Crisis of Decline in the Global Economy with the Absence of Automation

2557 words (10 pages) Essay in Economics

08/02/20 Economics Reference this

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Executive Summary

We have stagnated in our measures to maintain a strong economic growth and may soon have a crisis of decline in global economy. The study investigated whether if automation is a viable choice to avert such a crisis. The study consisted of an analysis on three factors pertaining the implementation of automation and was based on information from secondary data such as journal articles, industry research reports, and government reports. The conclusion gathered from the analysis is that automation can indeed be a viable choice in averting the crisis of decline in global economy. A number of recommendations are made regarding what actions are to be taken by businesses and communities including to use new automation work systems, to invest in autonomous electric vehicles to take advantage of the cost efficient energy source and to prioritize on automation instead of staffs.

Table of Contents

Executive Summary

Table of Content

1. Introduction

2. Discussions

2.1 The negative effects that will derive from the crisis of decline in global economy with the absence of automation

2.1.1 Setbacks from errors made by humans

2.1.2 Inefficient manual legacy systems

2.1.3 Shortage of staff

2.2 Changes related to automation that can be implemented to work industries and communities.

2.2.1 Autonomous modes of transportation

2.2.2 Autonomous administrative systems

2.2.3 Automated workflow systems

2.3 Implications to the economy and the environment if automation is adopted

2.3.1 Employment

2.3.2 Cost

2.3.3 Labour and productivity

3 Conclusion and Recommendations

References

1.      Introduction

We have now reached the peak with our current measures to maintain a strong economic growth. However, these measures have remained stagnant for too long and will not stand the test of time. If no further action or new systems are implemented, we may meet a crisis of decline in global economy. Thus, automation is being tested as a viable option in improving the global economy.

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The purpose of this report is to provide preliminary information regarding i) the negative effects that will derive from the crisis of decline in global economy with the absence of automation; ii) changes related to automation that can be implemented to work industries and to the community; iii) and implications to the economy and the environment if automation is adopted.

Note that the study of automation is fairly new and is still being constantly developed which affected the availability of certain information.

In the investigation these issues, three factors were put into consideration, namely Cost, Employment and Productivity. The cost relates to how much would a business invest; Employment is regarding the availability of jobs in certain fields; and Productivity relates to the efficiency in a work field.

Information for the study came from a range of secondary sources related to these factors including: journal articles, industry research reports, and government reports.

The report is divided into 2 main sections: a Discussions section, which presents information about the effects related to automation, and a Recommendations section which provides suggestions related to automation to improve the global economy.

2.      Discussions

The viability of averting the crisis of decline in global economy by implementing automation are considered in three categories, the negative effects that will derive with the absence of automation, changes related to automation and implications of implementing automation.

2.1  The negative effects that will derive from the crisis of decline in global economy with the absence of automation

According to Maulik (2018, par 1-2), for businesses to be able to grow and compete in the market, they need to optimize their efficiency and plan strategically but it is not attainable with the negative effects that stagnate the companies without automation. Each of the category is discussed below.

2.1.1        Setbacks from errors made by humans

According to Maulik (2018, par 13-14), in majority of the companies, transferring of data are still done in hardcopies from a department to another. As the contents of data are comprehensive, it will prove difficult to streamline and arrange them in order. Besides, as it is done manually, it will leave room errors made by humans.

“Manual input and human-driven data are identified as a major setback for businesses during its period of growth.” (Maulik, 2018, 5). This negative effect directly affects the productivity and workflow of a business as Maulik (2018, par 12) adds that the greater the error, the greater the cost and setback it will inflict on a business which will then make the time in making the effort all for naught.

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2.1.2        Inefficient manual legacy systems

In relation to errors made by humans, Maulik (2018, par 21) states that if a company works efficiently, the company will be expected to grow. However, he adds that with the old legacy systems companies have refused to change. “Managing a fast-growing company becomes difficult if the processes are not up-to-date”. (Maulik, 2018, par 21) This out-of-date system had caused a hindrance to the growth of the companies, as if the resources are not up-to-date it will be impossible to manage the growth, let alone allow it to grow.

2.1.3        Shortage of staff 

Staff plays an important role in allowing a company to work at its maximum potential. However without automation, staffs may be the first priority in most business models. In Table 1 below, it shows the estimated truck driver shortages from the year 2011 to 2024. According to Costello and Suarez (2015, 3), the trucking industry were getting short on truck drivers. In 2014, it is recorded that the trucking industry was short by almost 40,000 drivers and it is estimated that it will increase by another 10,000 by the next year. Costello and Suarez then continue to mention that if the pattern remains, it is estimated that by 2024, the trucking industry will be short 175,000 on truck drivers.

