Impact of Industry 4.0 on Labor and Work
Impact of Industry 4.0 on Labor and Work
de 33
ABSTRACT
This article comprises a literature review on recent research results analysing the implications of industry 4.0 and cyber physical systems on
human labour and work organisation meant to provide an overview of the current status of discussion on this matter. It therefore provides a
summary of the results from several international research studies and initiatives consolidating respective research findings further supple-
mented by the results of an additional non-representative expert panel review. The main findings indicate that Industry 4.0 would lead to a
substantial decrease in standardised low-skill and an increase in high-skill activities, embracing planning, control and IT-related tasks. The
majority of researchers expects a growing complexity in many job profiles, along with an increasing need for cross-functional work organisation
and cross-company partner networks. They also project a growing importance of continuous learning, training and education in order for the
workforce to be able to adapt to future qualification requirements derived from Industry 4.0 technologies. As a result of those developments, a
transformation of the tax system is suggested, away from the current focus on labour taxes.
Key Words: Industry 4.0, Cyber physical systems, Internet of things, Digitalisation, Change Management, Cross-company cooperation, Job
profiles
1 Introduction
This would consequently pave the way for an internet of Illustration 1: Converging Technological Developments (Kagermann,
things which enables subjects and objects to communicate 2014)
employability and associated attractiveness for the future technological advancements would have less impact than
labour market. former ones. Gordon projects a diminishing usefulness of
innovation compared to the great inventions of the past,
In view of this situation, this article firstly provides an but he does not specifically comment on the impact of
overview of the current discussion on the consequences of new computer and software technologies on jobs (Gordon,
Industry 4.0 on jobs and secondly contributes further 2012).
research results to this context, interviewing a panel of
seven representatives from industry, consulting and sci- Similarly, Erik Brynjolfsson and Andrew McAfee, who pro-
ence institutions on their views about the respective im- ject significant economic changes resulting from the rapid-
pact of Industry 4.0 on labour content and work organisa- ly growing appearance of cyber physical systems, are
tion. rather skeptical about potential positive job impacts aris-
ing from Industry 4.0 and therefore expect an intensifying
competition for jobs fed by a race between technological
2 Literature Review
and educational progress. In their view, technological
The following section provides an overview of the relevant advancements would not only tend to eliminate routine
topic-related publications regarding possible implications jobs, but also high-skilled jobs defined by pattern recogni-
of Industry 4.0, internet of things and cyber physical sys- tion and cognitive non-routine tasks (Bowles, 2014;
tems on the human factor, with particular reference to Brynjolfsson & McAfee, 2014). Similar to Ford in his work,
labour content and work organisation. Brynjolfsson and McAfee bring forward a set of measures
to mitigate negative impacts from cyber physical systems
In an analysis based on the situation in 2009, Martin Ford and to compensate for job losses arising from ever ad-
designed a comprehensive scenario of the implications vancing computer and software technologies, such as
cyber physical systems and the rapidly increasing capabili- better education, more focus on entrepreneurship and
ties of computer technology may have on human employ- startups, more support for academic research or the in-
ability and work organisation. According to his analysis, troduction of Pigovian and negative income taxes
technologies such as artificial intelligence, machine learn- (Brynjolfsson & McAfee, 2014). Those measures tend to
ing and software automation applications would no longer go in the same direction as the ones Ford is proposing,
primarily impact low-wage, uneducated workers, but though lacking a more comprehensive social impact anal-
would also increasingly enable computers to fulfill jobs ysis.
that require significant training and education. Conse-
quently, university graduates who perform highly skilled Further to this, Frey and Osborne undertook a study in
jobs would find themselves threatened by machines and which they addressed the question of how susceptible jobs
software algorithms that would be able to perform sophis- are to computerisation. Using a Gaussian process classifi-
ticated analysis and decision making (Ford, 2009). er, they estimated the probability of computerisation for
702 detailed occupations in the US labour market in order
In Ford’s view, ongoing progress in manufacturing auto- to analyse the potential jobs at risk and to assess poten-
mation and the introduction of advanced commercial ro- tial correlations between computerisation probability,
bots would continue to reduce opportunities for low-skilled wages and educational attainment (Frey & Osborne,
workers simultaneously. He believes that technological 2013). Such computerisation risks range from 99 percent
progress is relentless, and machines and computers would for telemarketers to 0.28 percent for recreational thera-
eventually approach the point where they would match or pists. The main result of their study is that 47 percent of
exceed the average worker's ability to perform most rou- US jobs are exposed to the risk of becoming redundant
tine work tasks. Ford draws the conclusion that the result through computerisation. According to Frey and Osborne,
of this development is likely to be structural unemploy- robots would not only be able to perform standardised
ment that ultimately impacts the workforce at virtually all programmes, but also sophisticated tasks beyond routine
levels from workers without high school diplomas to those in future times. They further provided evidence of a
who hold graduate degrees (Ford, 2009). This would ulti- strong negative correlation between an occupation’s com-
mately lead to the fact that the business models of mass puterisation probability and its wages and educational
market industries would be threatened, as there would attainment, promoting the argumentation of other authors
simply be too few viable consumers to purchase their that computerisation risk is particularly apparent for low-
products, resulting in a new social and tax system de- skilled jobs (Frey & Osborne, 2013). As a consequence,
signed to impose higher taxes on capital in order to be most of the lower skilled human jobs would be eliminated
able to nurture a significantly bigger class of unemployed and replaced through technology, leading to the remaining
people. human jobs becoming more complex and comprehensive.
