The World of Automation

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Automation is changing the way companies operate. Whether it is customer interaction, automated assembly lines, or computer-generated decision making, a majority of industries are preparing for the transition from a people-dominated workforce to a machine-reliant workforce. With that being said, workers need to be aware about the changes in their respective industries as well as the volatility of their jobs and have enough time to react to these changes.

The purposes of this wiki are as follows: provide a background about the history of automation and significant changes leading up to the present day, exemplify and explain the significance of how automation affected Detroit’s booming automotive industry and what eventually led to its collapse, go into detail about the future of automation and how it will affect the finance, customer service, and healthcare industries, and finally, project the future of regulating automation to help sectors most affected by automation.

We have gone into detail about 2 potential recommendations to offset the job loss due to automation: establish a universal basic income and implement a robot tax to make up for the tax originally collected from workers.

All research from this report come from secondary sources such as peer-reviewed academic journals, trusted periodicals, and industry reports.


Contents

Background of Automation

Automated Assembly

To provide a background on automation, we have to refer to Greek mythology over 3000 years ago. The concept of automation came from the Greek god Hephaestus, also known as Vulcan. The earliest mention of automation can be found in Homer’s “The lliad”. This was where Homer presented the tale of Hephaestus, the Greek god of blacksmiths, craftsmen, artisans and metals. His role was to manufacture all the of the weaponry used by the gods of Mount Olympus.

Hephaestus crafted automatons to aid him in his work. Automatons were self-operating machines fashioned from metal. Although not much detail was given on how they operated, it was said that with the help from the automatons, Hephaestus was able to produce unrivaled, magnificent equipment used by gods and mortals alike [1]

The term automation was first coined and credited by Ford Motor Company’s VP, Delmer Harder, in 1948. This came as a result of the increased use of automatic devices in their factories’ production lines. It first gained popularity in the manufacturing world; however, it became a more common term outside manufacturing as more industries saw a significant increase in the use of mechanical, electrical or computerized action for human effort and intelligence. [2] Nowadays, we define automation as an “automatically controlled operation of an apparatus, process, or system by mechanical or electronic devices that take the place of human labor". [3]

Detroit

Detroit was once the pinnacle of the American automotive industry. It was a city that grew and boomed because of 3 major automotive companies: General Motors, Ford Motor Company, and Chrysler. From the 1930s to the early 2000s, these companies supported the growing city and made it a very attractive city to live in. That is, until the automotive industry began to waver in the 2000s.

There were multiple reasons as to why Detroit collapsed. One was automation, back in the 1930s, as the companies were getting established, Ford looked into using automatic machinery to make the jobs easier for their assembly line workers. As they found more creative and advanced ways to make the car building process simpler, they found that it’s much easier to focus more on machinery than manpower. [4]

Ford Employees from 1992-2012

By pouring more money into the research and development of automatic machinery, Ford’s employee count continually decreased after 2002. This somewhat correlated with the amounts of units sold, but the change was not as drastic.

Second was the change in the motoring companies’ growth. The big 3 automotive companies saw their revenues skyrocket as the demand for an American-made heavy-duty car gained popularity. This would mean that they needed more space to create new assembly lines. However, most factories of the automotive companies were located within the city, and they found it very difficult to expand. [5]They found that real estate was getting expensive, government regulations to be quite bothersome, and adding a story to their current building hindered production rather than help the situation. As a result, the companies began to move out to the suburbs, or to small neighboring communities. Due to the advanced automation levels of their process now, they did not have to worry much about the welfare of their employees. The simple choice was to drive to work far away from the city every day or quit.