Table 1 : Truck Driver Shortage (Costello and Suarez, 2015, 3)

2.2  Changes related to automation that can be implemented to work industries and communities.

Automation, Work and Job Polarisation Critical to marketability-based empowerment, and indeed to the appeal of the knowledge economy as a whole, was the promise of a surfeit of highly-paid, highly-skilled jobs for the citizens of developed democracies”. (O’Donovan 2019, 12-14) The discussion below will talk about what changes related to automation can be applicable to businesses and communities.

2.2.1        Autonomous modes of transportation

In light of tedious steps in certain industries such as the freight industry, Paddeu (2019, 9) mentions that autonomous vehicles and drones have been invented to resolve such issues. Paddeu adds that with these autonomous modes of transportation, it can benefit by working in conjunction with the urban freight systems to make deliveries more efficient and reduce congestion in urban areas.

In Table 2 below, it shows how various new technologies of autonomous transportation is implemented across the supply chain and what benefits can it bring, which have been depicted to cause improvements in efficiency and cleaner to the environment.

Table 2 : Application across the supply chain and benefits (Paddeu, 2019, 9)

2.2.2        Autonomous administrative systems

According to Udell and others (2019, 46-48), it is implied that with the advancement of information technology, an economic singularity would occur to aspects of knowledge production. This is due to the technological growth in Artificial Intelligence, in which it is being developed to assist or take control entirely of high-skilled tasks.

Though it may seem that artificial intelligence may be replacing human tasks, in table 3 below, it depicts a survey conducted to executives who have been working with artificial intelligence, in which they stated the benefits AI have assisted them in theses ways.

Table 3 : Percentage of executives who cite the following as benefits as AI
(Udell and others, 2019, 46-48)

2.2.3        Automated workflow systems

In table 4, it depicts that with the implementation of automation, the workflow of a company can be streamlined and optimized to support minimal intervention from staffs operating on the systems and to allow automation to work in a stage of the production almost entirely.

According to Udell and others (2019, 46-48), allowing automation to be implemented will cause staffs to be deemed unnecessary, in fact, it can reduce operating costs of staffs as it 50% of a vessel’s operating costs and open up space for more cargoes to be boarded as in normal situations it would be replaced by staffs.

Table 4: Difference of old and new systems in assembling a product
(Udell, 2019, 46-48)

2.3  Implications to the economy and the environment if automation is adopted

According to Paddeu and others (2019, 55), with the implementation of automation, there are three aspects that are to be considered as it will be majorly affected by automation, that being employment, cost and productivity.

2.3.1        Employment

Regarding employment, O’Donovan (2019, 14) states that with the implementation of automation, we may see that our standards and requirements for occupations may rise, causing low-skilled to medium-skilled job holders to struggle to maintain themselves economically and their jobs as well.

In table 5 below, it illustrates the changes in labour market share for countries from low-skilled jobs to high-skilled jobs. In which we can see severe decline in medium-skilled jobs in all counties and a minor decline in low-skilled jobs in certain countries.

Table 5: Percentage changes in labour market share by job skill level for selected EU countries (n.a. 2019, 15-16)

2.3.2        Cost

In table 6, a bar chart illustrates the difference between the cost per ton mile on vehicles before adopting automation and after adopting automation. From this table, it is apparent that adopting automation would indeed be more cost efficient than without adopting it, with a net saving of 0.09 US$ per ton mile by using autonomous electric trucks and would also save 0.16 US$ per ton mile in its additional expenses.

Table 6: Cost per ton mile savings with autonomous and electric trucks
Paddeu and others (2019, 45)

2.3.3        Labour and productivity

According to Neumann and others (2019, 4064-4068), by implementing automation the productivity and workflow of a company can be greatly increased and will allow a company to work more efficiently.

In table 7 below, it indicates how automation affects productivity in a production process. From the table, it is shown that the volume and variability of the production have increased. It is also depicted that labour input required from staffs per product have resulted to decrease, indicating that minimal staff is required to maintain it.

Table 7: Performance differences from three work perspectives
(Neumann and others, 2019, 4064-4068)

3        Conclusion and Recommendations

The main question considered was whether automation will be able to avert the crisis of decline in the global economy. Based on the discussions above, it is concluded that automation is a sound investment that can be beneficial in stopping the stagnancy of economy and help businesses sustain in the industry.

The study also considered some current issues without the help of automation that will be impacted onto the global economy to ensure the crisis of decline in global economy will be averted by automation. In accordance to that, the following recommendations are made:

  • Businesses must replace old manual legacy systems with new automated systems to ensure that the company may continue to grow with its improved efficiency and to be able to manage the growth with new resources.
  • Invest in electric autonomous modes of transport to take advantage of its cost efficient expenses.
  • Minimize staff and prioritize automation to allow minimal error to occur and to allow businesses to pay less on labour costs.

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