In Search of Efficiencies: From Outsourcing to Automation
By Saghir Aslam
Rawalpindi, Pakistan
Many economies and policymakers support the nation that global trade and technological advancement will benefit the U.S. economy. Although globalization conferred benefits to U.S. consumers in the form of more plentiful choices and lower prices , 30 years of intensifying global competition , particularly from the emerging Asian economies eroded U.S manufacturing competitiveness and employment more substantially than many anticipated.
Advances in technology and communications have allowed to decrease labor costs by outsourcing work to lower-cost regions, with relative benefits accruing to the world’s poorest workers. In additions, lower-skilled segments of the U.S. workforce did not adapt rapidly enough to keep up with technological advancements.
Technology continues to exacerbate job displacement. If we assume that labor costs will rise as the U.S. economy approaches full employment, then productivity will become an increasingly important component of corporate profitability. It will be vital for businesses to innovate and automate to compete globally. This could benefit companies that sell capital equipment such as robotics. Interestingly, China may once again be leading the race to reduce production costs and increase profitability. Industrial robot sales in China are projected to far outpace those of developed markets such as the U.S., Japan and Germany.
One trend we are watching is companies locating their manufacturing facilities near their customers to reduce shipping costs and currency effects, as well as being viewed as contributing to the “Local” economy.
Labor Market Changes Bring Opportunities
The good news is that labor reallocation, which is the sum of job creation and job destruction, is intensifying. As jobs are eliminated, new jobs are being created. In this recovery, our research shows that job gains have been broad based across many different sectors.
Although a number of lower wage hospitality jobs were created since the financial crises, so were a number of higher-wage jobs in health care, business, and management.
The challenges are training workers to meet employer demands and matching available workers with available jobs. Education plays a vital role in this transition. Education companies should benefit from the need to train and train and retrain workers throughout their careers.
Automation is by no means a synonym for worker extinction. The proliferation of non-standard jobs, also known as the “gig economy”, may offer greater flexibility and autonomy for workers. This form of employment, which often includes temporary positions and independent contractors, may also offer access to those who have been shut out of the formal labor market. Short –term engagements may provide better matching mechanisms, in some cases creating demand and making new type of independent earning activities possible.
Over time, technology may make the hierarchical corporate model obsolete, replaced by leaner core organizations that rely on a loose network of contractual workers. This could potentially benefit both workers and investors in these companies.
There’s never been a better time to be a worker with special skills or the right education, because these people can use technology to create and capture value.
However, there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots and other digital technologies are acquiring these skills and abilities at extra ordinary rate.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
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