Wed. Oct 4th, 2023
    The Importance of Robot Adoption Rates for Economic Performance

    Robots are increasingly being recognized as essential tools for enhancing productivity and international competitiveness. As a result, rates of robot adoption serve as crucial indicators of economic performance for nations worldwide. However, when assessing robot adoption rates, it is vital to consider wage levels, as the economic case for adopting robots is stronger in higher-wage economies compared to lower-wage economies.

    In 2021, China surpassed the United States in terms of robot adoption, with 18% more robots installed per manufacturing worker. Adjusting for the significantly lower Chinese manufacturing wages, China had a staggering 12 times higher rate of robot use in manufacturing than the United States. This gap was not driven by market forces but by the Chinese Communist Party’s commitment to promoting manufacturing robot adoption through generous subsidies.

    In contrast, US policymakers often focus on the negative consequences of robots, primarily related to job displacement. The US tax policy does not provide support for robot adoption by firms, and proactive policies to facilitate manufacturing automation, including robotics, receive minimal funding.

    According to the International Federation of Robotics (IFR), Korea emerged as the global leader in industrial robot adoption, with 1,000 robots per 10,000 manufacturing workers. Singapore ranked second with 670 robots, followed by Japan and Germany, each with approximately 400 robots. The United States had 274 robots per 10,000 workers, while China had 322.

    When determining whether to implement robots, the primary consideration is the potential cost savings compared to human workers’ compensation levels. Consequently, high-wage countries like Germany exhibit higher robot penetration rates than low-wage countries like India.

    Examining robot adoption rates while controlling for wage levels reveals interesting patterns. Southeast Asian nations lead the world in robot adoption, surpassing expectations. China’s remarkable lead stands out, driven by significant financial support from its national and provincial governments. China’s commitment to robot adoption has made it the world’s largest market for industrial robots. While some cases of company fraud exist, the subsidies provided by China dwarf those offered by other nations. In contrast, the US lacks subsidies for robot installation and currently restricts equipment expenditure write-offs.

    To compete with China’s lower manufacturing wages, US manufacturers must focus on productivity enhancement, with automation, including robotics, as a key solution. Unfortunately, US manufacturing productivity has experienced a slump in the past decade. To reverse this trend, Congress should consider implementing a 10% investment tax credit for manufacturers and significantly increase funding for organizations like the NIST Manufacturing Extension Service and the National Robotics Engineering Center in Pittsburgh.

    Source: Information Technology and Innovation Foundation (ITIF)