Assuming the present price of the robots is 30 $ and that wages of labor are 120. Bruno presently employs 2 robots and 10 workers. The total cost of labor equals 1260 $. Two humans are important as manual labor is important and the company cannot rely on artificial intelligence. Thus the new combination is of two workers and 10 robots. The cost now comes to $ 540.
There are numbers of causes for the increased use of robots and decrease of wage labor:
In figure 1, 630,000 robots have been traded in 2020, because of the continuous progress in the field of science and technology and companies increasingly are relying on the products of science and tech irrespective of the domain (Robot Worx, n.d.). However, increased awareness about labor welfare and human rights has put companies under the pressure of increased expenses for wage laborers, due to the movements of international and national organizations and conventions and this is why in fig 2 labor cost can be seen increasing continuously due to the aforesaid reasons.
The production function curves of Bruno
Point O1F1 which is the curve of production functions in the case when Bruno employed 2 robots and 10 workers. The production function curve F2O2 is when Bruno employs 2 workers and 10 robots.
The above chart tells that the smaller part of the pie offered was rejected by a single responder more aggressively than the two responders. The increased size of the pie attracted the acceptance rate.
Bargaining Power- As soon as robots begin to replace the wage labor, the bargaining power of Angela will start to decrease because robots have more marginal utility than wage labor. Though Angela has the power to increase bargaining power with the new skills and having a better offer for the employer in the same field to operate the robots (Gerbert et al, 2017).
Real wage- Angela’s real wage will be declining as she will have an offer of lesser wage, she can increase her real wage by changing the industry with more labor dependant work (Rodgers & Freeman, 2019).
Profit of company- The diagrams show that increasing the number of robots in the labor decreased the cost of labor for Bruno by less than 1.5 times, assuming the same or more marginal productivity by robots, thus profits increased considerably.
A Pareto improvement is a condition in which a re-allocation of the available goods and services will increase the utility of at least one person and utilities of other persons being the same (CFI, n.d.).
The company here was 10 persons and 2 robots and then the company of Bruno decided to flip it to 10 robots and 2 employees. He can make a department of safety and maintenance of robots in which he can hire some labor say 4 out of those 10 as this team will provide productivity in the form of administration of robots. In this way, 4 people are employed without deducing productivity.
The fair work act says that under the substantive judgment of fairness, an employee can be dismissed only based on at least one valid reason which was in the interest of the company. The decision could not be unjust or simply arbitrary (Persad, 2017). With the help of some justifications given, employee dismissal can be justified. The company can arrange for the skill training of the employees and quick learners may be sustained in the company instead of single-handedly dismissing them. Fair compensation of say two months wages is given to sustain during the unemployed time. Thus some measures like these can be applied and thus the reasons for dismissal after this could be justified.
Following the procedural judgment fairness, the bias rule, the rule of evidence, and the rule of hearing must be justified with the dismissal order. If the dismissal order is not justified on these three grounds, dismissal can be canceled (Persad, 2017). The company must prove that the new employees are more skillful or productive compared to previous ones and must give the older employees a fair chance of hearing.
In this graph, the three conditions of Angela's bargaining power have been defined. In case Angela learns new practical skills, a higher wage will be offered to her and she will have more leisure and daily consumption, this curve is the topmost. If Angela decides to change the industry and not to learn a new skill, her wage offer will be the same, and consumption and wages are the same, which is the middle curve. When Angela wants to work in the same industry without learning new skills, her wages will be low and thus the curve is the lowest one.
Due to the increased use of robots and science and technology in the industries, employment takes a dip and then emerges in some other industry. Thus to avoid such a negative gap during a low employment period, the government should make a scheme of skills and learning for people to be updated and keep themselves ready for the updated and newly created jobs (Dahlin, 2019). The normal workers may not be aware of this job swing in the market and thus need help in applying in the right industry (Rodgers & Freeman, 2019). Thus the government should keep a record of every worker and offer a range of new and updated skills learning and then recommending them after the learning course ends. In the meantime, the government should also offer the wage laborers a compensation amount until they get a new job after skill learning, which will sustain the consumption levels.
Corporate Finance Institute (n.d.) Pareto efficiency. Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/economics/pareto-efficiency/
Dahlin, E. (2019). Are robots stealing our jobs? Socius 5(1).
Persad, G. (2017). What is the relevance of procedural fairness to making determinations about medical evidence?. Journal of Ethics 19(2). 183-191.
Robot Worx (n.d.). Cost savings with robots. Retrieved from https://www.robots.com/articles/cost-savings-with-robots
Rodgers, W. & Freeman, R. (2019). How robots are beginning to affect workers and their wages. Retrieved from https://tcf.org/content/report/robots-beginning-affect-workers-wages/?agreed=1
WEForum (n.d.) How to compete with robots in the age of artificial intelligence. Retrieved from https://www.weforum.org/agenda/2017/01/in-the-age-of-artificial-intelligence-heres-how-we-can-compete
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