Robots, AI and the labour market

The recent tightness in the UK’s labour market has impacted the country’s economic growth, and the resulting spike in wage costs has also contributed to that core inflation number that central bankers are so wary of.

There’s been much discussion about potential solutions, from increased migration to more technological methods: automation, robotics and AI.

Recent advances in the latter have fuelled the imagination and sparked investor interest, with huge tech players enjoying something of a renaissance as search engines become more intuitive and chips and processors become more responsive.

BT recently announced it was looking to replace about a fifth of its customer service workers with AI and there have been warnings that “tomorrow’s world” could see more than 300 million jobs at risk.

Rishi Sunak has promised the country will take a leadership position when it comes to these sweeping technological advancements, and it was hot topic at the recent G7 summit.

But it led me to ponder exactly what roles can’t be filled by tech?

On a recent trip to Belfast my pre-flight airport burger was delivered to me by a very polite, very speedy robot. Only the accompanying glass of wine couldn’t be handed over, a real person had to check I was legally of age to imbibe.

But how long before that robot is kitted out with facial recognition software that can scan my all too visible crow’s feet and decide I am “of age” – perhaps a better question is how long will it be before the law allows it?

There will be many examples of failures out there, and no investor wants to end up wearing the emperor’s new clothes or finding themselves in the next dotcom bubble when it bursts.

Robotics and automation in particular have a huge initial outlay so there has to be a real monetary gain in order for businesses to make this investment. At Belfast there are times the airport is almost empty and other times when every seat seems to be taken.

Paying for workers to stand around for hours makes little sense and very few people are willing to turn up for a shift that’s just an hour or two long.

But robots don’t always provide the solution business needs. The first incarnation of “Flippy”, the burger cook, was turned off after just one day at the stove because it was too slow and required too much human assistance.

And a bakery in Barnsley made headlines back in 2009 when it turned on it’s robotic helper which it hoped would decrease energy use and increase capacity in it’s ovens by a whopping 80%. The only problem was it just couldn’t stand the heat and when I returned to film at the bakery a few months later I found it had been quietly retired.

There will be many examples of failures out there and no investor wants to end up wearing the emperor’s new clothes or finding themselves in the next dotcom bubble when it bursts.

Sector-specific ETFs are one way to get exposure whilst remaining diversified, and increased headlines haven’t hurt share price performance of three of the major options since the start of the year.

Robotic ETFs share price performance this year

Source: Sharepad

Like those EV start-up companies, robotics and AI operations can burn through a whole lot of capital to take an idea from the drawing board into mainstream production. The aforementioned Flippy has since returned and Flippy 2 returned to service in the US in 2021 just as the post-covid labour crisis was at its peak.

Retail investors can’t currently invest in Miso Robotics, the company behind Flippy 2, but the above ETFs have a wide variety of global players in their portfolios including several UK businesses like Keyence and ABB Ltd.

Productivity-wise, investment in robotics, AI and automation seems like a total no-brainer, but there are questions about the ultimate impact this shift will have on the global labour force.

The potential is huge especially at a time when migration is such a political hot potato.

Food growing, picking and production is an obvious area for investment, and a new funding round has just gone live to allow businesses to invest in new technologies that could fill skill and staffing gaps, and ultimately help bring prices down for the consumer.

AI has further changed the game and there are now super smart robots (named Tom, Dick and Harry) that can identify and zap weeds amongst crops, which means less need for herbicides, and prototypes have been created that could ultimately solve the crop-picking crisis.

Right now, like Flippy’s first incarnation, those prototypes can’t match the speed of human hands, and a review last year into automation in farming found that it’s likely to take at least another five to seven years before the prototypes move to commercially available options.

Productivity-wise, investment in robotics, AI and automation seems like a total no-brainer, but there are questions about the ultimate impact this shift will have on the global labour force.

Which jobs will be safe, which jobs will be created and which jobs will disappear from our vacancy lists?

Governments will have to step in to regulate this space and that’s something companies and investors will have to watch closely.

But it seems “Tomorrow’s World” is really upon us and rather like the internet before it, I doubt anything is likely to slow it down.”

Past performance is not a guide to future performance and some investments need to be held for the long term.