Automation is transforming the industries of the Swiss economy, creating employment and innovation opportunities
Deloitte’s new report shows that roughly 270,000 new jobs will be created until 2025 in Switzerland
Zurich, 27 October 2016
Deloitte’s latest report on automation, Transforming the Swiss economy, shows that automation will continue to have an overall positive impact on the Swiss labour market. While some jobs will be replaced, many more new jobs will be created as automation cuts the cost of many goods and drives up wages, increasing demand and creating employment. Automation has a differing impact on the employment in various industries, as new analyses indicate – but also on innovation within the various industries and companies. Overall, increasing automation brings considerable advantages for the Swiss economy as a whole as well as for companies. It also represents an alternative to offshoring and thus offers an attractive opportunity to keep employment, revenues and value creation onshore and increase them.
According to the Deloitte study from November 2015, Man and Machine: Robots on the rise?, automation has had a positive impact on the Swiss labour market: In the last 25 years, net job creation has topped 800’000, with automation accounting for many of these new jobs. There are, of course, a number of reasons for this, including demographic change and economic growth, but automation also played an important role. This positive effect on employment will likely continue: Deloitte’s newest analyses show that roughly 270,000 new jobs will be created in Switzerland by 2025.
Complementary effects outweigh substitution
The impact of automation on employment can be divided into a) substitution and b) complementary effects. Substitution occurs where a machine replaces human labour. Automation may though also create jobs through complementary effects. Where man and machine are deployed in a complementary way in the production process, productivity rises and so does pay. Automation can also bring down the costs of the goods being produced. Higher pay and lower prices boost purchasing power, fuelling demand for goods and services, and, ultimately, creating new jobs. Moreover, employees are also needed to produce the machinery and new technology. Overall, jobs are certainly being lost as a result of automation, but new jobs are also being created. Since job creation significantly outweighs job losses, the complementary effects appears to outweigh the substitution effect – both in the past decade, and also most probably in the years to come.
Highly-skilled, knowledge-intensive and socially interactive jobs leading employment growth
Job creation is most probable in highly skilled and knowledge-intensive occupations that are unlikely to be automated such as medicine, architecture or engineering.
As Deloitte’s historical analysis in Man and Machine: Robots on the rise? showed, it is broadly the case that the probability of automation falls as skill level rises. This is likely to remain the case over the next ten years: New forecasts show that by 2025, Switzerland will need twice as many employees with advanced training as it did in 2005.
However, the correlation between skill level and automation does not apply across the board. Although training is crucial, it is not the only factor involved in future-proofing areas of employment. In occupations in which social interaction is important – for example in childcare, health care and hairdressing –, human labour will have the edge over machines for a long time to come.
Bjørnar Jensen, Managing Partner Consulting at Deloitte in Switzerland says: ʺWe strongly believe that the positive employment trend of the last decades will continue. We now have to seize the opportunities that technological progress offers us. Employees and employers alike have to increasingly work towards using technology to complement services delivered by humans – to get the best out of both man and machine. Even jobs with a high probability of automation can benefit from current developments. They have to look to create added-value, for example through delivering extraordinary customer service.ʺ
The industries of the Swiss economy are impacted differently
Automation has a differing impact on the various industries of the Swiss economy. Markus Koch, Head Consulting Industrial Products at Deloitte in Switzerland, says: ʺTo stay competitive the Swiss manufacturing industry had to automate. Production facilities have undergone a transformation, with entire processes being automated in some cases. We’ve seen job roles changing, with man and machine complementing each other to make processes more efficient. The use of robots is now also growing in other industries and presents great opportunities for employees and employers alike. For instance tedious and boring office tasks get automated through software robots.ʺ
Deloitte’s analysis of the likelihood of automation by industry shows great differences between the industries of the Swiss economy, but also that all industries can benefit from automation to a certain degree1.
At 76%, the agriculture and forestry sector has the highest proportion of jobs with a high likelihood of automation, while the public administration, health and social services (17%) as well as the ICT services (19%) sectors are the least likely to see jobs being automated (see figure 2). 61% respectively 68% of employees in the latter two sectors work in occupations with a low potential for automation.
