Digitization of economy in the manufacturing sector: How unions prepare for the factory of

tomorrow, the quest for Union 4.0 paradigm

Ramon Certeza

It is unfolding in our times that we are witnessing great transformation on the way things are being
manufactured. Things that are crafted by humans in the past are now being replaced by automatic
machines and robots. We are now in a middle of an on-going revolution – or in today’s parlance the
“industrial revolution 4.0” or the digitization of economy. Manufacturing industry as path to
development in most countries is perceived to be affected by this digital transformation. This piece will
look at how digitization rapidly transformed factories of today and how unions prepare to survive in the
factories of tomorrow.

Digitization of the economy was the central theme of the World Economic Forum in Davos in December
2015, where prominent economist and European research institutions came out with reports on the
future of work touching on some possible consequences of digitization on workers (draft internal
working paper of IndustriALL, 2017). Recently, in 10-11 May 2017 Friedrich Ebert Foundation (FES)
organized an international conference in Vietnam which tackles the same line related to digital
transformation that seeks to answer two main questions; what is the impact of transformation to Asian
economies and how this transformation be made fair and inclusive. These two events catapulted the
discourse at a greater height with differing views and perspectives from actors at different levels.

What history tells us?

We have learned from history how industrial manufacturing has been in a state of constant
technological change since the 1900s. Starting from the use of water and steam that introduced the first
industrial revolution that gives birth to certain manufacturing industry like textile, thru the development
of assembly line and conveyer belts in the period of fordism at the beginning of the 20 th century, then
facing the computer age in the 70s as the third industrial revolution, moving towards fourth industrial
revolution that fused advanced digital technology in the way products are being manufactured. Though
at the beginning of its introduction the productive potential opened up by digitization has been limited
by in its scope and space this has greatly enhanced when information technology was harnessed to
telecommunications enabling computers to linked with one another so seamlessly, with combination of
latest technology and fast internet connection.

In those first three phases of industrial revolutions labour have witnessed and painfully experienced job
displacement and worsened working conditions, however, it also created employment mostly in
manufacturing and labor-intensive sector and gradually with a mixture of government regulations and
industrialists’ innovations workers’ plight improved.
These major changes in the manufacturing process can be seen as both social and technological
revolution, as experienced in the past it is more than technological changes. True, that this digital
transformation will dramatically modify production processes utilizing cutting-edge technologies and to
some extent deploying robotics that in a way contributes to increasing productivity growth to
companies. This however, might also lead to displacement of workers and further erosion of
employment relationship.

Indeed, the discourses on the impact of industry 4.0 surrounds on two polarizing views. On the one
hand, optimists asserts that digitization in the labor market will create more high paying jobs, new jobs
will be generated with fairly high salary for highly-skilled workers and high level of autonomy and
flexibility that will be more attractive to young workers. On the other hand, there comes the pessimists’
view that there will be mass “technological” unemployment as the deployment of new technology will
displaced those low-skilled workers and tend to create more precarious jobs. Moreover, technological
trend will presumably leads to re-shoring of jobs from the developing to the rich and much more
developed economies. As predicted in the report of UNCTAD (2016) “reshoring economic activities to
developed countries is one mechanism that could lead to shrinking output and employment in the
manufacturing sector of developing countries”. I think that those opposing views need to be taken into
account as an old challenge that demands new answers.

Challenges for industrial unions: labor standards and industrial relations

One underlying assumption is that unions have narrow understanding on the complexity and
development of this new technology. For one unions view Industry 4.0 as computerization of things, the
use of smart machines such as 3D printing, robots and artificial intelligence in production processes is
still a long way in the future. How depth it will be embedded in the manufacturing process, how fast it
will come and how it will impact jobs is still a big question. However, others view that Industry 4.0 refers
to industrial innovations and inventions that change not only the production, but also workers’
circumstances and industrial work in general.