The nail in the coffin was the 2008 recession. According to Ford’s financial statements, in 2008 alone, Ford’s yearly revenue had decreased by over 15% from $6.5 billion to $5.5 billion. [6]Detroit, as a city, was slowly declining as other industries such as steel did not see it as an appealing place to land. This recession caused the motoring industry in Michigan to collapse and significant amounts of workers lose their jobs.[7]

Loss of jobs in Detroit

Due to the decline and collapse of Detroit’s motor industry, you can see that there was a net loss of over 500,000 jobs over the course of 8 years leading up to the recession.[8] To this day, many parts of Detroit are uninhabited. Broken down houses in bad neighborhoods are being sold for less than $10,000 as a way for the government to collect property tax. However, motor companies are continuing to invest money into their research and development departments, signaling that they are continually looking for better ways to automate their assembly process.[9]

Finance Industry

Background on Banking

Banking has been around since the first forms of currencies started to appear in the world. Empires needed a way to pay for the foreign goods they were buying. When individuals started to use coins, they needed a way to store their coins safely. The Roman empire were the first to formalize banks into their own institution and designated buildings instead of using temples[10].

The development of the banking system stayed fairly dormant until the rise of merchant banks such as J.P. Morgan and Goldman Sachs. Merchant banks provided customers with services such as loans, underwriting, and financial advising[11]. Since this time one of the main services which is financial advising has remained relatively stagnant. That is until now with the rise of robo-advising platforms providing an alternative to the traditional bank advising.


Banking in the 21st Century

The finance industry has long been stagnant with regards to processes from a technological standpoint. Automation is bringing the financial industry into the twenty-first century by changing the way companies and clients are interacting with each other. Automation in the finance industry consists of two main types: the first being finance process automation and the latter is robo-advisors.

Finance process automation involves the development of algorithms to simplify the internal processes of a financial institution or company such as accounts reconciliation, journal entries, or bookkeeping[12]. Robo-advisors, on the other hand, are meant to be used as a client-facing alternative where the financial planning and advising aspect of the company is handled by automated algorithms that can automatically rebalance a client’s portfolio[13].

There are many other concepts in progress that may change the future of automation in the finance industry that are not just limited to robo-advisors and finance process automation. Some examples include cryptocurrency and high frequency trading. Cryptocurrency utilizes blockchain based technology to verify transfer of funds which all happens automatically[14]. High frequency trading on the other hand utilizes algorithms with certain rules that automatically places buy and sell orders for securities[15].


Finance Process Automation

Finance Process Automation can be implemented by companies to speed up their internal processes that are time-intensive and tedious for employees. Some examples include pre-populating standardized worksheets and the completion of journal entries. Filling out worksheets can be tedious and expensive for companies with automation systems spreadsheets can automatically fill out with predetermined results. Automation also makes completing journal entries for a company much easier with the algorithms being able to complete journal entries as transactions are completed by the company.

Automation of these tasks makes it easier for finance employees to focus more on the decision-making aspect of their job rather than being swamped with administrative work. According to Kissflow, a provider of automation software, three main benefits of automation are data integrity, improved efficiency, and speedy approvals.

Data integrity in finance process automation is important because automation is not as prone to human errors[16]. This means that when decisions are being made based on the data provided, it is more reliable. Improved efficiency relates to how the finance team has an easier time tracking and processing the financial information that is provided to them. Finally, quicker approvals, where a company has an easier time approving processes such as budgets or reimbursement, save time and money for a company.

Finance Process Flow Diagram [17]

According to Kissflow, there are three main steps to preparing a company for financial process automation. The first step is to standardize the company’s financial processes and streamline them. The second step is creating a workflow which outlines who is assigned to tasks and how the exchange happens between the automated systems and actual employees. The final step is to integrate the automated software with all the other third-party applications that could be used by the company. Following these steps to implement financial process automation in a company can save countless hours.


Robo-advisors

The second type of financial automation is the up-and-coming use of robo-advisors, a relatively new addition to the finance industry. Traditionally, financial institutions would provide advice within the branch and require a lot of attention from clients. Robo-advisors from institutions such as Wealthsimple and Nestwealth changed the way clients interact with their financial institution[18]. Wealthsimple utilizes a robo-advisor which automatically inputs a client’s risk preference to balance their portfolio. A process that usually took weeks to finalize with a client had been cut down to only a couple of days.

