Automation is a key catalyst of industrial production in the goods-producing industry, which include sectors such as manufacturing, construction, utilities, mining, agriculture, and others.[1] This sector is a key driver of Canada’s export market and contributes approximately 30 percent to national gross domestic product.

Below is a breakdown of Canada’s five goods-producing industries and their corresponding contribution to GDP.

[1] Industry Canada (2013). Goods-Producing Sectors of the Canadian Economy. https://www.ic.gc.ca/eic/site/cis-sic.nsf/eng/h_00007.html

Figure 5. GDP contribution of goods-producing industries, July 2014, in millions of chained dollars (2007)

fig5

Source:  Statistics Canada (2014). Gross domestic product at basic prices, by industry (monthly). http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/gdps04a-eng.htm

Industrial production in Canada increased at an annual rate of 4.8 percent in July 2014, and has averaged approximately 1.1 percent annually since 1998.[1] Manufacturing output, which accounts for a key component of industrial production, has rebounded in 2014 after experiencing a broad slowdown the previous year that resulted from generally weak international trade.

Canada’s manufacturing industry has been in expansion mode since April 2013, as higher levels of output and new orders continue to support domestic producers, according to the Royal Bank of Canada’s monthly purchasing managers’ index (PMI). Manufacturing output reached a nine-month high in August, which supported the fastest rate of jobs growth in nearly one year. Total output eased slightly in September, but the rate of growth was enough to give Canadian manufacturers their strongest quarter of growth since the third quarter of 2013.[2]

[cs_blockquote cite=”Source: Statistics Canada (2014).” type=”right”]Goods-producers, year-on-year growth Manufacturing: +4.7% Construction: +1.6% Utilities: -3.1% Mining, quarrying, and oil and gas extraction: +7.2% Agriculture, forestry, fishing and hunting: -11.1% Total: +3% [/cs_blockquote]

Canada’s export sector is a heavy user of industrial automation. In 2013, Canadian exports were valued at more than $479 billion.[3] Motor vehicles and parts, industrial machinery, aircraft, telecommunications equipment, timber, natural gas, and crude petroleum are just some of the major goods Canada exports.

Businesses operating in these and other industries rely heavily on industrial automation to streamline process, enhance efficiencies, and increase production output. This is especially the case for manufacturers, who based on ICTC’s survey, allocate significant resources to boost productivity and reduce costs. To gauge the impact of automation on Canadian industry, ICTC considers how companies today are using automation for:

Accessibility

  • Construction
  • Hazardous work
  • Equipment repair
  • Product assembly
  • Product packaging
  • Product testing
  • Product transportation
  • Resource harvesting

As discussed in Section 4, Canadian businesses began integrating industrial automation into their workflow relatively recently. Businesses generally adopted industrial automation in a piecemeal fashion, beginning with the automation of minor components of their operations before automating major elements of their operations. Businesses generally had machines they considered “automated,” such as CNC machinery (e.g., automated lathe, press, cutter), while fewer had “robotics” (e.g., welding arms, pick-and-place machines). There was general consensus that CNC technology was the entry-level technology among automation equipment, and that industrial robotics were more advanced.

[1] Trading Economics (2014) Canada Industrial Production. http://www.tradingeconomics.com/canada/industrial-production
[2] Markit Economics/Royal Bank of Canada (2014). Manufacturing business conditions continued to improve in September. http://www.markiteconomics.com/Survey/PressRelease.mvc/82c1c4bb37d84a51914bda389b113879
[3] Statistics Canada (2014). Imports, exports and trade balance of goods on a balance-of-payments basis, by country or country grouping. http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/gblec02a-eng.htm

Productivity

Automation is a labour saving innovation that is widely believed to increase labour productivity. This is especially true in manufacturing, where automation has replaced repetitive tasks such as product assembly and packaging. Automation has also increased productivity by reducing human involvement in hazardous work, which reduces the likelihood of severe injury. Figure 6 illustrates the general and specific uses of industrial automation in Canadian industry.[cs_blockquote type=”right”]Among those that have been using automation for at least a decade, 70% indicated their use of automation “changed significantly over the past ten years.” Of these businesses, two-thirds (68%) report production costs have decreased as a result, and nine-tenths (90%) say productivity has increased. [/cs_blockquote]