1Please note that this analysis illustrates how easy it would theoretically be to automate specific occupation, and thus only takes the substitution effect of automation into consideration. The analysis should thus not be seen as reflecting actual changes in employment.
In absolute terms, public administration, health and social services has the highest absolute employment level, closely followed by the wholesale and retail trade, transportation and storage industry. The latter as well as the manufacturing industry have a high number of employees in jobs likely to be automated (see figure 3).
A) Public administration, health and social services
Almost two-thirds of employees in public administration, health and social services – the largest industry in the Swiss economy – are in jobs with a low likelihood of being automated. This is due to the fact that the industry employs a high proportion of highly skilled individuals (e.g. city planners) and/or that interpersonal contacts are crucial (e.g. police officers). This should though not detract from the fact that many processes within the sector have the potential for (further) automation. The use of new technology in these cases could mean that many employees would be able to do their jobs more efficiently, boosting productivity (complementary effect of automation).
For more details and case studies on this industry, please revert to p. 12ff. in the report.
B) Wholesale and retail trade, transportation and storage
In the whole and retail trade, transportation and storage industry, virtually half of the workforce is in a job with a high likelihood of automation; in absolute terms, around 430,000 people. No other sector comes close to such a high figure. For example, machines are already able to take over a high percentage of the roles performed by sales staff and cashiers. Nevertheless, many commercial companies – particularly in retail – are opting for a mix of automated and human-operated sales and payment systems, reflecting customer preferences but also the social interaction factor. Logistics also offers large potential for automation, for example through drones. This could lead to considerable fewer jobs for drivers, but could also create jobs for technicians to maintain and ensure the safety of the robots.
For more details and case studies on this industry, please revert to p. 15ff. in the report.
C) Manufacturing and life sciences
Technological innovations over recent decades, such as computer controlled machines, industrial robots and 3D printers, have made manufacturing one of the most heavily automated sectors. This trend has been even more marked in Switzerland over the past few years as a result of the strong Swiss Franc. Job roles are undergoing a transformation, and the Swiss industrial companies are looking to (further) increase productivity and innovation. Ongoing automation will probably lead to employees’ skills levels further increasing, so to operate and maintain the more new and complex machinery being used in the production process.
For more details and case studies on this industry, please revert to p. 18ff. in the report.
D) Financial and insurance services
Due to factors such as more complex regulation, increasing digitisation, changing customer needs and a demanding economic environment, the pressure to automate is now impacting the financial services industry more and more on both the revenues and costs of service providers. According to the recent Industrialisation in Banking study by Deloitte and IFZ, Swiss banks are planning to increase their level of industrialisation substantially over the next five years, relying heavily on further automation, process digitalisation and robotics.
For more details on this industry and case studies, please revert to p. 23ff. in the report.
How can companies benefit from automation?
Companies have many opportunities to implement automation. One major area with recent acceleration is process automation, in particular in the financial services sector. There are two types of automation:
i. Robotic Process Automation, which can take over repetitive and structured human activities (e.g. transferring addresses from the internet to a spreadsheet).
ii. Intelligent automation / cognitive technology, which carries out unstructured activities and non-standardised processed, and demonstrates human-like abilities (e.g. speech recognition).
Rapid advances in technology represent huge potential for companies, as Bjørnar Jensen concludes: ʺAutomation brings considerable advantages for companies. Automation enables productions processes to be optimised, costs to be cut, production quality to be increased, land use to be reduced, and interactions between customers and suppliers to be improved. Jobs become more interesting, increasing employee satisfaction and boosting companies’ abilities to attract a skilled workforce. Also, cooperation between man and machine enables companies to increase employee productivity and offers an alternative to outsourcing and offshoring.”
About Deloitte in Switzerland
Deloitte is a leading accounting and consulting company in Switzerland and provides industry-specific services in the areas of Audit & Risk Advisory, Consulting, Financial Advisory and Tax & Legal. With nearly 1,700 employees at six locations in Basel, Berne, Geneva, Lausanne, Lugano and Zurich (headquarters), Deloitte serves companies and institutions of all legal forms and sizes in all industry sectors. Deloitte AG is a subsidiary of Deloitte LLP, the UK member firm of Deloitte Touche Tohmatsu Limited (DTTL). DTTL member firms comprise of over 225,000 employees in more than 150 countries.
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