(Editor's Note: A correction has been made to this article. See the end of the article for details.)
In Arkansas, where the May unemployment rate was a record-setting low of 3.4 percent, manufacturers aren’t concerned about robots taking jobs. They’re concerned about competing in a global marketplace.
It’s that competitive edge, they say, that will ultimately bring jobs back to Arkansas. Their businesses will grow, reshoring will increase and foreign direct investment, an area where Gov. Asa Hutchinson says the state is leading the nation, will get a boost.
The rise of robotics — though responsible for hundreds of thousands of lost jobs in the United States — is leading to the development of a new kind of employee, one who can do it all. Those employees, with sets of higher skills, are needed to build and program robots and machines and recognize malfunctions and repair them, several state manufacturers told Arkansas Business.
“We are facilitating the development of a workforce that hasn’t existed in the past, and that workforce is going to be comprised of [the employee] between a high school graduate and a college-degree engineer that has a per capita income that’s much higher than folks in other industries with equivalent education and skill sets,” said Tomas Blodgett, manager of the automation and robotics division at Multi-Craft Contractors in Springdale.
Now is a good time for companies to invest in automation because the economy has been doing well for several years, confidence in it is high, interest rates are low, technology can do more now and automation costs less than it used to, Blodgett said.
Automation is also a good investment for companies because, by increasing efficiency, they can overcome the labor cost advantage that drove the production of goods overseas for the past few decades.
Over 338,000 manufacturing jobs were brought to the U.S. from offshore between 2010 and 2016 as domestic companies moved production back and foreign-owned companies created new American jobs, according to the Reshoring Initiative, a nonprofit based in Kildeer, Illinois. The latter is called foreign direct investment.
One example of that is Suzhou Industrial Park Tianyuan Garment Co.’s plan to spend $20 million building a factory in Little Rock. The Chinese garment maker expects to create 400 jobs over the next four years and pay employees an average of $14 per hour.
State officials have said the new plant will use highly automated robotic equipment to make it feasible to produce Adidas brand clothing here.
That project is on track, with the company planning to start production in November, according to Scott Hardin, a spokesman for the Arkansas Economic Development Commission.
Recent foreign direct investment deals for the state also include the Shandong Ruyi Technology Group’s plan to open a textile plant in Forrest City and Sun Paper’s plan to open a pulp mill plant in Clark County. Together, the two companies expect to create 1,050 jobs.
On a national scale, the Reshoring Initiative reports, preliminary 2017 data trends look at least as good as 2016.
Companies that ask for Hytrol Conveyor Co. Inc.’s help in automating want to reshore jobs because they have trouble attracting, training and retaining employees overseas and face higher supply-chain costs, said Boyce Bonham, chief engineer for the Jonesboro company.
There’s much more to gain from reshoring than removing those challenges, however. Advantages of moving production to the U.S. include higher product quality, shorter delivery times, lower inventory and the ability to be more responsive to changing customer demands, according to the Reshoring Initiative.
The quality advantage relates directly to those robots and machines that Arkansas manufacturers said can perform tasks in the same way over and over again, make fewer mistakes than humans and don’t call in sick.
The companies also said they need robots and machines to handle more orders and outperform their competitors, which leads to their businesses growing in revenue and employees.
“We couldn’t have enough people, basically, because the automation gives us the capability to produce the quality and the numbers that we need,” said Roger Wright, plant manager for Intimidator, a utility vehicle and mower manufacturer in Batesville.
Intimidator had 38 employees when it was founded in 2013. The company now employs 256 and is hoping to reach 450-500 by 2021.
It has four robotic welders, six computer numerical control machines and six lasers.
Owner Robert Foster said Intimidator has invested millions of dollars in automation so far and will continue to do so. “Numbers drive everything. Every time the numbers get high enough in an area that is feasible to automate, we will automate,” he said.
Foster also said automation has allowed his business to move people to its research and development division.
“Our deal is we’re very aggressive on new products,” he said. “So if we free up someone that’s at a welding station, we can take the people we’re freeing up and immediately put them to work somewhere else … We have to innovate; we have to be on the cutting edge, not of only manufacturing but coming up with new products.”
Janelle Shell, Intimidator’s marketing manager, said automation is “not as much of a give or take. It’s more about using robots to make operational improvements …”
Intimidator has automated the building of frames and painting, but not assembly. Foster said doing that has reduced months of work to just days and increased the quality of Intimidator’s products.
Wright pointed to another advantage: The plant doesn’t have to store as many products on site, freeing up space that can be put to better use.
Shell said adding robots has also prompted employees to step up their game and look “for ways to make what we do even more efficient.”
Trouble Finding Workers
In addition, the jobs machines are doing require few skills, are often hazardous to humans and had been difficult to fill in the first place. Robotic welders in particular are all the rage here, as Arkansas companies struggle to hire human welders with the skills they require.
Intimidator’s managers said they hadn’t had much trouble recruiting talent, although they agreed highly skilled welders are in short supply. But other manufacturers have struggled with finding workers and said automation is helping them close that gap.
Some of Multi-Craft's clients are “very plain that one of the reasons they’re needing to automate is actually lack of workforce,” Blodgett said. His 14-person division serves more than 100 clients, including Tyson, Wal-Mart, John Deere, Procter & Gamble, Pace Industries and Gillette.
