Back in college some decades ago, the economic argument between my professor and classmates was about a country’s competitive advantage derived from the use of cheap labor to drive down costs of production.  This idea can be seen in many up-to-date business textbooks.  However, with companies increasingly turning to robots to handle the cheaper labor tasks that humans are less inclined to do, the inevitability of this shift is becoming more apparent.

The catchphrase then and now is “outsourcing,” where a firm would send work offsite to be completed at a marginally lower cost.  Globally speaking, a country would harness the division of labor based on what it could produce or manufacture relatively cheaper and more efficiently than its neighbor.  The main sectors where cheap labor is applied are agriculture, retail, manufacturing, and the service sectors.  And yes, these sectors have begun to switch from cheap labor to robotic partners.  The question is not if, but when cheap labor, as it has been applied to business operations, will end as robots enter the workplace en masse.

What is meant by cheap labor, otherwise known as low-cost country sourcing?  The term has different meanings at different times and geographies, but it tends to imply the availability of laborers who willingly work for lesser wages than complementary markets, with work conducted in challenging or extreme work environments.  Cheap labor also includes countries with a lower labor cost, primarily due to having larger populations of workers available.  These workers are paid less and accept less than other industries that require higher education, skills, and abilities.  

It was often said, and maybe still is, that the competitiveness of countries like China that manufacture all types of economic goods is attributed to cheap labor policies.  Bangladesh, Vietnam, Sri Lanka, and others were also at the top of the list for competitive advantages in trade due to cheap labor being prevalent.

With the advent of robotics, can countries compete on cheap labor the same way they did almost a decade ago?  I say no.  Management had to realize the costs and profits to be offset by using humans or robotics, especially in manufacturing and agriculture.  How to Robot says, “The market reflects this shift towards physical automation: analysts project the retail robotics sector to grow from $20.12 billion in 2024 to $181.14 billion by 2031.”  Apparently, in the manufacturing food industry, the same can be said about robotics, says CBS4: “Companies such as GoodBytz and BotInKit are developing robotic kitchen systems that replace commercial kitchens, while robots at Smithfield Foods are taking on dangerous jobs, such as slicing pork ribs.  Tyson Foods has similarly introduced automation at its Danville, Virginia plant, replacing 250 workers in the production of chicken nuggets and other processed poultry items.”

The presence of robot workers in the agricultural sector is slated to surpass 620,000 by 2025.  Electro IQ projects that “by 2030, the total number of agricultural robots worldwide is estimated to reach 36 billion units.”

These are just data that show the wave of robots in sectors known to use cheap labor for productivity.  However, these same cheap labor industries, and the companies therein, for a long time carried a heavy stigma for using cheap labor.  In fact, companies were blasted in the media for using cheap labor to produce goods or extract resources.  Then managers switched the verbiage from cheap labor to “outsourcing,” seeking low-cost labor.  Fast-forward, and many companies are quickly implementing robots to work on the lower end of the value-adding process, once worked by cheap labor.

Are robots really cheaper than cheap low-cost human workers, or are people reluctant to do lower-wage work?  The low-cost labor advantage argument may end abruptly if we consider the future influence of robots on jobs that do not require a human to do the same thing cheaper.

Image via Unsplash.