My Ssec Capstone Project Uttarayan Dasgupta John Locke Institute Essay Competition- Economics Should we be more worried about productivity stagnating or about robots and artificial intelligence making our jobs obsolete


Uttarayan Dasgupta John Locke Institute Essay Competition- Economics
Should we be more worried about
productivity stagnating or about robots
and artificial intelligence making our
jobs obsolete?
To begin to answer this question we must first ascertain whether it is fair to compare productivity
stagnation and robots rendering our jobs obsolete. In my opinion, it is not. To me it is like comparing
anthrax and penicillin, a disease and a treatment. Stagnant productivity leads to multiple problems
ranging from high unemployment rates to higher costs of living to lower living standards. It means that
countries struggle to fund healthcare, welfare and education, hindering progress in quaternary sectors
such as medical research and development. Productivity stagnation is a perennial concern for
developing states, and there has always been one clear cut way to combat it; automation and
mechanisation. Many historical precedents spring to mind, such as Arkwright’s spinning frame
revolutionizing textile production in the UK, or the introduction of the motor vehicle to transport goods
exponentially faster than by horse drawn carriages. These are instances of innovation boosting
productivity by changing the way an industry operates, just as robots and AI are doing. For this reason I
see the introduction of robots and AI into our workplaces as another step in development, to boost
productivity and change our way of working. It is not so much a problem; rather, it is a solution.
Productivity stagnation occurs when the total output/total input of a country is constant or fluctuating
minutely, i.e. there is no growth. Productivity itself is usually calculated by dividing total GDP by the
capital and labour used to produce it, one of the most common methods is to divide total GDP by total
hours worked. In other words it is a way to measure how efficiently the inputs of production (capital and
labour) are being used to produce a given amount of output. In order to understand the negative effects
of productivity stagnation we will examine two examples, the United Kingdom and Japan. They are two
instances of the same problem with different causes.
Currently, in the time a British worker makes £1, a German worker makes £1.35, and Britain has the
lowest GDP per hour worked between Italy, France, the USA and Germany1. Britain’s productivity
stagnation was predominantly instigated by the 2008 financial crisis, when the government paid out
£500bn2 in an attempt to save RBS and Lloyds banking group. The government was left with huge debt
and a severe cut in capital available to them. This causes productivity to take a fall as capital investment
is a key factor of productivity, and it is extremely difficult to boost output with a reduction of input
funds. Hence, on account of heavy debt and the countermeasures taken against it (e.g. budget cuts),
productivity has only risen minutely since 20093. This stagnation means that Britain has produced, on
average, almost the same amount (in terms of value) of goods and services for the past 9 years.
Consequently, it has generated a similar amount of money to fuel its economy each year. As the
population continues to grow at 0.8%4 per annum, there is less capital in the economy per person. This

Uttarayan Dasgupta John Locke Institute Essay Competition- Economics
causes the average person to have less disposable income to invest or buy British made products with,
leading them to purchase cheaper imported alternatives, lessening the demand for British products. This
lack of demand means British businesses sell less, reducing the need for personnel as less product is
made. This leads to unemployment and lack of job availability, lowering GDP. This creates a vicious
cycle, as it increases the number of those who are dependent on state welfare, further restraining the
spending power of the government on investing and trading, yet again reducing GDP.
Productivity stagnation also means people become poorer. With the cost of living in Britain being so
high; on account of the high inflation (2.9%)5 and the falling value of the pound, people need more
money to afford basic goods and services. This means wages have to be high, hence companies would
prefer to outsource lesser skilled jobs to other countries (such as Indonesia or China) where wages are
much lower. This hinders British productivity as it means jobs are lost or are never created and fewer
goods are actually produced in Britain, yet again lowering GDP and job availability. The adverse effects
of productivity stagnation are plain to see in Britain, but do we see the same problems occurring in
other instances of productivity stagnation?
Japan has experienced productivity stagnation from 1992, with its GDP growth falling from the average
4.6% it had maintained in the previous four decades to 0.7% per year up until 20036. One of the causes
of this slump was Japan’s asset bubble bursting. Over-optimistic investment led to stratospherically
overvalued stock and property prices, and then in 1992 the bubble inevitably burst causing heavy losses
for both corporations and citizens alike. Yet this was just the trigger event, the reason this ‘lost decade’
has lasted for over 20 years is Japan’s population demographic. The two main production inputs are
capital investment and labour, and Japan lacks the workforce to boost its productivity growth back to its
original pre-1992 levels. 39.68% percent of Japans declining population of 127 million is over 55 years
old7, and that figure is growing. There are therefore fewer workers available for Japanese companies to
employ, leading to a smaller workforce, and in turn a reduction in GDP. This again causes the lack of
capital available to the government, leading to potential damage due to cuts to sectors like education,
healthcare and welfare. The lasting impacts of damaged education systems can be devastating to a
country, causing a lack of tertiary and quaternary workers and a stagnation of innovation.
The large proportion of elderly people in Japan has led to its huge spending on healthcare, 10.2% of
GDP7 in 2014, yet again causing lack of capital to invest and grow GDP with. Japan now has 1.48 jobs8 for
every applicant; it simply does not have the population of workers that it requires. This has led to a lack
of capital for the government, but also the reduction of quality of life for its workers due to the low
wages the companies pay in order to compensate for the sub-optimal output. This shortage needs to be
addressed as the government needs capital in order to boost the economy and GDP further. However, it
cannot be solved in the short term without the use of thousands of immigrant workers, something Japan
has restricted for a very long time. Therefore a different solution had to be found, and Japan is using it
already. Robotisation.
A robot is defined as a machine capable of carrying out a complex series of actions autonomously.
Whether in the form of robot astronauts designed to aid in the repairs of the international space station
(like Robonaut 2), or on car production lines (like the ABB IRB 7600, a specialist welder), robots have