Robo-advisors also provide high levels of advice for much cheaper fees. For example banks usually hover around the 2-2.5% range for management fees while Wealthsimple charges a 0.5% fee to utilize their product[19]. These reasons all provide a compelling argument for a more automated process within the traditional banking system that can provide a cheaper and easily accessible experience for consumers.

Customer Service Industry

Background on Customer Service

The idea of customer service came into fruition in the late 1700s and the early 1800s. This was due to an increasing population and the idea of scale. Simply said, the more people you attract, a way of servicing them and adding value to your product would be to support them along the way. This idea of customer service launched a plethora of developmental ideas that has impacted the way we experience it today. Some major milestones include the development of incentives such as money-back guarantees and discounts, the transition to customer service through the newly invented telephone, and the digitization of customer service to the increased popularity of online chats.

The first known money-back guarantee incentive dates back to 1868. Watkins Liniment, a company that sells tonic and other herbal remedies began offering money-back guarantees if the customer was unsatisfied with their purchase. This was seen as crazy because it was hard to see the value of the policy back then. Then we turn to Coca-Cola, who in 1887, offered the first discount coupons. This idea began to change the way companies can incentivize their customers into buying their product.[20]

Over time, the world began to transition to the use of phones for customer service. This was much more convenient as it allowed customer to not travel long distances to ask for repairs or questions. Over time, larger companies began setting up call-centers, making their operation more centralized.

Finally, the customer service industry has taken large leap over the past 20 years. The biggest change is the digitization of customer service. There has been a transition from talking to individuals over the phone and instead, speaking to them through email or live-chat. It was in the 1980s where Customer Relationship Management started.

The 1990s saw emails become an incredibly popular means of communication. Ultimately, many applications from companies such as Quantum Link (On-Line Messages) for AOL, Computer telephony Integration, Jeremy Miller and Jabber, as well as Salesforce began developing automated ways for companies to support mass amounts of customer service requests.[21]

Intregration of New Technology in Present-Day Customer Service

According to a study done by Mckinsey, “Almost zero to thirty percent of hours worked will be automated by 2030”.[22] This puts into question the changes citizens will need to go through in order to maintain a living wage. Different countries will have different alternatives, but even now, we see that jobs are disappearing in place of an automated, convenient machine. A great place to start is of course, customer service.

Nowadays, it’s very common to see algorithms that provide you with an automated message when asking for customer service. For example, Wal-Mart has what is now known as a “smart assistant”, which are a series of robots that have a range of applications. The Auto-S scans products and are able to complete inventory checks while the Auto-C is an automated floor cleaner. It’s too early to gather enough significant data to see how this affects customer interactions, But “at the end of the day, human interaction is what makes customer service real”. So the question that has to be asked is how much do customers value customer service?[23]

Walmart's "Smart Assistants"

The idea of keeping a personal touch on customer service is very popular for companies whose products have a long lifecycle. For example, ABB provides access to power grids, electrification products, as well as robotics and motion products. A lot of their products have a long lifecycle, leading them to have a policy where they focus on long-lasting relations with their clients. As of now, they are considered a leader within the industry.[24]

The service industry affects countries in different ways depending on which part of the development process they are in. For example, in China, as an emerging economy in the midst of a large-scale change, the customer service industry is seeing a large growth of jobs. These jobs are considered middle-wage operations and is the leading cause of the development of a middle class in China.[25]

Meanwhile, in a more developed country such as the USA. We have seen a shift of recruitment needs in the past 10 years. There has been a significant increase in demand for tech-based jobs. Now, employers focus more on complex problem solving, creativity, and persuasion skills on top of project management and coding instead of an independent and hard-working work ethic like it did in the past.[26]

The Future of Customer Service

By 2022, a study conducted by the UK-based Juniper research says that chatbots will save companies over $8 billion. [27]It will only get harder and harder for you to determine whether or not you are speaking to a human or a computer. In the end, customers only want to be serviced and have their questions answered. So it begs the question, how far can AI be developed to solve unique problems and how can the program learn and grow from each interaction. There isn’t a definite, game-changing discovery in the development of AI that can turn the industry on its head yet, but rather it’s a slow process as customer service positions are slowly being squeezed out by a convenient computer program.[28]

