This article forms part of CAER’s  ‘Responsible Investment Agenda 2019 – A Work Plan for Australian and New Zealand Investors’ Report

Advancements in the materials, software and robotic industries are driving an explosion in the take-up of automation technologies across the global workforce.

While mechanisation and the rise of machine-based working environments have traditionally had their primary impacts in the blue collar and manual labour sectors, the latest wave of automation is more pervasive – the rise of big data, machine learning and advanced algorithms means that all sectors of the economy will be impacted to some extent. As is the case with all new technologies, the nature of the impacts will be mixed. Investors are preparing for opportunities in new growth sectors, but responsible investors will also need to be mindful of the potential negative repercussions for those elements of the workforce who find their jobs evaporating.

Is this the future?

They say that all journeys start with a single step – the relentless march of automation is well underway, however.

With a large wages bill, a high proportion of FIFO workers, and a comparatively high level of OH&S risks on site, Australia’s mining sector has been an enthusiastic early adopter of automation technologies. Australian company Rio Tinto is a leader in the implementation of new technologies in their remote workplaces, with 400 people employed in a Perth office controlling operations at 16 mines, 4 port facilities and 1,700 kilometres of rail.[1]

When looking at the sorts of work that can be automated, it has long been axiomatic that while production-line style jobs are readily automated, tasks requiring more dexterity and judgment were less likely to be lost to automation. Recent work by an Australian industry body may put the lie to this belief, however.

In a collaboration with University of Technology in Sydney, the wool industry’s research and development body Australian Wool Innovation (AWI) is incorporating automation into the Australian shearing sheds, with the aim of developing a fully automated wool harvesting production line in 4 years.[2]

If a task as complex as shearing a sheep is in the sights of automation technologies, it becomes harder to imagine manual tasks that can’t be undertaken by a robot. Even human-facing services are rolling out algorithm-driven product lines, such as the job interview AI being developed by Sydney-based startup Curious Thing.[3]

The Pros and Cons

Advocates of automation highlight the benefits that the technology will bring to the economy, environment and to society, including increased workplace productivity, lower operating costs, improved human safety and more leisure time.

It is likely that investors who are able to accurately predict the corporate winners from coming waves of automation will enjoy higher returns. Australian fund management firm Nanuk Asset Management have been early movers in this space, predicting that lowering cost of robot production will lead to rising affordability and a virtuous circle of demand and production.[4]

While it is generally agreed that there are large economic opportunities associated with an increase in the use of automation technologies, it is not as clear that the impacts on society will be as positive.

A recent McKinsey report has estimated that a rapid uptake of automation in the workplace will lead to the loss of up to 800 million jobs globally.[5] While they also predict that a large number of new roles will be created, there is a risk that unless considerable investment is made in training and upskilling, a 2-tiered employment market will be created, with benefits for high-paid and cognitive roles but a shrinking opportunity pool for physical or repetitive labour.

Responsible investors also need to be mindful that the impacts on employment will impact some sectors disproportionately, with the associated reputation issues that go with that.

A way forward

The majority of commentators acknowledge that the genie is well and truly out of the bottle when it comes to automation. The question now is how to make sure that the changes that will be taking place in global workplaces lead to the best possible outcomes for workers and society in general.

Education and re-training of workers constitutes one of the most important tools to assist in this process. Global civil society is already taking steps to develop frameworks and lobby for more investment in re-skilling – examples include the International Labour Organisation’s Global Commission on the Future of Work,[6] and in the UK the Fabian Society’s Commission on Workers and Technology.[7]

At a corporate level we have seen the mining industry investing directly in the re-training of workers for new automation-related roles, but beyond that there has not been a lot of noise in terms of direct action.

While training will play a key role, we must also be prepared for some broader fundamental changes in the way society thinks about work and the role of the state in supporting people who are unable to make the transition to a future workplace. This will pose significant challenges in a political environment that has seen populist political messages around the globe demonising the unemployed.

