Introduction to Industry 4.0
There have been four phases, each with increasing productivity and cost savings, of the industrial revolution. The industrial age was introduced around 1784 with the development of mechanization using steam power. This is known as Industry 1.0. In 1870, Industry 2.0 introduced mass production assembly lines powered by electric energy. Industry 3.0 emerged in 1969 with the automation of business and industrial processes using computers and electronics and non-mobile robots. Today, we are entering into the era of the 4th industrial revolution. Industry 4.0 depends upon cyber-physical systems that control physical processes. Key elements of Industry 4.0 are big data, autonomous mobile robots and transportation, Internet of Things (IoT), integration of industrial control systems and other cyber-physical systems with information technology that form the foundation of a smart factory. This enables newer ways of production, value creation, and tailoring of products for individual customer needs and tastes.
Industry 4.0 is making it easier for companies to collaborate and share data among customers, manufacturers, suppliers, and other parties in supply chain. Industry 4.0 improves productivity and competitiveness, enables the transition to a digital economy, and provides opportunities to achieve economic growth and sustainability. Industry 4.0 is going to impact all manufacturing including chemical, health care, transportation, construction, energy production, finance, food and agriculture and the Defense Industrial Base.
Societal Challenges of Industry 4.0
There are enormous potential benefits to the automation of processes by cyber-physical systems, however, the potential for significant societal impact exists and must be addressed by all the countries in the world. PWC studied 200,000 jobs in 29 countries to explore the economic benefits and potential challenges posed by automation –see https://www.pwc.com/hu/hu/kiadvanyok/assets/pdf/impact_of_automation_on_jobs.pdf
The report divided the automation estimates into three waves. These are shown in Chart 1
CHART 1 Description of Waves (Source PWC Study)
Figure 1 (below) from PwC’s report states that initial impact of Industry 4.0 will be low but by mid-2030s as many as 45% of jobs for low education workers will be automated. However, the report estimates that only about 12 percent of high education workers are at risk of automation by mid-2030s.
Figure 2 shows the impact of automation on transportation, financial services, and health care as well as the total for all sectors. This forecast seems to conflict with recent employment statistics, but this deviation may be due to the pandemic and the large infusion of economic support from the federal government. The Bureau of Labor Statistics (BLS) on May 11, 2021, reported 8.1 million open jobs in the U.S. at the end of March 2021, the highest amount since the bureau began tracking the data in December 2000. The National Federation of Independent Business’ May report showed a record 44% of small-business owners reported job openings they could not fill in April, up from 24% in April 2020 and up from the average of 22% over the past 48 years. The labor shortage has hit the construction, manufacturing, transportation, and restaurant sectors. These are sectors when Industry 4.0 and autonomous automated systems can ease the shortage. Noteworthy is the transportation industry where a severe shortage of truckers is primarily due to the relatively low pay and the difficult lifestyle. Autonomous long-distance trucks could fill the void.
The economy is constantly evolving and changing due to new technology. The World Economic Forum recently published an article on the history of jobs and automation ( https://www.weforum.org/agenda/2020/09/short-history-jobs-automation/). In that paper they predict that “one-third of all jobs could be at risk of automation in the next decade.” People with low levels of education are the most vulnerable. However, in looking at the history of automation the World Economic Forum offers hope. They provide several examples where the implementation of automation was at first feared but lead to improvements for society. In the 19th Century, textile workers and farm laborers faced Industry 1.0 –mechanization using steam power. Fortunately, growing populations drove the need for increased clothing and food production. The introduction of automation provided productivity increases enabling the additional food and clothing production while having a positive impact on the economy by freeing up people to do other activities. In the middle of the 20th Century came the introduction of computers and limited capability, non-mobile robots. Computers have an enormous impact on society. Predominately very positive, however it has caused significant disruption to the workforce. Unfortunately, many low skill positions have suffered job losses. For example, telephone companies employed hundred of thousands of telephone operators. The Bureau of Labor Statistics estimates that only 5000 operator positions still exist. Automation often replaces human labor, but very rarely in the last sixty years has it eliminated an entire occupation. Only one of the 270 detailed occupations listed in the 1950 US Census has since been eliminated by automation, according to a working paper by Harvard economist James Bessen. The one exception: elevator operator.
The question is will other jobs be created by Industry 4.0 and what do we do with the low skill workers. This is particularly important to third world countries where items are produced by low-skill manual labor. The Wall street Journal (https://www.wsj.com/articles/the-robots-are-coming-for-garment-workers-thats-good-for-the-u-s-bad-for-poor-countries-1518797631 ) states that “The apparel industry—unlike cars or electronics—seemed protected. Fabrics are notoriously difficult to work with, meaning nimble human hands are often better than machines. There was plenty of labor in Bangladesh, Cambodia, and China, reducing the urgency to automate. But labor costs have been climbing, even in developing countries. And technology is becoming so advanced that machines can increasingly handle difficult tasks such as manipulating pliable fabrics, stitching pockets and attaching belt loops to pants.” Jobs in third world countries could dissipate as automation enables the production of products at a lower price and quicker, tailored availability in developed countries. How will this impact global stability? Will there be an increase in the economic gap between developed countries and developing countries? What will be the impact to the workforce in developed countries?
The Wall Street journal in another article ( https://www.wsj.com/articles/many-jobs-lost-during-the-coronavirus-pandemic-just-arent-coming-back-11626341401) states that even though job openings are at a record high, many jobs lost to the pandemic will not come back after a recovery. Many organizations will have fewer employees in the future. The article makes the following statement: “As with past economic shocks, the pandemic-induced recession was a catalyst for employers to invest in automation and implement other changes designed to curb hiring. In industries ranging from hotels to aerospace to restaurants, businesses have reviewed their operations and discovered ways to save on labor costs for the long term.” An example provided by the Wall Street Journal is Raytheon which has more than 500 automation and equipment upgrade projects underway. As a result of these efforts, 4500 jobs will be eliminated.
Historically, the long-term effect of automation has been improved living standards and many new additional employment opportunities. The question is will cyber-physical systems in general and Industry 4.0 specifically will result is such a dramatic elimination of workplace opportunities that there will be an overall reduction in employment and a corresponding in society unrest. I cannot predict the future, but my hope is that history will repeat itself and Industry 4.0 will raise the living standards of everyone and increase job opportunities for all education levels. Emphasis on education and workforce training can help displaced workers find better more satisfying work.