Lack of workforce is one reason heavy construction company Lexicon of Little Rock has been automating some processes, according to President Patrick Schueck.
“The steel fabrication industry is experiencing a significant shortage of skilled craftsmen,” Schueck wrote in an email to Arkansas Business. “We are seeing substantially fewer qualified fitters and welders across the United States. Automation is an alternative to help alleviate this problem.”
“It is extremely difficult for us to fill open positions without a great deal of training,” he added. “We are trying to hire daily, without much luck.”
Lexicon subsidiary Prospect Steel has been gradually automating its steel fabrication shops for the past 20 years, according to Schueck.
“Automation started with the use of punches and drills and has migrated into fitting and welding robots,” he said. “We are finally to a point where digital drawings, equipment and software are capable of working together to enable equipment to produce most fabricated structural steel pieces.”
The company is automating by using digital 3-D drafting software called TEKLA that allows for quick interpretation of drawings and by using robotics for the fitting and welding of steel.
“We have not eliminated a single job with automation,” Schueck said. “We are using automation to make our labor force more productive …”
Neither has Lexicon increased its workforce, at least not as a result of automation. But automation has changed the work required of Lexicon employees, according to Schueck.
“In some circumstances, some of our employees will shift from self-performing the work to operating equipment that performs the work,” Schueck said.
“Our best machine operators have been fitters and welders in our shops. They know the problems to look for, they take pride in their work, and they understand our processes.”
Caterpillar Is Hiring
Caterpillar Inc., which has also been automating for decades, is automating and hiring.
The global construction and mining equipment maker’s North Little Rock plant is planning to double its automation equipment and hire at least 150 people over the next 12-18 months.
Plant manager Paul Rivera said the new employees, along with nine new robots and several computer numerical control machines, will help the site produce a new product — medium rear loaders. “Technology allows us to create jobs. If we weren’t able to be competitive in the world marketplace, we wouldn’t be hiring these folks,” he said.
The plant already has 10 welding robotic arms, one cutting robot arm and two computer numerical control tools.
Rivera has worked for Caterpillar for 22 years and said the growth it’s experiencing now, fueled in part by automation, will “consume” the North Little Rock location for another three to five years.
He also described a job robots do at the plant: dual-wire welding. Rivera said a robot can weld 800 inches per minute while a person can weld only 420-430 inches per minute. Also, the high temperatures involved in the process make it dangerous for human welders to perform the work. The Caterpillar plant here has improved its safety record to more than 560 days without injury, thanks in part to automation, Rivera said.
Blodgett, the Multi-Craft manager, cited that same advantage of robots and machines over humans. “Where we see a lot of displacement, those jobs are typically in those more dangerous fields of work in which you typically see very high turnover.” They are jobs that a person might leave in just four or five weeks because of safety concerns and because the work is difficult, he said.
Caterpillar, like Intimidator, has not automated its assembly line. Rivera said that is because the steps involved in that process are more difficult for a robot to repeat. Carmakers automate their assembly lines, but their much higher volume justifies it, he explained.
Robots Rise, And Debate Turns to Jobs
Despite the benefits to employers, many people nationwide can blame robots and machines for the disappearance of their jobs. Since 1990, the U.S. has lost between 360,000 and 670,000 jobs to robots, according to a report published by the National Bureau of Economic Research in March.
“Because there are relatively few robots in the U.S. economy, the number of jobs lost due to robots has been limited so far,” although several studies suggest usage is increasing, the NBER researchers wrote.
The researchers concluded that, on average, the arrival of one new industrial robot in a market coincides with an employment drop of 5.6 workers, and they expect the pace of displacement to accelerate.
Recent trend data supports that.
North American companies ordered and shipped more robots than ever before in the first quarter of this year, breaking the last record, which was set in the same quarter of 2016, according to a Robotic Industries Association report released in May. The association is a nonprofit trade organization based in Ann Arbor, Michigan.
Units ordered from North American companies that sell robotics rose by 32 percent year-over-year — to 9,773 from 7,406 in the first quarter of 2016.
Order revenue grew by 28 percent, to $516 million from $402 million.
Units shipped to North American customers also increased by 24 percent, to 8,824 from 7,125.
The NBER researchers write that, if automation proceeds at predicted rates, millions of jobs could be lost while wage growth is reduced by up to 2.6 percent between 2015 and 2025.
U.S. Treasury Secretary Steve Mnuchin recently dismissed the trend, telling a reporter for the Axios information website in March that displacement of jobs by artificial intelligence and automation was “not even on my radar screen” because the technology was “50-100 more years” away. He also said he is “not worried at all” about robots displacing humans in the near future. “In fact, I’m optimistic.”
The tech community’s response to Mnuchin’s comments, Axios reported, was a “harsh and swift” rebuttal.
(Correction: A previous version of the story incorrectly attributed a partial quote, “very plain that one of the reasons they’re needing to automate is actually lack of workforce,” to Hytrol's Boyce Bonham and said his 14-person division serves more than 100 clients, including Tyson, Wal-Mart, John Deere, Procter & Gamble, Pace Industries and Gillette. The quote was actually said by Tomas Blodgett of Multi-Craft and the rest applies to Multi-Craft.)