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Quiz Society SRCC

Automation of Work in the Economy

The advent of the Covid-induced digital world and the increasing dependence of humans on technology has increased the demand for digital devices. This has ushered in a new age of automation with advancements in artificial intelligence and machine learning, which has led to a wide range of human activities being performed through AI. Although AI performs these mundane and routine tasks efficiently, it has attracted attention from policymakers and people who fear that automation may take away various jobs, and the few people having jobs will balloon the inequality as a result. For instance; the operation of driverless vehicles may take away the jobs of cab drivers, Delivery of takeout and groceries through drones could directly impact the jobs of delivery partners with companies like Swiggy, Zomato and Big Basket. Similarly, jobs which require human intervention like waiters and receptionists also have a possibility of becoming automated. This idea is represented in the novel ‘Player Piano’ which is representing a piano that plays itself. It represents a world where machines can work themselves and people are no longer required for such work. So is the AI revolution, the next Industrial Revolution? Will it lead to a trade-off between high industrial productivity and job losses?

As it is said history often repeats itself, whether it is an economic crisis, political instability or a labour market disruption. The set of events which precedes such incidents at different times is often similar. Thus, to explore and develop insights about the AI revolution, drawing a cause-effect relationship from previous industrial revolutions like the steam engine, spinning jenny, and computer chipscan help us understand the impact of such automation which have a powerful displacement effect by replacing workers with machines. For instance,during the dawn of the Industrial Revolution, automation due to machines made manual spinning and weaving done by artisans redundant. Although this led to improvement in living conditions and wages; the wages of artisans took around 65 years from 1755 to 1820 to recover back. Similarly, during the first IT revolution, jobs which involved routine and repetitive tasks were automated. Thus,what we can concludefrom these events is that even though some workers lose their jobs; these labour-saving innovations also increase the profitability of other inputs and hence the demand for workers producing them. The innovation of the flying shuttle increased the demand for yarn, creating jobs for people to produce yarn. This increase in productivity created more demand for other products and services like accounting et cetera, offsetting the impact of job losses from automation. Thus, what we can explore about the current AI revolution is that it tends to displace jobs that require certain skills, mostly the ones which are routine and increase the demand for some specific skills (like the software programmer for machines). Looking through another perspective, new businesses would be formed for supporting this increased productivity of output which would take advantage of the freed-uplabour. In this way, automation could encourage innovation through new business models and lead to constant reskilling of the workforce.

So far, we have looked at automation from the point of view of workers. But even corporations face the dilemmaof whether to automate their responsibilities or hire people to do it. This is because corporations gain certain incentives from automating their tasks and investing in AI. For example; when companies invest in AI, they can claim depreciation for it as capital expenditure and if it is financed via loans, they get to deduct interest from their earnings. Such tax advantages provide employers with an incentive to automate tasks. Similarly, they can help companies face labour market disruptions as robots would not demand maternity leave or protest against a wage cut during a recession. Thisautomation by businesses can be broadly divided into two categories:

When a business invests in highly productive technology, it displaces workers but it also increases productivity manifold to provide jobs for the freed labour. However, when the automation of tasks is just innovative enough to replace routine jobs but not increase productivity for creating new jobs, it will lead to an increase in unemployment and this type of automation worries workers and societies which does not offer any offsetting gains. For instance,When an insurance company want to make its claim approval process it will lead to job losses without any job creation but if the same company creates softwarewhich could assist patients with rehabilitation after surgery at home rather than at the hospital, could save money for insurance companies along with creating jobs for health workers, software programmers etc.

Thus, when workers would lose employment due to automation, it would increase costs for society due to an increase in unemployment, welfare payments and social costs of people not being able to contribute to the economy.

So, we can conclude that in this world of innovation, “Change is the only constant”. Artificial Intelligence has the power to disrupt the economy and if it is directed towards creating new business models that would promote the demand for new products and services, Automation could help in creating synergies between increased industrial productivity and increased employment thereby leading to growth and development of the economy.

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