Industrial production was transformed by steam power in the nineteenth century, electricity in the early twentieth century, and automation in the 1970s. These waves of technological advancement did not reduce overall employment, however. Although the number of manufacturing jobs decreased, new jobs emerged and the demand for new skills grew. Today, another workforce transformation is on the horizon as manufacturing experiences a fourth wave of technological advancement: the rise of new digital industrial technologies that are collectively known as Industry 4.0.
How will this next wave of industrial evolution play out? Will it create or destroy jobs? How will job profiles evolve? And what types of skills will be in demand? The answers to these questions are critical to business leaders and policy makers as they seek to take full advantage of the opportunities arising from Industry 4.0 by ensuring that an appropriately skilled workforce is in place to capture them.
To understand how the industrial workforce will evolve with Industry 4.0, we looked at the effects that these new technologies will have on Germany’s manufacturing landscape, which is among the world’s most advanced. We found that by adopting Industry 4.0, manufacturers will be able to increase their competitiveness, which will enable them to expand their industrial workforce at the same time that productivity increases. As production becomes more capital intensive, the labor cost advantages of traditional low-cost locations will shrink, making it attractive for manufacturers to bring previously offshored jobs back home. The adoption of Industry 4.0 will also allow manufacturers to create new jobs to meet the higher demand resulting from the growth of existing markets and the introduction of new products and services. This favorable scenario contrasts with previous eras of technological advancement, during which the number of manufacturing jobs declined despite an increase in overall production volume. For example, automation and offshoring caused an 18 percent decrease in Germany’s manufacturing workforce from 1997 through 2013, at the same time that production volume increased.
In this report, we examine how Industry 4.0 will alter the landscape for manufacturing jobs through 2025. We present the results of a quantitative modeling of the labor market’s evolution, as well as qualitative insights gleaned from discussions with a wide variety of experts. Applying these findings, we offer recommendations to leaders in business, education, and government for how they can foster the adoption of Industry 4.0 and thereby enhance the productivity and growth of the industrial workforce.