The End of Factory Jobs
In the Developing World, Robots Are Short-Circuiting Economic Growth

Amidst all the fears that machines will lead to the unemployment of millions of Americans, the jobs robots are most eager to steal may in fact be in China. The FT reports:

After a six-month trial, the world’s second largest sportswear group has decided to start large-scale production next year at a custom-built, highly-automated facility near Ansbach. Here — and at another factory to be built in the US — Adidas plans to produce about 1m running shoes in developed markets within the next three to five years.

In the past 30 years, when western manufacturers were busy shifting production to emerging economies in an attempt to cut their labour costs, such a move would have been unimaginable. But, as wages rise in China, and advances in robotics allow more tasks to be automated, there are signs that the tide may be turning.

“When I started at Adidas in 1987, the process of closing factories in Germany and moving them to China was just beginning,” says Herbert Hainer, who steps down as chief executive of Adidas later this year. “Now, it’s coming back. I find it almost uncanny how things have come full circle.”

After all, automating factory work reduces the impact of labor costs, making it more attractive to keep production at home. That leads to fewer problems with global supply chains, faster response to consumer orders, fewer worries about intellectual property theft, and a more transparent legal and regulatory framework. In short, there are a lot of companies that will see upside in shifting production out of China—especially as the Chinese business environment becomes more hostile.

The return of manufacturing won’t mean a new wave of manufacturing jobs in the advanced countries, and given that a lot of the robots in the factories of the future will be immigrants, so to speak, from China and Japan, developed nations may not benefit as much as some hope.

Nonetheless, the biggest losers here are going to be the developing countries like India and Indonesia which had hoped low-skilled jobs would come to their countries as China transitioned to a high-skill manufacturing and services.

Thanks to robots, countries walking the well-worn road of economic development through industrialization may soon find themselves at a premature dead end.

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