Foreign Direct Investment in Latin America and the Caribbean 2017

182 Chapter III Economic Commission for Latin America and the Caribbean (ECLAC)
Box III.1
Generic robot cost versus average manufacturing labour costs
(Dollars per hour)
Commercialization of industrial robots is on the rise, with the global motor vehicle industry the most intensive user of the
technology to the tune of 1,200 robots per 10,000 workers, compared with national averages of 100-200 units per 10,000
workers in Japan, the United States and Germany (IFR, 2016). The use of robots in the automotive industry grew at an annual
rate of 20% between 2010 and 2015, representing 38% of the total number of robots sold globally at the end of this period.
In this context, Mexico has become an increasingly important emerging market; in 2015, the country doubled its demand
to 5,500 units, clearly surpassing the 1,400 units acquired by Brazil that same year.
From a labour market perspective, the shift towards robotization has revived past tensions between technological
progress and job creation, especially in terms of the threat to jobs posed by automation in the auto sector. Leaving aside
the impact of automation per se, the employment issue is especially relevant for Mexico insofar as its lower labour costs
have historically been a key differentiating factor in its competitiveness vis-à-vis the United States.
A simulation presented below compares the trajectory of labour costs with that of robot costs for similar tasks. The
labour data are based on hourly earnings, including wages and other benefits, while the variables considered for robots
are initial investment and maintenance costs. Data on labour costs are plotted according to historical trends, while two
scenarios are considered for robots at cost reduction rates of 8% and 15%, on the basis of Sirkin, Zinser and Rose (2014).
The initial hypothesis for the cost of a welding robot —widely used in the automotive industry— was US$ 8 per hour
in 2015, rising to US$ 28 per hour for a generic industrial robot. For that same year, manufacturing labour costs per hour in
Mexico came in at US$ 5.90 per hour, with a projected annual growth of 3%.
Under these assumptions, cost convergence for the whole of the manufacturing sector would materialize towards the
end of the 2020s, a non-trivial finding for many traditional motor vehicle industry suppliers operating in Mexico. However, the
timeline is much tighter for carmakers: in the case of welding robots, cost convergence could already be taking place in 2017.
Figure 1
Generic robot cost vs. average manufacturing labour costs
(Dollars per hour)
30
25
20
15
10
5
Cost of a generic robot
0
Manufacturing labour costs
in Mexico
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Sirkin, H., M. Zinser and J. Rose, “The shifting economics of global manufacturing:
how cost competitiveness is changing worldwide”, The Boston Consulting Group, August 2014 (robot price data), and The Conference Board, “International comparisons
of hourly compensation costs in manufacturing, 2015 - Summary tables” [online] https://www.conference-board.org/ilcprogram/index.cfm?id=38269 (labour cost data).