing soft skills. Emphasize leadership, resilience, and creativity. Remember, a diverse skill set ensures versatility in an ever-evolving workplace.

The Right Mindset When Adopting AI: Your Role in an Ever-Changing Landscape

As Robert Meißner, Co-Founder and Head of Solutions at Vernaio, can confirm, seeing AI as a powerful ally rather than an opponent is crucial. Drawing from our hands-on experience at Vernaio, here's some real-world advice: First, adopt the right mindset.

If You're an Individual:

  • AI as a Tool, Not a Threat: For example, suppose you work as a data scientist in steel manufacturing, analyzing massive data sets to improve production. You might worry that AI, with its ability to process massive amounts of raw data, could threaten your job.
  • Yet, our experience at Vernaio shows that AI isn't your enemy; it's your powerful ally that does the tedious data crunching, freeing you for more value-creating activities like hypothesis generation and problem-solving. It's not about AI doing your work; it's about AI saving you time to do the work you love.

“It's not about AI doing your work; it's about AI saving you time to do the work you love”.

If You're a Business Leader:

  • Be Curious and Choose Tools That Empower: Always look for new solutions, but pick those that make your team more robust and inspired. Don't just adopt new tech; ensure this solution benefits your people, is tailored to the end-user needs, and is open to ongoing scrutiny.

“Hold nothing sacred - challenge both your old ways and any new tools that come along. Be playful, experiment; that's how you'll discover what really works.“ – Robert Meißner, Co-Founder and Head of Solutions at Vernaio.

How to Navigate AI's Impact on Jobs in the Manufacturing Sector

In today's manufacturing world, people and machines work together more closely than ever. While new jobs are being created in sustainability and data-driven fields, it's crucial to remember that AI can help current workers, too.

So, how can you, as a strategic manufacturer, leverage new technologies for growth while maintaining ethical standards? The answer lies in balancing efficiency with empowerment. Focus on upskilling your workforce to tackle more complex, value-added roles like sustainability or data analytics. Utilize AI for what it excels at—eliminating tedious tasks and automating processes. As seen in the example with the German company Vacom, industrial AI decreased routine and tiresome duties and allowed employees to focus on more valuable work that suited their talents.

Yes, there are risks, especially for low-skilled jobs. But with the right mindset and willingness to retrain, AI can help workers gain new skills. According to a report by the World Economic Forum, the future looks promising but challenging, filled with risks and opportunities. The key is to use AI as a tool for empowerment, not just efficiency.

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