However, another way to look at it is distinguishing customer service from hospitality. Customer service fulfills a need, whereas hospitality fulfills people. At what point will humans notice and care about who they are interacting with online? At that point, what can customers do if large corporations only want to focus on the bottom line? [29]

Health Care Industry

The History of Health Care Technology and Evolution of EHR

Automation in healthcare is more common now than any other time in the past. To better emphasize the scale of these changes, we must refer to the history of healthcare technology and the evolution of the Electronic Health Records (EHR).

EHRs are real-time, patient-centered records that make information available instantly and securely to authorized users. These records are shared through network-connected, enterprise-wide information systems or other information networks and exchanges. A few years ago, EHRs were used as a key to increase the quality of healthcare. However, providers today are using data from patient records to improve the quality of health care services provided through their care management programs. EHR can improve quality care by using the data and analytics to prevent hospitalizations among high-risk patients[30].

To better understand how EHRs came into fruition and why it is considered to be significant, we must first look at the history of healthcare technology and how it has developed throughout the past century [31].

1920s: First Medical Records Emerged: back in 1920s healthcare professionals started using medical records to document the details and outcomes of patient care.

1960s/1970s: New Approaches to HIM: paper records were utilized until the 1960s/1970s, when technological innovations, such as the use of computers, led to the use of new approaches to HIM — the standardization and sharing of medical records.

1970s: Pioneers in HIM Emerged: the late 1960s and early 1970s saw a huge technological advance in computers that inspired the development of many healthcare information management systems. For instance, Lockheed Corporation created Eclipsys in 1971, a computerized physician ordering system for El Camino Hospital in California.

1980s: Computers Become Prominent: in the 1980s, the introduction of the desktop computer really ushered in the modern age of healthcare information technology. Hospitals were able to invest in systems that will benefit the patient floor. Another major benefit was that doctors in small practices were able to afford the machines that would revolutionize the industry.

2010: EHRs Become Commonplace. As of 2015, electronic health record adoption had doubled in just seven years. 96 percent of hospitals and 87 percent of physician practices were using electronic health records.

Health Care Information Technology Today

Since 2010, healthcare technology saw a tremendous improvement in how it can help doctors and people working in the medical field to have a better and more accurate information about their patients. Despite the evolution of healthcare systems, there are still 2 sides to the coin in a few pros and cons[32]


Pros


Cloud adoption — Healthcare organizations are shifting from data centers to cloud-based computing. The goal is to lower the cost of data storage and enhance the ability to share healthcare data within departments and among other entities.

Automating healthcare administration — Major administrative functions of healthcare, such as hospital billing, financial applications and physician billing, have been automated.

Actionable insights from data — Healthcare organizations are investing in data tools to lower costs, improve results of care and comply with value-based mandates.

Labour Savings: Some jobs require some repetitive tasks to be done over a long period of time. Therefore, replacing humans with machines can be a big-time saver. It doesn’t necessarily have to eliminate employees, but rather elevate them into higher-functioning roles that make use of the clinical expertise they have been trained for.

Improved quality and consistency: While humans can get tired and make errors from working extra hours, machines don’t. Automation tools can help provide a consistent basis of care activities

Reduce Waste: Use of paper and spread sheets needed for an overfull workload can lead to a lot of waste


Cons

Nurse Talent Gap [33]


EHRs still need work — some physicians complain that EHR interfaces are poorly designed and confusing and takes more time than paperwork

Higher Throughput: A nurse supported by automation tools can handle a larger population of patients at one time. This point should be one of the pros of healthcare automation, however, it has another side that we are not really aware of. Automating the roles of nurses will greatly improve the efficiency of their work, but it will decrease the demand for nurses. As one nurse with the aid of automation can do the job of four or five nurses. This will lead to employment problems in the nursing field, especially in a country like Canada that imposes a lot of regulations and rules for nurses who got their training outside of Canada.

