Global Development in the Age of Automation: Catapult or Detour?

Global Development in the Age of Automation: Catapult or Detour?

by Jessica Davis Pluess

Earlier this fall, renowned physicist Stephen Hawking told readers on Reddit’s Ask Me Anything question series that despite machines having the power to enable humanity to enjoy a life of luxurious leisure, current trends point toward “technology driving ever-increasing inequality.”

Hawking joins a chorus of influential voices from academia and public and private sectors who express cautious optimism about this era of expansive technological change and its impact on quality employment and economic inequality. The growing sophistication and declining costs of technologies such as 3D printing, robotics, and the Internet of Things that define this new age of automation are changing the way goods are produced and delivered and, by extension, transforming labor markets around the world.  Experts point to labor’s declining share of GDP, structural unemployment, and rising economic inequality in many countries as signs that this transformation is underway. Some estimates suggest that more than 47 percent of the U.S. workforce is at high risk of automation.

The risks and opportunities of this era of technological change are important to consider from the viewpoint of low-skilled workers and vulnerable groups, particularly in developing and emerging economies. These groups make up a large portion of the workforce in global manufacturing and agriculture value chains – areas that are increasingly at risk of being replaced by machines. They also stand to gain the most from harnessing technology as a driver of economic opportunities and improved well-being.

Development Catapult

Labor-intensive manufacturing has been an important engine of economic growth for many economies, such as Bangladesh, where the garment industry is the largest employer in the country. More than 3.5 million people work in the industry, 90 percent of them women. The industry helped reduce the poverty rate in the country from 56 percent in 1992 to less than 32 percent two decades later.

Technology has played an important role in the growth of these industries and economies. This era of technological progress could serve as a catapult for many developing countries, helping them leapfrog low-skilled manufacturing to create high value industries that meet the demands of an increasingly digitized and knowledge-based economy. This development catapult will create jobs as well: according to one study, over 1 million robot-driven jobs could be created by 2016. Research also shows that the Internet creates 2.6 jobs for every job lost to increased technological efficiency.

Technology can also unlock new economic opportunities by making the means of production accessible to more people, enabling new business models like the sharing economy. For example, online work has enabled women in remote areas in India to earn cash while caring for children and elderly family members. Facilities such as “makerspaces” and tech incubators provide access to new technologies, which can bring more people into the economy through self-employment and entrepreneurship.

Moreover, jobs in the technology industry may offer higher salaries. As part of its Digital Jobs in Africa initiative, the Rockefeller Foundation found that in countries such as Zambia and Ghana, jobs in the ICT sector provide higher than average wages and are less volatile than much of the informal work available to most youth.

Development Detour

If automation leads to a shift away from labor-intensive manufacturing, what will this mean for millions of entry-level job applicants? Could this actually be a development detour for many countries?  The number of jobs expected to be created in this age of automation pales in comparison to jobs created through labor-intensive manufacturing. In 2009, 99 million people were employed in the manufacturing industry in China. Foxconn, the Taiwanese contract manufacturing company and supplier to Apple and other consumer electronics companies, will use robots and machines to complete 70 percent of its assembly line work. Although automation may be an opportunity for China to maintain some of its manufacturing competitiveness in the face of rising wages and competition from other countries, it is not unreasonable to anticipate that China and many other manufacturing centers around the world could see significant job elimination with automation.

Many low-skilled workers are likely to face barriers in accessing these opportunities. These jobs will likely require more complex skill sets, making it difficult for lower-skilled, less-educated workers to capture the opportunities created by automation. Instead of hiring line workers, more advanced factories are hiring industrial engineers. This is particularly concerning for women who, in many countries, face significant gaps in education and skills needed for many jobs created through automation.

Technology is also likely to affect the quality of jobs and protection of worker rights. Automation could make certain positions more attractive if machines fill the more physically grueling, unsafe, and lower paying jobs. Wages could rise dramatically if the benefits of higher productivity are returned to workers but it may be harder for human capital to compete with cost-effective machines, prompting downward pressure on wages. Furthermore, more “on-demand employment” or contractor work that is generated by technological advances can be unreliable and offer limited benefits and weak protection under traditional employment law.

The age of automation is no longer science fiction that only Hawking and futurists can envision. This future has arrived, and just as it could serve as a catapult for global development, it could easily lead to a detour with roadblocks and challenges along the way. The answers are not easy. Investments in education and skills are a natural starting point, but this can’t be left to policymakers alone. The private sector is an essential partner in designing and applying automation in a way that respects worker rights, creates opportunities for more people, and drives inclusive economic growth.

This article draws on findings from research the author conducted while working at Business for Social Responsibility (BSR), a non-profit business network. For more information about this research please see the BSR issue brief.

Image "New 2012 Fiat 500" Courtesy Fiat Chrysler Automobiles: Corporate / CC BY-NC-ND 2.0

About the Author

Jessica has nearly ten years of experience working in the corporate sustainability field for organizations including the World Business Council for Sustainable Development and BSR. During this time, she led consulting and research projects on topics including sustainable supply chain management, inclusive business, human rights, social finance, and women’s empowerment. She recently moved to Switzerland where she is working as a freelance researcher and writer. Jessica graduated from The Fletcher School in 2006 with a focus on development economics and China.

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