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Robots leave behind Chinese workers

These are difficult days to be a factory owner in China. Workers are increasingly scarce, wages are rising, and strikes are breaking out with regularity. Factories in South-east Asia are now beating China at its own game, attracting investors with the promise of even cheaper labour for low-value assembly work. What’s a factory owner to do?

These are difficult days to be a factory owner in China. Workers are increasingly scarce, wages are rising, and strikes are breaking out with regularity. Factories in South-east Asia are now beating China at its own game, attracting investors with the promise of even cheaper labour for low-value assembly work. What’s a factory owner to do?

One increasingly popular option is to buy robots. Lots of them. But that solution is already raising another uncomfortable question: What to do with the workers they displace?

According to the International Federation of Robotics, an association of academic and business robotics organisations, China bought approximately 56,000 of the 227,000 industrial robots purchased worldwide in 2014, a 54 per cent increase from 2013.

And in all likelihood, China is just getting started.

Late last month, the government of Guangdong Province, the heart of China’s manufacturing behemoth, announced a three-year programme to subsidise the purchase of robots at nearly 2,000 of the province’s — and thus, the world’s — largest manufacturers. Guangzhou, the provincial capital, aims to have 80 per cent of its factories automated by 2020.

pursuit of automation

The government’s involvement in this process should not come as a surprise. The Chinese government (nationally, and in Guangdong) has long wanted to shift the country’s manufacturing away from low-quality products that are manually assembled and towards higher-value ones, such as automobiles, household appliances and higher-end consumer electronics, that require the precision of automation.

And it is no secret that demographics are not on the side of China’s traditional, labour-driven factories. Urbanisation, population-control policies, and cultural shifts have pushed China’s average birth rate below those in more developed countries such as the United States.

Meanwhile, as a result of growing urban affluence, workforce participation rates are in decline, especially among women. Together, these factors are pushing wages upwards, with an average annual increase of 12 per cent since 2001.

That trend offers plenty of incentive to factory owners and government officials to pursue automation.

Of course, what looks sensible from the perspective of the economic planner’s office is more distressing from the factory floor.

In March, Caixin, a Chinese business magazine, reported that Midea, a major Chinese manufacturer of air conditioners and other appliances, plans to cut 6,000 of its 30,000 workers in 2015 to make way for automation. By 2018, it will cut another 4,000. What will happen to those and the millions of other low-skilled workers who will be displaced by the shift?

The answers offered so far by companies and government officials have not been very reassuring.

When Foxconn, the contract manufacturer for many Apple products, announced in 2011 that it was beginning a three-year programme to replace some of its workers with as many as one million robots, the company said it was doing so out of a “desire to move workers from more routine tasks to more value-added positions in manufacturing such as research and development”.

But even if those intentions were sincere, Foxconn never gave any indication that it would have enough higher-skilled positions to employ every displaced iPhone assembler.

Meanwhile, officials in Guangdong Province and their supporters in the Chinese media argue that the government-subsidised robotics industry will provide plenty of employment opportunities in robot manufacturing. But even if displaced low-skilled workers can be funnelled into those jobs as rapidly as the Chinese government suggests, there is no guarantee that the resulting jobs will pay as well as those they replace. In fact, with so many displaced workers seeking to fill them, they might even pay less, showed a recent study of automation’s impact on labour markets.

Helping the working class

China’s central government, always keen to avoid the disgruntlement of its working class, has made efforts of its own. It has committed to expanding vocational education so China’s low-skilled workers will not get left behind in an automated economy.

Beijing also continues to encourage the early stages of economic development of China’s western provinces, including the relocation of lower-value manufacturing to the region.

Still, it’s easy to see how China’s millions of low-skilled workers might still be left with an uncomfortable sense of impending obsolescence — a sense not unknown to their working class counterparts in more developed economies.

Their best hope is the simple fact that China’s economy continues to grow. True, at a projected 7 per cent for 2015, the country is not growing as fast as a decade ago. But that should be plenty fast enough for China’s shrinking labour force to find other opportunities, and avoid competing — for now — with China’s inevitable robot workforce. BLOOMBERG

ABOUT THE AUTHOR:

Adam Minter is an American writer based in Asia, where he covers politics, culture and business.

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