Mechanisation: the introduction of machines or automatic devices into a process, activity, or place (Cambridge dictionary), where the process is controlled by a human operator.
Automation: the use or introduction of automatic equipment in a manufacturing or other process or facility (Cambridge dictionary), where the process is controlled by software.
Employability: the skills and abilities that allow you to be employed (Cambridge dictionary).
Graduate: a person who has a first degree from a university or college (Cambridge dictionary).
In order to investigate the question of whether the trend towards increasing automation of production processes will threaten the employability of graduates I focus on the role of mechanisation and automation in attempting to reduce labour costs and consequently increasing the demand for high-skilled graduate workers. I examine which segments of the workforce will be most affected by automation, whether graduates are more employable than non-graduates, and whether the subject of the degree a graduate studied has any impact on employability. I also consider the increasing progression of automation and whether the threat to graduate employability will change over time.
In order to examine the effects of mechanisation and automation on work it's useful to look at the GDP as a measure of output per person and whether technology increases productivity. Figure 1 shows how for much of history productivity existed in a Malthusian economy (also referred to as the Malthusian Trap) of being linked to population growth (Malthus, 1798). The Malthusian Trap describes how any increase in productivity (measured by GDP) led to an increase in population, which resulted in decreasing the GDP per capita, thus sustaining a constant level of productivity. This idea is widely accepted as explaining the linear economic progress prior to the introduction of technology and social change of the industrial revolution.
Figure 1. Source: "Statistics on world population, GDP, per capita GDP, 1-2008 AD, Angus Maddison: IMF
The introduction of technology into the manufacturing processes in England and the United States of America in the eighteen century is widely accepted as being linked to the industrial revolution which took economic progress from being linear to enabling society to escape from the Malthusian trap and enabling greater output to be achieved with the same number of workers.
Contrary to the technological explanation for the onset of the industrial revolution, there is the idea that it may have been caused by social mobility (Clark, 2007). An analysis of wills showed that the wealthy had more offspring than the poor, and that this increasing upper class population disseminated it's values across society, including education and saving for investment in capital resources (Baumol, 2002).
Although the causes of the industrial revolution are multiple and complex, and not solely limited to technology, the introduction of technological advances had a huge effect on the workers of the time. New technologies required skilled workers to install, operate and maintain the machines, and this demand for scarce skilled labour increased labour costs between 1800 and 1900 (core-econ.org), which resulted in an increase in capital investment to reduce labour costs.
Machines then, became labour-saving devices and mechanisation threatened jobs, disrupted entire sectors, and caused shifts in the production processes of every industry. But the effects were not the same or equal across all industries, sectors, and roles. Frey and Osborne (2013) illustrated in the shifting of certain production processes in the nineteenth century from artisan shop to steam powered factory increased the number of workers required but deskilled those workers through breaking the work into small, specialised sequences. Where the electrification of factories was introduced, more machinery could be utilised to automate production processes, resulting in a demand high skills in the production workers and an increase in the share non-production workers also employed (Goldin and Katz, 1998). In 1913, when Henry Ford introduced continuous-flow production the assembly lines were designed to around unskilled workers (Frey and Osbourne, 2013).
Education and technology had to keep pace. The introduction of new technologies into the workplace resulted in demand for technologically-proficient workers to operate the new technologies. Without sufficiently educated and skilled workers the technology would fail to produce the expected productivity gains. These educated workers demand higher wages, increasing the labour costs and so driving further investment in capital and adoption of mechanisation and automation technologies. (Goldin and Katz 1995).
These examples show that the effects of mechanisation of the workplace was not as simple as machines replacing people. One interesting effect, for the purposes of this essay, is that industrial revolution technology had a profound and complex impact on productivity and employability (Baumol, 2002) through the increase in labour-saving machinery that created a demand for educated and skilled workers, and so increased labour costs fueling the introduction of further labour cost-reducing technologies.
New Growth theory, with its emphasis on knowledge creation and entrepreneurship, argues that physical assets such as capital (machinery) can only produce limited growth but that knowledge is an intellectual asset that enables increased productivity (Mankiw, Phelps & Romer. 1995) as knowledge is non-rival and non-excludable, meaning the value extracted is not restricted by the value of the asset. The endogenous model better explains how productivity can increase than the exogenous model informing Solow's argument that productivity can increase purely through capital accumulation and technical progress (Solow. 1956), which seems to fall foul of the trap of introducing labour-saving machinery to reduce labour cost, but creating a demand for educated and skilled workers, and so increasing labour costs driving the introduction of further labour cost-reducing technologies.