Perception or reality? Economist questions whether manufacturers actually embrace automation 

By August 15, 2017Product News

Ask West Michigan manufacturers how they’re addressing the challenges of finding qualified workers, and many of them likely will cite automation equipment as a key part of their solution.

Industry statistics would seem to bear that out. Capital investment in robotic equipment has been skyrocketing at a double-digit pace, with the automation supply chain struggling to keep up with increasing order volumes. Additionally, the cost of automation continues to decline, meaning that more companies should be able to afford the technology.

But economist Paul Isely said there’s just one problem with the commonly repeated narrative proclaiming the rise of the robot: Labor productivity statistics for Michigan suggest that it’s not true.

“We’re really in a world where the output per worker is static or even dropping,” said Isely, the associate dean and professor of economics at the Grand Valley State University Seidman College of Business.

If manufacturers were turning to automation in droves, worker output should be increasing, not moving in the opposite direction, he said.

“What that tells me is that we’re not replacing workers with automation. If we were, you’d need fewer workers to produce the same amount of stuff, and we’re not seeing that. We’re actually seeing that workers are becoming less efficient (and) that those workers are producing less stuff each,” Isely said.

While manufacturing labor productivity data — defined as output per hour worked — increased sharply following the recession as companies leaned their operations, it’s largely flatlined during the recovery. Labor productivity grew approximately 11 percent in 2010, but has hovered around 1 percent since then, according to data collected by the Bureau of Labor Statistics (BLS).

During past recessionary periods, labor productivity has grown at nearly twice that rate, Isely said.

“As we look at the things that really drive us here in West Michigan — those manufacturing components — there’s just not evidence that people are running to have machines build everything,” he said.

For the economist, the disparity suggests perceptions of the industrial market may not match reality.

“We certainly have a lot of anecdotal evidence that the companies selling automation to manufacturing are doing a very brisk business right now, but it’s not breaking through to the end result where we are seeing output go up,” he said.

Unsurprisingly, executives in the automation sector take issue with Isely’s analysis, citing evidence that companies are increasingly adopting automation, even if that hasn’t translated into productivity statistics.

“I don’t think everyone would agree with that economist,” said Jeff Burnstein, president of the Ann Arbor-based Robotic Industries Association.

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