Conflicting Views on Robotization in Hungary

It is estimated that the pace of automation expansion in Central and Eastern Europe will be above the European average in the near future, so labor market effects are sure to be felt in this region, according to the GVI research into the automation of occupations registered in Hungary.

Routine, easy-to-write, and consequently programmable tasks that could be replaced by robots and computers as a result of technical progress were considered to be tasks that could be automated by the research.

In GVI’s view, automation is a problem in some areas: certain non-routine, complex tasks, and skills such as dexterity, creative intelligence, or social skills, can still not be replaced by a robot, which could have a complementary role besides a human at best in these cases.

According to GVI, automation does not always lead to the termination of the professions concerned, since in most occupations only part of the tasks can be automated. Roles that require someone with tertiary education often cannot be replaced by new technologies.

“In the case of professions requiring higher education and other professions requiring tertiary or secondary education, we did not find any profession that could be fully automated. However, in the latter group, 8% – 28,000 persons – of the employed work in a profession which contains subtasks, which could be automatized,” wrote GVI.

“Automation could help solve the long-term efficiency improvement measures in Hungary that are essential for increasing the country’s economic competitiveness and sustaining growth,” a separate study made by McKinsey on robotization in Hungary points out.

According to its calculations, by 2030, automation will have a significant impact on one million jobs in Hungary.

While GDP fell and more than a million people lost their jobs following the 1989 regime change, economic growth was based on capital investment and productivity growth of about 2.3% a year between 1995 and 2009.

Since 2010, rising employment has become the main driver of economic growth. The number of employees has increased from 3.73 million to 4.35 million over the past seven years.

Higher Value-added

But while employment growth is approaching its ceiling, productivity has fallen in some industries. Automation, it proponents insist, offers opportunities for higher value-added jobs and increased productivity.

When looking at which sectors and in what workspaces it is worth using a robot for a company, the keyword is value. 21st-century robotics companies no longer look at where machine can lift more, bigger and heavier items faster than humans, but how they can relieve the human workforce so that it can shift to a higher value-added task.

Moreover, robotization can also be a partial answer to today’s coronavirus crisis, with robots stepping in for people in areas which are considered dangerous right now and which cannot be replaced by home office solutions, jobs on the factory floor being an obvious example.

The Danish industrial manufacturer Mobile Industrial Robots calculated the hourly wage of its 100 kg, in-house loading machine at a total cost of EUR 5. Meanwhile, a warehouse assistant in Denmark has total wage cost of EUR 6-7 per hour, added to which the worker will sometimes require sick pay and will from time to time asks for a pay raise. While in Hungary the average wages are lower, similar calculations have comparable results.

“So, after a while, robotization will be a simple price issue,” says Júlia Varga, a senior researcher at the Institute of Economics at the Hungarian Academy of Sciences.

“If the robots are so cheap that it will be much better for the German car companies to robotize that part of production that they have currently outsourced to Hungary, then they will do it, so they can stay competitive,” she added.

Negative Views

In addition to opportunities, automation also presents social and economic challenges. A 2017 Eurobarometer survey found that 38% of Hungarians negatively evaluate automation, one of the highest rejection rates in the European Union.

Their fears may be at least partly well-founded; according to a report by the World Economic Forum, by 2022, 54% of employees will need retraining due to digitalization and automation. The good news is that companies will generally bear the cost of retraining well-performing employees.

But that also means that those who are less capable of creative, critical thinking and complex problem-solving will be more likely to be replaced by machines. Curiously, despite Hungary’s much touted highly skilled workforce, some see a danger here.

“There has been a significant decline in the creativity of work tasks in Hungary between 2005 and 2010, and the situation has not improved since 2010,” warns Miklós Illéssy, a researcher at the Social Sciences Research Center of the Hungarian Academy of Sciences.

The authors of the McKinsey study, though, think otherwise: according to the company those fears are unfounded and negative change will not happen for several reasons.

First of all, automation will not occur immediately because the transition rate is determined simultaneously by technical feasibility, social and infrastructural preparedness, and the economic benefits of automation. For companies, it will take time to fill vacancies, partly with human labor and partly with automated machines, which gives businesses, the labor market, and policymakers time to prepare for the transition.

Secondly, automation, along with economic development, will also create new professions and it increase the number of high value-added jobs, thereby generating higher incomes, which will create more demand.

Among all those studies, calculations and expert opinions, there is one thing for certain: there’s still a long road in Hungary for both man and machine for the proper expansion of robotization and the current global pandemic situation does not help in this either.