In an attempt to transfer this study approach from the US
Drawing from a classification provided by Jeremy Bowles
to Europe, Bowles came to the conclusion that Northern
in his recent publication on the computerisation of Euro-
European countries such as France, Germany, Sweden
pean jobs, Ford - in view of his conclusions - may be as-
and the UK show similar results as the US and would
signed to the camp of skeptics who are fairly conservative
potentially be less affected by computerisation risk than
about overall future job opportunities against the back-
Southern European countries, which have a range from 45
ground of consequences resulting from industry 4.0
to over 60 percent of the work force that could be affected
(Bowles, 2014). In the same camp, the recent work of
by a potential level of high and persistent unemployment
Robert Gordon has put forward a hypothesis that in a
(Bowles, 2014).
coming period of expected low economic growth, new
Consequences of Industry 4.0 on Human Labour and Work Organisation 35
atives), from 41 up to 55 years (one representative) and new ones. This is particularly projected for the area of
from 56 up to 70 years (four representatives) going along planning and control and for IT jobs. The interviewees are
with a track record concerning their current positions of also in accord with their views on the consequences for
less than three years (two interviewees), between 3 and employee supervision and control. They argue that due to
ten years (two interviewees) and more than ten years the introduction of cyber physical systems, processes and
(three interviewees). All the interviewed persons had activities would become completely transparent for man-
experience with industry 4.0-related technologies and/or agement, and would pose a lot of challenges on individual
with associated implementation processes and projects, rights concerning data protection.
thereof four representatives with an experience back-
ground of more than two and a half up to four years, two Interviewees expect cyber physical systems and the cor-
representatives of more than one up to two and a half responding digitalisation of the work environment to im-
years and one of up to one year. Interviewees have been pose new requirements on qualifications and capabilities
contacted based on personal knowledge (one representa- of employees. According to their views, this would lead to
tive), based on third person’s references (three represent- higher levels of adaptability and flexibility. The latter
atives) or based on “cold calls” after associated internet would go along with the need for continuous learning and
research (three representatives). Another three contacts a stronger need for personal responsibility to assess and
had been identified as suitable experts to be interviewed undertake necessary training and education measures at
in this context, but finally turned down their participation. their own initiative beyond the level provided by employ-
The interviews have been designed to be conducted for a ers. There is also consensus on the fact that digitalisation
period of approximately 30 minutes, whereby six of them and internet of things would result in a generally higher
have been conducted over the phone and one face-to- degree of complexity in work processes, which would
face. A detailed description of the interview panel’s de- coincide with a growing demand for higher skilled special-
mographics is provided in appendix 2 of this article. ists. In this respect, participants also argue that continu-
ous learning, training and education would automatically
The questionnaires were sent to the interview partners boost employability and therefore reduce the risk of long-
prior to the interviews in order for them to better prepare term unemployment for employees, even if they were to
themselves for the discussion process. The questionnaire be made redundant temporarily.
has been developed on the basis of current research work
and has been pre-discussed and refined in a discussion Interviewed experts share the view that Industry 4.0
with a panel of scientists with educational engineering would enforce a closer cross-functional cooperation be-
background. It consisted of seven main chapters contain- tween different company units, leading towards the estab-
ing personal questions on the interviewed person, on lishment of cross-company partner networks. Here, most
Industry 4.0 in general, on preparations for Industry 4.0, of them see bigger hurdles for German companies. In
on objections and fears regarding Industry 4.0, as well as contrast to the American and Asian conglomerates, where
on employee motivation, new jobs and further develop- cross-company cooperation is already being intensely
ments derived from Industry 4.0. Interview results have practised and supported by the governments, this is still
been recorded and subsequently transcribed. Further to not a common phenomenon in German companies. They
the transcription, text results have been structured and further argue that necessary change management initia-
categorised according to major topics followed by a specif- tives and measures should accompany required changes
ic coding. The coding process resulted in a category sys- in labour content and work processes even before such
tem which has been designed to structure and guide the changes are introduced, as many of these changes may
information data evaluation process. The selected catego- go along with significant consequences for the respective
ries comprise the following: (1) estimated time horizon employees in terms of substance and organisation of their
until a comprehensive, industry-wide application of cyber daily work, making a proactive change management ap-
physical systems and internet of things in German com- proach necessary. In this respect, participants are of the
panies is carried out, (2) modification of the work envi- opinion that the expected higher job transfer rates within
ronment, (3) modification of job profiles, (4) change companies and within their partner networks would need
measures and (5) social consequences. The corresponding to be prepared and smoothened through suitable change
full list of designed categories and codes is provided in measures in order to keep employees motivated and avoid
appendix 1 of this paper. negative psychological consequences.
