According to a study by Oxford Economics, each robot installed in a lower-income area displaces an average of 2.2 factory workers. But in higher-income areas of the same countries, the displacement average is just 1.3 workers.
Politicians have to weigh up the distribution of costs and benefits. In the U.S. and Europe, there is a strong political imperative for industrial policy to boost wages as well as profits, and the spirit of reviving manufacturing is aligned with creating new jobs.
In Singapore, even though manufacturing employment has shrunk for eight years in a row, the social costs of robotic automation have been displaced onto foreign migrant workers.
While automation creates winners and losers in the workforce, Singapore’s labor market is skewed toward the winners: 60% of its manufacturing workers are classified as highly skilled, and their share is growing.
Singapore may be relatively unique, with its tiny land mass, highly educated population and world-class infrastructure, but its successful exploitation of robots still offers lessons for the wider world.
The first is the need for long-term strategic planning, something often absent from larger advanced economies that respond to countervailing pressures from business, finance and labor unions. The U.K., for example, in 2021 abandoned the industrial strategy it had put in place four years earlier in favor of a different approach.
A rare example of coherent forward-looking planning in the West though can be seen in the passage by the U.S. Congress of the CHIPS and Science Act last July to provide $52 billion in subsidies for chip manufacturers and a further $100 billion for technology and science investment.
Another ingredient in Singapore’s recipe for success has been its tie-up between industrial policy, the education system, specialist training institutions and the business ecosystem. On top of that has been public investment to promote academic research on advanced technologies, tax breaks for businesses investing in their technological capabilities and programs to raise the skill levels of the workforce.
There is a limit to how much a continental-sized economy like the U.S. or the European powerhouse of Germany, with their diverse manufacturing bases, can learn from a city-state economy.
But Singapore’s example shows that targeting government investment toward the long-term acquisition of new manufacturing technologies, improving education and skills levels and expanding the social safety net to catch those directly affected by technological transitions can place the manufacturing sector on a growth footing.
By taking a long-term perspective and embarking on a coherent plan, businesses and governments can exploit the benefits of robotics while helping vulnerable workers prepare for and adapt to the upheaval that automation can bring.
