Robots and International Economic Development

As the next wave of technological innovation emerges, interest in technology's role in international affairs appears to be growing.¹ But much of that focus has been on product technology (e.g., smart phones, commercial jets, autos, solar panels), rather than process technology ("machines" to improve how a good or service is produced).

Automation is a particular kind of process technology. The term was originally coined in 1945 when the engineering division of Ford Motor Company used it to describe the operations of its new transfer machines that mechanically unloaded stamping from the body presses and positioned them in front of machine tools. Today, it refers to any production process that is controlled by a machine with little or no input from an operator in order to produce in a highly automatic way. There are many technologies that can enable a production process to be automated, but robotics is an increasingly important one. While there is no hard and fast definition of a robot, the term generally refers to physical machines that can be programmed to perform a variety of different tasks, with some level of interaction with the environment and limited or no input from an operator. Whether a robot looks like a human is irrelevant to whether it is a robot.

Robots are key tools for boosting productivity. To date, most robot adoption has occurred in manufacturing, where there are robots designed to perform a wide variety of manual tasks more efficiently and consistently than humans. But with continued innovation, robot use is spreading to many other sectors, too, from agriculture to logistics to hospitality. Robots are getting cheaper, more flexible, and autonomous, in part by incorporating artificial intelligence. Some robots will substitute for workers; others (cobots) will complement workers. As this trend continues, robot adoption will be a vital determinant of national economic progress and potentially will reshape global supply chains.

Boosting robot adoption will be critical because both the US economy and the global economy are suffering from a productivity slump. The Conference Board has found that change in GDP per person employed has slowed in from 2.6 percent per year from 1999 to 2006 to around 2 percent per year from 2012 to 2014.² Most of this decline has occurred in advanced nations: productivity growth in the EU, Japan, and the United States fell by more than half after 2007 compared to 1999 to 2006.

Improving productivity in many functions and industries that involve moving or transforming physical things will depend on much better and cheaper robots. To be sure, robots are already driving productivity.³ Investment in robots contributed 10 percent of growth in GDP per capita in OECD countries from 1993 to 2016.⁴ But we have barely scratched the surface of their potential because of limitations in functionality and costs.

Patterns of National Robot Adoption

A critical question is how nations compare in robot adoption. The most commonly used metric is the number of industrial robots as a share of manufacturing workers. According to the International Federation of Robotics (IFR), the global average for industrial robots per 10,000 manufacturing workers grew from 66 robots in 2015 to 85 in 2017.⁵ South Korea was the world's most advanced adopter of industrial robots in 2017, with 710 robots per 10,000 workers; Singapore, Germany, Japan, and Sweden followed. Man United riates raokke seventh Fede rati on of Ro botic s, Ò Robot Den ers. Russia and India ranked last with just 4 and 3 robots per 10,000 workers.

There is a stronger economic case for adopting robots in higher-wage economies than there is in lower-wage economies because investments in robots often are justified by how much they can save in labor costs. This is why the Boston Consulting Group (BCG) estimated that the projected labor cost savings from robotics are considerably lower for developing nations than for developed ones.⁶ So, the more germane question is: Where do nations stand in robot adoption when we take wage levels into account? To assess this, the Information Technology and Innovation Foundation⁷ identified average total compensation...