Why are there still so many jobs?

Automation has been happening for over 200 years. So far, it has created a lot more work than it replaced. Will Industry 4.0 be different?

by Justus Krüger

The specter of the dark factory is haunting industrialized countries. It is dark because there aren’t any people in it and no need to turn on the lights. Machines will do all the work. If this vision were to become reality, it would challenge the very foundations of our societies.

In such a pessimistic scenario, a large number of people would simply be cut off from the means of subsistence. Wages are the central mechanism for the distribution of wealth. If they were to diminish greatly, the implications would be revolutionary. The stage would be set for trouble.

Industry 4.0

Historically machines have created far more jobs than they have replaced, but this time will be different says MIT's Andrew McAfee, author of the book The Second Machine Age. With the advent of Artificial Intelligence (AI), machine learning and the Internet of Things (IoT) – in short, Industry 4.0 – machines are quickly getting better at performing both manual and cognitive tasks without much human intervention. In the past machines have augmented human labor, according to McAfee, “Now, they are replacing it.”

Oxford economists Carl Benedikt Frey and Michael Osborne published a widely-noted study on the effects of automation in 2013. It concluded that up to 47 percent of jobs in the USA are at high risk of being made redundant. Subsequent studies predicted similar figures for other countries.

This would be very worrying. But is it true?

Machines create jobs and replace tasks

The facts, so far, do not bear this out. An increasing number of studies show a positive correlation between automation and jobs – not only in the past, but also under the conditions of Industry 4.0.

For example, the positive impact of robots on employment can be seen in Germany, says Joe Gemma, President of the International Federation of Robotics (IFR). The country's automotive sector holds the top position for robot density in Europe – with about 1,150 industrial robots per 10,000 employees. “As a result,” says Gemma, “employment in the German car industry rose by about 93,000 jobs in the period 2010 to 2015.” Similar trends can be observed in the UK and in America.

The biggest market for industrial robots is China, a relative newcomer to modern automation. Some observers worry that the dark factory will become a reality in that country. This is unlikely as Chinese robot density at present is extremely low – at around 30 robots per 10,000 workers. Automation in Chinese tech-heavy industries, such as cars, does not primarily serve to cut jobs. It serves to make these firms competitive and thus save jobs.

In addition, it is not jobs which are replaced by automation – it is tasks within jobs. The implication is that while most jobs will change, they will not disappear. A study published by the McKinsey Global Institute in 2017 comes to the same conclusion: “More occupations will change than will be automated away.”

Education and training

This does not mean that there will be a smooth transition. In the middle-income bracket, where most people work, employees with the right skills for Industry 4.0 are upwardly mobile – the value of their work increases, but there is a severe shortage of such workers. Globally, supply will fall short by 40 million in 2020, according to McKinsey. Concurrently, workers who lack the right skill sets are facing downward pressure.

In the last five years, a number of mass open online courses (MOOC) have begun to address both problems. They are enabling employees to obtain new qualifications even as they continue to work.

One of most reputable, Coursera, currently has 24 million registered students. Its founder, Andrew Ng, is a Stanford scholar with a background in AI. “As AI researchers,” he said in an interview with The Economist, “we have an ethical responsibility to address the problems we create.”


On-the-job-training is equally important. Germany’s dual system is well-placed to make a contribution.

The Siemens Campus in Erlangen, Germany, opened in 2017 and is a case in point. Apprentices on the campus learn to utilize augmented reality (AR) in order to work alongside cooperative robots. They learn to check components digitally, and to test code for automation systems by utilizing virtual models. Clearly, this goes far beyond traditional skill sets and training methods.

Siemens and many other German companies are exporting this approach by seeking out public and private partners in China and the USA, to establish dual systems there as well.

Jobs are changing

When manufacturing merges with information and communication technology, workers will have new sets of tasks. Their jobs are increasingly focused on planning and coordinating, supervising and decision making. To the extent that their work remains manual, it will increasingly be augmented by machines such as collaborative robots.

Management level employees will also face new tasks. On her blog Sabine Bendiek, Chairwoman of the Management Board at Microsoft Germany, writes, “As an executive, I feel that we need new skills, We need to coach rather than lead, facilitate rather than determine, and steer processes rather than tasks.”

However, automation is not restricted to manufacturing industries. It plays increasingly important roles elsewhere. In medicine, physicians applying AI to diagnostics can improve outcomes significantly. In recent tests, some forms of automated image recognition performed up to 50 percent better at classifying malignant tumors when analyzing X-rays and CT-scans than a team of expert human radiologists. The machines had a false negative rate (where a cancer is missed) of zero, compared to 7 percent for the human team.

Mobility is another case in point. Self-driving cars are the most widely discussed example. Less known, but no less important, is the impact of automation in other areas. For instance through automatic train control systems. These increase both punctuality and headways – and save work for the driver, who can focus more on passenger safety.

The current wave of automation and digitalization does not only change individual jobs. It changes the entire work process, whether in services, research and development, sourcing, production, or distribution. In short: Connectivity trumps hierarchies.

Digital twin

Merging the virtual and “real” aspects of manufacturing is the key to Industry 4.0, and nothing exemplifies this better than the digital twin – a virtual representation of a product down to the last technical detail.

This pairing of the virtual and physical worlds allows analysis of data and monitoring of systems to head off problems before they occur, prevent downtime, develop new opportunities and plan for the future by using simulations. The ultimate aim is to create, test, and build products in a virtual environment – so that physical manufacturing only begins when the product already performs.

Comprehensive chains of 3D CAD models are an essential part of digital twins. The work at Siemens Power and Gas (PG) is an example of the effectiveness of this approach. “These new 3D CAD modeling methods provide us with an important shortcut to the product,” says Bernhard Wegner, Development Engineer at the Siemens division Power Generation. “They reduce the time needed to proceed from the development stage to production by as much as three months,” with regards to the production of gas turbines. At the same time this approach leads to lower costs and higher quality.

In other words, digital twins, and Industry 4.0 at large, give productivity a boost.

The best news on the planet

This gain in productivity is excellent news. Andrew McAfee, the MIT scholar who fears that Industry 4.0 will undermine jobs, goes even further. “It is the best news on the planet,” he says, because it has the potential to increase the overall welfare of the world’s population.

What he worries about is not what he calls “the bounty” – the overall product – but the “spread.” How will those gains be distributed if they undermine employment?

This worry is one-sided, according to the MIT economist David Autor. “Even expert commentators tend to overstate the machine substitution for human labor,” he wrote in a study published in 2015. “Automation does indeed substitute for labor – as it is typically intended to do.” He adds, “However, automation also complements labor and raises output in ways that lead to a higher demand for labor.”

It appears that the specter of the dark factory will remain just that: A ghost story.



Justus Krüger is an independent journalist based in Hong Kong.

Picture credits: Siemens AG

Last update: July 2020

In July, 2017, The Manufacturing Institute released a new report, Training to Win.

The report covers trends that are remaking the manufacturing workforce and addresses talent solutions for the new economy.

Best estimates are that in the U.S. today more than 350,000 manufacturing jobs are unfilled. Through 2025, that number is expected to total 2 million unfilled positions.

The report outlines principles for closing that gap, including improved career and technical education, apprenticeships and on-the-job training models.

Requirements more common today are math skills, teamwork and advanced problem solving, the report says. There will be a much greater need for programmers, operators and maintenance workers. These highly skilled maintenance technicians can earn more than $100,000 per year.

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