As we will see in the employment section, automation has had a big impact on employment. For some companies, automation greatly increases employment whereas for others the introduction of lean manufacturing has removed the need for certain types of workers. These competing forces arise from the fact that automation reduces labour intensity, which results in higher levels of productivity and a reduction workforce. However, the savings associated with this process – that is, the reduction in overall marginal costs – leads to higher levels of output and greater job opportunities in other fields.[1]

[1] Lene Kromann, Jan Rose Skaksen and Anders Sorensen (2011). Automation, labor productivity and employment – a cross country comparison. Aim-Projekt. http://www.aim-projekt.dk/files/robot-employment.pdf

Figure 6. Specific Functions of industrial automation in Canadian business

fig6

Source: ICTC (2014)

Among businesses that began using industrial automation within the last ten years or indicated their automation use has changed significantly in the past decade, an overwhelming majority (90 percent) said the integration of automation increased productivity. More than half (52 percent) noted productivity gains of between 10 percent and 29 percent.

Increased productivity as a result of industrial automation also reduces overall production costs, as predicted by the literature. Two-thirds of these businesses said the integration of industrial automation reduced production costs. Nearly half of companies (42 percent) said production costs fell between 10 percent and 29 percent as a result of automation.

Figure 7. Other impacts of industrial automation

fig7

Source: ICTC (2014)

Canadian businesses acknowledged several other practical and economic benefits of industrial automation processes, including improved product quality and increased workplace safety. Figure 7 illustrates other perceived benefits of automation adoption.

Expenditure

Canadian automation companies generate approximately $2 billion annually in revenues, although this only scratches the surface of total expenditures on industrial automation technologies. As discussed previously, the total end-market value of the global automation industry is $152 billion – a figure expected to grow more than 6 percent annually.

For the most part, automation-related expenditures account for between 5 percent and 49 percent of companies’ total operating expenditures. Fifty-five percent of companies fall into this category. For a further breakdown, see figure 8.

Figure 8. Percentage of total operational expenditure spent on industrial automation

50% or more

25% to 49%

10% to 24%

5% to 9%

Less than 5%

Thirty-nine percent of companies indicated they spend less than 5 percent of total operating expenditures on automation equipment and processes. By contrast, only 7 percent of the companies surveyed said 50 percent or more of operational expenditures are devoted to industrial automation.

Businesses noted that automation-related equipment was not readily available from Canadian suppliers, forcing them to search internationally. Some equipment was manufactured in Canada but by foreign-owned companies. Businesses said that foreign suppliers have greater experience, which allowed them to produce more advanced automation equipment that fulfilled very specific functions. Even then, some businesses have had to modify their equipment to fulfill product-specific functions (e.g., food processing). This may have required bringing on consultants to assist with this process.

Employment

There are competing views about the impact of automation on the labour market and whether advances in lean manufacturing result in more job losses or increased job opportunities in the rest of the economy. The popular myth that surrounds automation is that it takes away jobs and results in downsizing labour. Our research indicates that that instead of replacing jobs, automation displaces jobs. In other words, automation reduces the need for monotonous tasks and lower skilled jobs, while increases demand for more cognitive tasks with digital literacy. Also, higher productivity and lean manufacturing generally lead to increased sales and expansion of business in scale and scope, resulting in additional employment potential.

While historical trends clearly indicate that automation will inevitably impact employment trends over time, this impact is not always predictable.[1] Automation has been shown to reduce labour input per unit of output, which results in higher levels of productivity, but also a reduced workforce. However, automation has also been proven to reduce the marginal costs of production, which leads to higher output levels that often lead to increased employment.[2]

Companies interviewed by ICTC were virtually split evenly on the overall impact of automaton on the workforce. Although most companies indicated a direct relationship between industrial automation and staffing levels, no clear trend emerged. Among businesses that said their usage of automation had increased over the past decade, about one quarter (29 percent) said the adoption of automation reduced overall employment. About the same (30 percent) said industrial automation led to higher employment in the company (see figure 9).

