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