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Uttarayan Dasgupta John Locke Institute Essay Competition- Economics
been integrated into our industries for a long time. The introduction of robots and AI in sectors like
manufacturing, food services, accommodation, retail, healthcare, transportation and law has the
potential to boost productivity immensely.
Let us take Relay, a robot developed by Californian firm Savioke, as an example to illustrate the benefits
of robotisation. It is used as room service in Residence Inn hotels. The general manager of the LAX
airport Residence Inn estimates using the robots has boosted revenue per available room by at least
0.5%. With a Relay unit costing $2000 a month, compared to employing a human, it is fairly affordable.
Robots like Relay work at a faster rate than their human counterparts, without the need for breaks and
never getting ‘distracted’ from their tasks. They require less maintenance than humans in terms of
running costs; companies do not have to pay for health or life insurance for its robots, or worry about
employee welfare. The use of Relay also means less staff need to be hired in total, as previously
companies would have multiple servers who rotate based on working hours, whereas while using Relay
only one unit is required. With so many benefits to using robots it is clear to see why companies have
already adopted their use in many sectors, including medicine.
Enlitic, a firm specializing in medical aids, uses AI to aid in diagnostics from CT scans and X-rays. Enlitic
uses deep learning (the application of artificial neural networks to learning tasks with multiple possible
outcomes or processes) to teach its computers how to identify anomalies in scans and identify the
differences in them that humans are not able to identify. In a recent test between Enlitic’s computer and
3 expert radiologists the AI was 50% better at identifying malignant tumors than its human
counterparts, and had a false negative rate (where cancer was missed) of 0% compared to the human’s
7%9. This marked difference is due to Enlitic’s AI being able to process thousands of previous examples
of malignant tumors it has ‘seen’ and cross-reference their characteristics with the given example.
Humans also do this, however with at most hundreds of examples, whereas the AI is able to process
thousands more in a much shorter space of time. With this obvious increase in effectiveness it seems
clear that AI will dominate these kinds of jobs in the future.
I believe the notion that robots will ‘replace’ humans is a fallacy. Robots lack creativity and flexibility,
traits that humans possess in abundance, and this is the reason why the human mind will always be
used in conjunction with robots. Mercedes Benz has recently encountered this problem with robots in
its Singdelfingen assembly plant: the Mercedes s-class model has so many variations and optional
accessories, from heated cup holders to carbon fiber decals, that the robots on the assembly line are
unable to cater to all of them. This has led to Mercedes opting for a different approach, rather than just
using robots to assemble their vehicles with only human overseers, they have decided to tackle the
problem with ‘robot farming’. This process entails shifting from the use of large robots which operate in
areas isolated from humans to smaller, lighter robots that operate alongside humans. This process
maintains the virtues of robotics, consistency and reliability, while adding human creativity and
adaptability, saving time (it can take up to three weeks to reprogram a robot to perform a new function)
and money (in wastage of material from incorrect parts being manufactured).
The damaging effects of productivity stagnation, ranging from a lack of available jobs to the quality of
infrastructure in our cities being affected adversely by the lack of capital available to the government,

Uttarayan Dasgupta John Locke Institute Essay Competition- Economics
are clear to see. Its long lasting effects can cripple a country, encouraging excessive borrowing and,
subsequently, progress-hampering debt. Productivity stagnation causes nothing but harm, a stark
contrast to the integration of robots and AI into the workplace. Robots create jobs for people alongside
them; there will always be room for the adaptability and creativity of the human mind. Companies have
already adopted this hybrid workplace attitude, where productivity is boosted by cooperation between
man and machine rather than simple replacement. Robotisation is less of a threat and more of an
opportunity for people to focus on the creative side of their jobs, and move away from the repetitive
nature of data entry or manual labour. It is certain that robots will create redundancy, just as the car
made the horse and carriage drivers’ jobs obsolete, but there will always be different, new jobs to
replace them. I believe we should embrace the integration of robots into the workplace, and reap its
benefits to combat productivity stagnation. This leads me to my conclusion that we should fear
productivity stagnation more than we should fear robots and AI taking our jobs, just as we should fear
the disease more than we fear the treatment.
Main body word count: 1963
R e f e r e n c e s:
1: The Guardian: Why is UK’s productivity still behind that of other major economies? Phillip Inman
2: Wikipedia: 2008 United Kingdom bank rescue package
3: Office for National Statistics: Labour Productivity time series dataset
4: World bank UK population growth overview 2016 value
5: The Guardian: Britons feel the squeeze as inflation rises to 4 year high of 2.9%. Katie Allen and Angela
6: World Economic Forum: No China is not the next Japan

Uttarayan Dasgupta John Locke Institute Essay Competition- Economics
7: Indexmundi Japan Demographics Profile 2017 (two references from this source)
8: CNN Money: Japan needs more workers and it can’t find them. Alec Macfarlane
9: The Economist: Automation and anxiety


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