Are robots eating our jobs?
That’s what I wondered when I read Kellogg’s recent announcement. They’re laying off about 2000 workers, 7% of their global workforce. The company cited slack demand for their signature breakfast cereals amid competition for new items like Greek yogurt and oatmeal bars. But the real focus, it seems to me, is efficiency. The company is in the middle of an effort to consolidate production facilities and integrate global supply chains, creating structural efficiencies and cutting costs by perhaps 10%.
Revolutionary robotics and advanced automation are making it increasingly easy to purchase and program new machines that can do just about anything. As a result, traditional manufacturing employment, which was about 30% of the labor force in the 1950s, seems destined to continue to fall.
As a result, our economy needs more and more professionals and technicians—people who can customize the machines, rather than just tend them. At the same time, we also need people who provide personal care and services. But fabricators and laborers? Not so much. Some economists have called this an “hourglass” economy: Wide on the top and bottom, hollowed-out in the middle
But the nature of work has been changing ever since the industrial revolution began in the mid-18th century. New technologies have always been disruptive, painful for those displaced, but good for the overall economy. We never run out of jobs. It may take time to learn the necessary skills, but there’s always something to do. Shipping and packing may get automated, but the firms designing and building the robots are hiring.
Having a more productive economy is essential to creating higher living standards. For the foreseeable future, robotics will be part of our creative destruction.
Douglas R. Tengdin, CFA
Chief Investment Officer