Interviewed experts conclude in general that it may take In terms of industry sector impact, a more diverse spec-
rather decades than years before Industry 4.0 technology trum of experts’ opinions becomes evident. Some argue
would fully evolve in German companies with particular that most of the jobs in the agricultural sector would be at
reference to industries with job process-dominated pro- risk, whereas others have a more conservative view on
duction structures. Participants agree on the fact that the scope of replaceable activities and work processes
simple, highly standardised physical human activities within the sector. The experts basically agree on the fact
would be eliminated and replaced by computerised auto- that the potential for job redundancies through Industry
mated systems and devices. The scientists envision a 4.0 technologies is limited in the care sector, as machines
more aggressive development towards smart factories would not be able to compete with human beings in show-
with very little remaining employees in production pro- ing empathy to patients. Most of them think that this
cesses compared to the other interviewed experts. There sector might provide job potentials for employees who
is agreement among the participants that Industry 4.0 have been made redundant in production processes. On
technologies would not only eliminate jobs but also create the topic of tax ruling, interviewees brought up the idea of
Consequences of Industry 4.0 on Human Labour and Work Organisation 37
a basic income for everybody, making jobs possible that initiative embracing industrial and educational policies has
would not be paid sufficiently high enough to maintain a to be negotiated between the company managements and
living. They also commonly criticise that human labour is their union counterparts, which could ultimately lead to-
still in the focus of taxation and suggest instead higher wards the principle right to lifelong regular education
VAT rates. (Kurz, 2013; DPZ, 2014). Future work organisation would
be significantly more marked by close cooperation be-
4 Discussion tween machines and workers than it is today which would
most probably lead to further emphasis on change man-
A consolidated view on the aforementioned literature agement initiatives and measures (Paul, 2014).
review results supplemented by the findings of the above
described non-representative sample of expert panel in- In a certain way, there is also agreement across current
terviews leads to the conclusion that the pressure on literature with regards to the consequences of Industry
human working environment would be likely to increase in 4.0 in terms of a necessary intensification of cross-
the future, whereby the majority anticipates a significant functional cooperation as well as cross-company partner
decrease in lower skilled highly standardized jobs, being networking. Especially the latter aspect has been contro-
replaced by cyber physical systems to a large extent. With versially discussed in recent articles. Some authors are
regards to higher skilled jobs, research results suggest a rather skeptical in their assessment on the initiatives of
more diverse future scenario, leading towards less de- German industrial companies towards cooperation with
mand for central management capacities, further automa- competitors. Those industrial companies are facing the
tion of indirect processes and more demand for decentral risk of losing their competitive advantage and may conse-
integrative and cross functional management capabilities quently lag behind American technological companies such
leading to the consequence that planning and control jobs as Google or Apple, who are aggressively trying to enter
would gain more importance. In addition, a growing im- traditional industries like mechanical engineering and
portance of teamwork, interdisciplinary cooperation and automotive also by intending to leverage on the expertise
partner networks is expected, along with an increase in of their network partners (Maier & Student, 2014; Som-
flexibility of individual work life, attention towards social merfeldt, 2015). Finally, significant parts of the current
media risks and IT and programming capability require- literature along with interviewed German experts are in
ments for all levels. German expert panel interviews re- accord in their opinion that in order to balance off job
veal a more conservative view on the time horizon re- redundancies and associated tax revenue losses, tax rules
quired before the actual impact of Industry 4.0 technolo- and regulations would need to be reformed and trans-
gies may take place compared to their American and An- formed into a system less dependent on income from
glo-Saxon peers, whereby this view corresponds to a labour taxes. This topic has only recently been further
certain extent with recent doubts about the readiness of discussed in the context of the debate on the introduction
significant parts of German small and medium-sized com- of an unconditional basic income as a potential conse-
panies to face the challenges of digitalisation and cyber quence of the growing shift towards income from capital
physical systems and to progressively advance towards gains at the expense of income from human labour (Blasi
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Interview 5
Board Member
Private Company / FMCG
Male
Age Category 56-70
Job Experience in Position: > 10 Years
approx. 4 Years
Experience in Industrie 4.0
Contact Establishment: Facilitated through third person
reference
Telephone administered interview
20 December 2014
48 Minutes
Interview 6
Consultant
Consulting Company
Male
Age Category 56-70
Job Experience in Position: > 10 Years
approx. 4 Years
Experience in Industrie 4.0 -related Projects
Contact Establishment: Facilitated through third person
reference
Telephone administered interview
03 January 2015
35 Minutes
Interview 7
Consultant
Consulting Company
Male
Age Category 56-70
Job Experience in Position: > 10 Years
approx. 4 Years
Experience in Industrie 4.0 -related Projects
Contact Establishment: Personally known
Face-to-Face interview
06 January 2015
11 Minutes