ICTC’s research found that the introduction of automation certainly reduces demand for certain types of workers, but also increases demand for other professionals as a result of higher productivity and increased cost savings. In the latter case, costs savings are redistributed back into the economy via lower prices, higher wages for remaining employees, and increased profits for successful business.[3] In other words, automation enables companies to boost productivity without increasing costs, which leads to greater prosperity. More prosperous firms expand their operations and purchase new equipment in order to grow. These practices support job creation over the long-run, although the exact nature of these jobs – technical vs. non-technical, highly skilled vs. low skilled – varies considerably among businesses and industries.[4]

In the declining demographics context of Canada lean manufacturing is helping boost productivity, even with a minimal labour force. This is a huge benefit for regions where finding skilled ICT workers is a huge challenge. However, this puts added pressure on skilled workers tied to the manufacturing industry whose skills may no longer be as relevant due to industrial automation.

[1] Oliver Balch (3 September 2014). “Will robots take over the world? The social impact of automation.” The Guardian. http://www.theguardian.com/sustainable-business/2014/sep/03/robots-take-over-world-social-impact-automation
[2] Ben Miller and Robert D. Atkinson (2013). Are Robots Taking Our Jobs, Or Making Them?” The Information Technology & Innovation Foundation. http://www2.itif.org/2013-are-robots-taking-jobs.pdf
[3] Ibid.
[4] David Greenfield (1 September 2011). “Automation’s Effects on Jobs.” Automation World. http://www.automationworld.com/batch-manufacturing/automations-effect-jobs

Figure 9. Impact of industrial automation on staffing over the last decade (2004-2014)

fig9
Source: ICTC (2014)

Automation-related positions can be any ICT occupation directly involved in the development or maintenance of automation workflow, software or processes. These workers typically have a background in information technology, engineering, or a related field. In addition to these ICT-specific roles, ICTC’s survey results identified four additional automation-related jobs whose skills are vital to businesses: mechanical engineers, machinists, welders, and electricians. Below is a breakdown of automation-related occupations and the percentage of businesses that employ them:

Field Occupation %
ICT Technologists 48%
Systems technicians 46%
Computer programmers 45%
Electrical and electronics engineers 39%
Computer engineers 24%
Software engineers 21%
Software developers 21%
Software testers 18%
Non-ICT Mechanical engineers 73%
Machinists 73%
Welders 68%
Electricians 64%

Generally speaking, Canadian businesses are staffing automation services locally, but relying more on foreign sources for automation equipment. For instance, almost half (45 percent) of businesses say they rely exclusively on Canadian sources for industrial automation professional services, but only a fifth (20 percent) rely exclusively on Canadian sources for automation  equipment.

While businesses tend to currently only have a fraction of their staff using automation, this is likely to change significantly in the next three-to-five years. Most businesses do not anticipate their automation-related employment levels will increase this year, but most believe they will increase within five years. Very few businesses expect to reduce the number of workers who are using automation (see figure 10).

Figure 10. Industrial automation staffing outlook

fig10a fig10b

 Source: ICTC (2014)

Figure 10 compare the number of businesses that expect their automation and robotics-related staff numbers to increase, decrease, or not change over the short-term (12-months) and long-term (three-to-five years).

As the figure shows, nearly two thirds of businesses expect no change in automation-related employment over the next 12 months. Among those who do expect growth, their estimates are generally modest. The figure on the right shows that most businesses do anticipate significant change within the next three-to-five years. A fifth of businesses expect to increase their automation-related employment by 20 percent or more. This does not necessarily mean businesses will have to take on more staff. Rather it could include retraining existing staff to use new equipment and processes.

Whether businesses plan to bring on new employees to use industrial automation, or retrain the employees they already have, they may have some difficulty maintaining a skilled workforce. About half of businesses said they always or sometimes experience difficulty filling their industrial automation-related positions (57 percent). Figure 11 illustrates this point.

A small pool of available talent and challenges retaining staff were the two biggest employment-related challenges companies faced. Regional issues, industry competition, and a dearth of post-secondary programs specializing in industrial automation exacerbated these challenges.

Figure 11. How often businesses face difficulty recruiting talent for automation operations

Never

Always

Rarely

Sometimes

Source: ICTC (2014).