In a future where there are less jobs to go around, one solution is to reduce the amount of hours that people work – resulting in a more even spread of opportunity across the society. Anthony Veal from the University of Technology in Sydney has recently suggested that a reduction in the working week from 40 to 15 hours would address the challenges posed by a future workplace dominated by   automation, as well as dealing with issues plaguing Western society around stress and over-work.[8]

Another radical suggestion that is gaining currency at the moment is the adoption of a universal basic income, whereby the state supports all members of society with a living wage, allowing for people to move away from paid work and focus on alternative activities.[9]

While all of the above measures will pose economic and practical challenges for society, it is likely that some form of each of them will be required if our society is to remain stable in the face of a rapid change in the labour market.

The Impact on Investment

While the obvious role for investors is to ensure that their portfolios maximise returns from these emerging new workplace paradigms, responsible investors need to be mindful of the long-terms societal risks associated with a poorly managed transition to automated workplaces.

Investors engaging with companies on this topic could consider asking questions such as:

  • How transparent are companies being about their own plans for workforce downsizing?
  • Has the company made a commitment to re-training and re-deployment of workers within their organisations?
  • Is the company’s representative industry body taking a progressive position in in terms of encouraging government investment in social security measures, and in debates around issues like changes to existing working hours and related workplace practices?

If these risks are management appropriately, then the future workplace will be one that is productive for employers and rewarding for employees. If not, there is a risk that future societies will be characterised by a significant disparity between high and low income people, with the potential for conflict and disharmony that implies.

Read the full ‘Responsible Investment Agenda 2019 – A Work Plan for Australian and New Zealand Investors’ Report

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[1] Babs McHugh, ‘Robots and tech get vocational training tick as Rio Tinto joins TAFE in reskilling mine workers,’ ABC News (27 October 2017): <www.abc.net.au/news/rural/2017-10-27/rio-tinto-joins-tafe-in-developing-training-of-mine-workers/9080222> [Accessed, 05/02/2019].

[2]  Dominique Schwarz, ‘Robots may take on shearing as Australia’s resurgent wool industry deals with a labour shortage,’ ABC News (18 January 2019): <http://www.abc.net.au/news/2019-01-18/australian-wool-shearing-could-soon-be-done-by-robots/10708256> [Accessed, 05/02/2019].

[3] Paul Smith, ‘Job interviews by an AI bot … There’s a Curious Thing,’ Australian Financial Review (4 February 2019): <www.afr.com/technology/job-interviews-by-an-ai-bot–theres-a-curious-thing-20190130-h1ao6n> [Accessed, 05/02/2019].

[4] Nanuk Asset Management, Investing in robotics (February 2018): <https://www.nanukasset.com/polar/documents/Nanuk-Investing-in-Robotics-Final_Feb-23-2018.pdf> [Accessed, 05/02/2019].

[5] McKinsey Global Institute, Jobs lost, jobs gained: What the future of work will mean for jobs, skills, and wages (November 2017): <https://www.mckinsey.com/featured-insights/future-of-work/jobs-lost-jobs-gained-what-the-future-of-work-will-mean-for-jobs-skills-and-wages#0> [Accessed 05/02/2019].

[6] International Labour Organization, Work for a brighter future – Global Commission on the Future of Work – Executive Summary (2019): <https://www.ilo.org/wcmsp5/groups/public/—dgreports/—cabinet/documents/publication/wcms_662539.pdf> [Accessed 05/02/2019].

[7] Fabian Society, Commission on Workers and Technology (6 August 2018): <https://fabians.org.uk/workers-and-technology/>, [Accessed 05/02/2019].

[8] Anthony Veal, ‘It’s time to put the 15-hour work week back on the agenda,’ SBS News (26 December 2018): <https://www.sbs.com.au/news/it-s-time-to-put-the-15-hour-work-week-back-on-the-agenda> [Accessed 05/02/2019].

[9] Nicola Sturgeon, ‘Why universal basic income is worth a serious look,’ The Economist (31 May 2018): <https://www.economist.com/open-future/2018/05/31/why-universal-basic-income-is-worth-a-serious-look> [Accessed 05/02/2019].

Duncan Paterson

Author: Duncan Paterson

Duncan Paterson Executive Director