At the workplace level, wages, hours of work and working conditions remain to be a challenge that
needs special attention in the digital transformation.

Many of the factories today, whether small and medium size and to some extent micro-enterprises are
somehow linked with the global value chain driven by transnational corporations. Multiple layers of
contractors and subcontractors are being connected with TNCs. Still many of those production facilities
are in poor conditions where men and women workers doing things in repetitive tasks for long hours of
work. However gruelling and demanding tasks work it may be this leaves no choice for workers to take
and compete with a large army of the unemployed people.
Low union density and low membership coverage in collective agreements are also an ongoing trend in
the manufacturing sector. This will aggravate with the perceive reduction of permanent workforce
replacing with temporary workers with no job security and limited access to rights afforded by law.

Furthermore, the deployment of automated machines or robotics as shown in Foxconn China’s leading
manufacturing factories mainly producing Apple’s “iPhone” has a tendency to replace entire workforce
with “Foxbots” in the near future. With China’s industrial strategy of “Made in China 2025’ more robots
will be deployed in its manufacturing sector.

For some other countries who can manage to mitigate the impact of job displacement due to digitization
there will also be a possibility of reduction in the number of hours worked. However, for most of the
developing countries reduction of hours of work means reduction of workers income especially to those
countries who does not have institutionalized social security protection.

The perceive impact of Industry 4.0 on employment and industrial relations can be made fair, equitable
and inclusive if it is based on social justice.

Role of trade unions

Trade unions have a bigger role in this transformation process. For what role unions may play in this
industrial transformation will be subject on its own analysis and actions. As Industry 4.0 will inevitably
penetrating various industries faster and deeply than we could ever imagine trade unions must be
prepared for the possible impact on employment, working conditions and workers’ rights and move
towards working on a just transition that is fair and equitable. What do we mean by just transition? It
means that it should go beyond provision of safety net and compensation to those who will be affected
but a way to bring economic life into social and democratic framework. A just transition should be a
complete package of sustainable industrial policies and social programs that will allow workers to
benefit from change, rather than bear is costs.

Trade unions active participation in social dialogue at all levels are considerably important to prepare for
this transformation. Unions has also rethink strategies beyond their traditional ways based on old
industrial relations model, new mode of organizing utilizing new technology and finding new source of
power in the digitalisation era is a must. Unions may organize workers online and through network using
the same technology where capital has been utilizing. Where capital transform and uses Industry 4.0 as
platform of change, unions also need to shift to Union 4.0.

Technological innovations and digital automation will be the way of the future and is here to stay.
Inevitably there will be transformation that will happen. Defending the indefensible and trying to keep
these transitions from coming is not a winnable option. Trade unions have been most successful not in
preventing transformations but in making a possibly socially disastrous transformation a lot more livable
and ensuring that workers, their families and society remain protected.
Trade unions must guard against ever-growing inequality in wealth distribution. We need a new social
deal and a just transition to get there.

Ramon Certeza is an alumnus of the Global Labour University (GLU) labour policies and globalization
masters programme. He is currently the national coordinator of the IndustriALL Global Union for the
Philippine project on union building. He is also a lecturer at the University of the Philippines – School
of Labor and Industrial Relations.

References

Huws, U. (2014) “Labor in the Global Digital Economy: The Cybertariat Comes of Age”, Monthly Review
Press, New York.

IndustriALL Global Union (2017) “The Challenge of Industry 4.0 and the demand for new answers: The
Role of Unions for the Future of Modern Societies in the Light of Structural Diversities” (unpublished
draft internal working paper).

OECD (2016). “Automation and Independent Work in a Digital Economy”.

Statt, N. (2016). “iPhone manufacturer Foxconn plans to replace every human worker with robots”.
https://www.theverge.com/2016/12/30/14128870/foxconn-robots-automation-apple-iphone-china-
manufacturing Accessed 20 May 2017.

UNCTAD, (2016). “Robots and industrialization in developing countries”, Policy brief.