Robots and the Economy: The Role of Automation in Productivity Growth

December 22, 2020

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Kara Mazachek is an Economic Research Analyst at SelectUSA

Bar graph showing industrial robot installations growing steadily from 2009 to 2018
Source: International Federation of Robots, World Robotics 2019, Accessed February 12, 2020, https://ifr.org.

Innovation in manufacturing is key to global industry competitiveness. In honor of this year’s Manufacturing Day, SelectUSA highlighted the positive impact of industrial robots on productivity growth by releasing a report: Robots and the Economy: The Role of Automation in Driving Productivity Growth.

Robots and manufacturing

Automation is a form of technology that mechanizes a repetitive process, thereby reducing the need for human assistance; As you’re likely aware, automation can describe anything from self-checkout lanes at the grocery store to  automated teller machines (ATMs) at the bank. It is important to study the impact of automation in the workplace and how this technological change might alter companies’ fundamental production processes.

The report found that, globally, the sectors with easily automated labor and the financial resources to overcome the cost barriers associated with industrial robot adoption are naturally the sectors that deploy the most robots. These industries are the automotive and other transportation manufacturing, metal and electrical/electronic manufacturing, chemical manufacturing, food and beverage manufacturing, and wood and paper manufacturing industries. Meanwhile, the education, construction, utilities, textile manufacturing, mining and quarrying, and agriculture, forestry, and fishing industries face more barriers to robot adoption and deploy the fewest robots. Though some industries have been slow to adopt robots, there has been an increase in automation worldwide. Within the United States, industrial robot installations increased at a 10.28 percent compound annual growth rate (CAGR) in the past decade, from 15,170 in 2008 to 40,373 in 2018. The vast majority of U.S. automation is in manufacturing, which represented 82.3 percent of industrial robot installations across all U.S. industries in 2018.

Impact of robots on productivity growth

Another conclusion of the report is that adopting robots has generally led to growth in productivity, but the effects have varied by industry and over time. Among all industries, a one percent increase in robot density correlated with an increase in productivity of 0.8 percent. The largest productivity gains were made in industries where companies were in the early stages of adopting robots. These industries saw a 5.1 percent increase in productivity with an increase in industrial robot density of one percent. Over time, there were still gains in productivity resulting from the use of robots, though they were smaller than the initial increase.

As one might expect, the number of hours worked by employees decreases with robot adoption. As with the productivity trend, if an industry had not previously adopted robots, it saw a larger decrease in hours worked when first implementing robots. These industries saw a 2.7 percent decrease in hours worked with an increase in industrial robot density of one percent.

Investment in manufacturing

Global multinational companies have consistently selected the United States as a destination for their manufacturing operations. In fact, foreign direct investment (FDI) in manufacturing in the United States represented 40.1 percent of all FDI in the United States in 2019, and automation plays a key role in attracting that investment and creating jobs. Our goal in writing this report was to help understand how SelectUSA can better support our clients and continue supporting manufacturing investment into the United States. Following this most recent Manufacturing Day, we want to draw attention to how automation helps keep the United States competitive as a destination for manufacturing FDI and reshoring.

Read the report to understand how automation increases productivity across firms and industries, but also supports a healthy U.S. business ecosystem! 

For more information For more information on industrial robots and productivity growth, check out our recent report on robots and the economy. To learn more about how SelectUSA supports FDI in all industries, sign up for our email updates and visit SelectUSA.gov for resources such as FDI fact sheets, interactive data tools, and informative reports.

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