Robotics and the Business Cycle

Unlike others that try to peer into the economic future, I’m not waiting for flying cars. I’m not anxious for a time when people have even more opportunities to wreak havoc on my daily life by flying near my home and office.

That being said, I am very interested in the next step in technological change in the workforce. Just as desktop computing, voicemail, and email erased much of the need for secretaries, robots are quickly gaining ground in areas such as machine operation in manufacturing… but they might not be ready to replace retail clerks just yet.

The hard part of working with robots in manufacturing was the need to keep a safe distance. Without the ability to recognize and appropriately respond to the presence of people or other fragile objects, early robots were useful for tasks such as welding and transport, but were very dangerous…

Now, several robot companies have solved this issue. Universal Robots of Denmark is one manufacturer of a new class of machines called collaborative robots. These units work with humans without the fear of injury, so the robots can be part of a manufacturing process that requires the judgment of people, but can also benefit from the precision and durability of a robot.

Imagine a part that is being welded or treated with chemicals. A person can’t hold such items without protective gear or some other method of separation. Robots can hold the parts while they are worked on, as well as move the parts around while they are still hot or otherwise dangerous.

The cost of the collaborative robots has fallen to as low as $20,000 making them affordable for even the smallest of operations. Compare that with the wage of a machine shop operator of $22.42 per hour as reported by the Bureau of Labor Statistics.

This operator, who gets sick days, holidays, time off every day after work and benefits will cost a company roughly $44,000 per year. The robot, which can operate 24 hours per day and never calls in sick, would save the company money over hiring the operator in just under six months. And that’s if they simply worked the same hours.

Of course, not every new use of a robot turns out to be a great idea.

Can You Help Me, Robot?

Lowe’s Home Improvement is rolling out two retail robots in a subsidiary store, Orchard Supply Hardware, in San Jose, CA. The units will greet customers at the door and ask if they need assistance.

Customers can ask where products are located, place a bolt, nut or nail on a 3D scanner that will determine the exact size and where replacement pieces are located in the store. It’ll even provide video conferencing with personnel who can assist clients with their needs for projects.

The robots then travel with the customers to the appropriate location in the store to locate the exact product in question. This all sounds great but it misses part of the experience of home improvement stores, as well as other retail outlets.

Many shoppers — me included — don’t know exactly what they want or need.

Waiting around to video conference with an expert isn’t the same as standing in the aisle with an employee talking through a project. The interaction with a live person can include pauses and alternative scenarios for completing tasks.

Imagine standing in a hardware store, staring at a screen and telling a person sitting in a room somewhere that you’re not really sure what you need. The expert might talk through some of the issues but there will be a sense of urgency to end the conference. There is an awkwardness to silence on calls, even when they are live video feeds.

Robotics and the Business Cycle (2)

Real Steal Robot

Of course, the reason for putting the robots in hardware stores is the same reason for putting them on factory floors — increasing productivity per dollar spent. Robot guides don’t have to take breaks or stop working after eight hours, so arguably Lowe’s could replace a large part of their staff simply because the company wouldn’t have to run more than one shift of workers that assist clients in stores.

 

Whether this cost savings is enough to roll out the initiative to other stores remains a question, as does the actual client experience of interacting with one of these robots.

Both of these developments — collaborative and guide robots — increase the speed at which people are being replaced in the workplace. Such displacements have happened throughout history, constantly killing different types of employment, driving would-be weavers, carriage makers, secretaries and now machine operators into other jobs.

While there’s no doubt that society as a whole is better off with greater productivity, the picture isn’t so bright for the would-be machine operator. With median income falling as the middle class loses ground, we need a faster method for retraining displaced workers and training those new to the workforce in jobs that are unlikely to be automated in the near future.

Otherwise, we’ll end up with many potential workers who can’t even get a job at McDonald’s… because that company is also automating the ordering process.

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Rodney

Categories: Business Cycle

About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.