As mentioned before, there are 2 sides to the coin. There are some technological changes that most people are afraid of. The primary example is the fear that some jobs will be obsolete due to robots. For example, there is a lot of concern coming from the nursing field. Canada has a significant shortage of nurses. There has been difficulty filling vacancies in hospitals, especially in small cities and rural areas. On July 30, 2019, the government of New Brunswick announced their new goal of adding 130 nurses a year over the next 10 years to attack the nursing shortage. This strategy focuses on attracting internationally trained nurses [34]

This brings into question whether or not we should blame automation for causing shortages in jobs when we are not putting a planned strategy to accommodate the shortage? The government’s resilience of not accepting nurses who trained outside Canada is the biggest reason for this shortage. The provinces which are lacking nurses should start implementing a new program for international nurses outside Canada to facilitate the accreditation process for them, instead of putting hard to achieve rules and regulations that make them apply in other countries. This will not only fulfill the shortage, however, it might create a surplus as well, as most of the immigrants applying to immigrate to Canada are either engineers or in the medical field. It will be a win-win situation for the Canadian government, they will solve the shortage problem and they will help immigrants start a new life in Canada while working in their profession.


According to the graph above, there is more job postings for nurses than the number of nurses applying. It is a definite crisis that the government should fix soon.

Future Projections

The possibilities with automation are endless but it also leads to a lot of uncertainty about job stability and employment options for workers. One of the biggest concerns is that a significant amount of jobs will be cannibalized over the next 20 years with fewer opportunities for working people. Our group has reached the consensus that jobs will not necessarily be lost, but they will be changing to fit more analysis-based requirements. It’s a matter of learning how to manage or work along-side machines.

However, we do agree that the pace at which robots are taking over the job market is moving faster than the creation of new jobs. Therefore, we have come up with 2 potential suggestions that could regulate the use of robots and provide for those who have been affected.

Robot Tax

Although there will be a loss of jobs from the lack of basic opportunities there will be a gap in the economy. Bill Gates the founder of Microsoft describes in an interview with Quartz he believes a robot tax should implemented[35]. A robot tax would require companies to pay a proportionate amount of money to the amount of work the robots do to ensure that the economy is functional[36]. Overall, this strategy does have a few quirks with it being very tough to quantify exactly how much companies should pay in taxes for each robot. This can also lead to multiple loopholes for companies to exploit with regards to paying as little tax as possible by reporting the fewest hours possible.


Universal Basic Income

Universal Basic Income is a buzzword thrown around by many economists and politicians. Although the big question is what is UBI? Universal Basic Income is cash payments made to persons over the age of 18 with no requirements or repercussions for receiving the money[37]. With the countries already spending billions of dollars on welfare programs, UBI could replace these programs. With millions of jobs in danger, UBI is a strong option that many politicians are considering. The big problem everyone is trying to solve is where the money would come from some politicians such as Hilary Clinton have said UBI is just not feasible with too many social programs being cut[38]. Other ideas include a flat tax on the richest one percent of earners in the economy to raise the funds. Overall, although the idea of a Universal Basic Income program is intriguing many of the kinks need to be ironed out for it to actually become a feasible solution.

Should We Be Scared?

Within our team, we have agreed that we should be concerned about automation. In the next few years, it is highly likely that automation will begin to replace humans and will cause employment problems. The world of robotics is growing so fast and becoming more accurate and reliable. That’s why companies will most likely shift to a more accurate and fast way of completing their tasks rather than relying on human workers who will only work for certain hours and being vulnerable to fatigue. The worst case scenario that we are expecting to happen is the disappearance of important and highly demanding jobs like accountants and doctors. This will increase the poverty rate of a large portion of the population as they will become unemployed and will not have alternative option to work in other fields, as their profession is very specialized.

Authors

Seif Aly Kishan Parekh Chancey Wu
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
samohame@sfu.ca kishanp@sfu.ca chanceyw@sfu.ca

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