Increased automation could negatively impact developing countries’ economies – new report

CThe increased rate of automation in low-wage countries, which have traditionally attracted manufacturing firms, could see them lose their cost advantage and potentially lose their ability of achieving rapid economic growth by shifting workers to factory jobs according to a new research by Citi and the Oxford Martin School at the University of Oxford.

The research, which sought to explore some of the most pressing global challenges of the 21st century and titled ‘Technology at Work v2.0: The Future Is Not What It Used To Be’, was conducted via surveys with institutional clients, 70 per cent of who expressed their belief that automation and the developments in 3D printing will encourage companies to move their manufacturing process closer to home — with North America gaining the biggest advantage from this development and China having the most to lose.

The research, which was published in January 2016, comes against the backdrop of an ongoing debate over the impact automation will have on the workplace, a key example being the recent decision by the World Economic Forum to chose “Mastering the Fourth Industrial Revolution” as its primary theme for the 2016 World Economic Forum meeting in Davos while the Financial Times followed suit, giving its 2015 Business Book of the Year to Martin Ford’s ‘The Rise of the Robots’.

“In our February 2015 Citi GPS report Technology At Work we cited three primary reasons why we believed the impact of technology change on the economy was different this time:  the pace of change has accelerated; the scope of technological change is increasing and unlike innovation in the past, the benefits of technological change are not being widely shared — real median wages have fallen behind growth in productivity and inequality has increased,” states the report’s executive summary.

For the research, Citi teamed up with Oxford Martin School’s Carl Benedikt Frey and Michael Osborne.

Over 96 per cent of institutional clients who participated in the survey on technology and work believe that automation will accelerate over the next five years compared to the previous five years.

“Our work also suggests the scope of technology change is increasing. The big data revolution and improvements in machine learning algorithms means that more occupations can be replaced by technology, including tasks once thought quintessentially human such as navigating a car or deciphering handwriting,” it states.

However, in order to guard against job losses due to automation, the report adds that “it is important to recognize which characteristics are most likely to be associated with a given job being automated — perception and manipulation, creative intelligence, and social intelligence are the three bottlenecks to automation.” It notes that cities and regions that have invested in skilled industries remain relatively safe from automation, adding that technological dynamism will remain the best way to maximize employment and to benefit positively from new technologies, further urging policymakers to leverage on education in preparation for the effects of accelerated technological change.

The report’s chapter titled ‘How Susceptible are Countries Worldwide?’ which utilizes data from the World Bank, shows that the risks of automation are actually higher in many other countries, an example being the OECD countries where about 57 per cent of jobs are susceptible to automation, with the number rising to 69 per cent in India and 77 per cent in China.

It also highlights a number of sectors such as the food industry, call centres and factories that are already automating a number of different processes which could ultimately affect (or are already affecting) a number of different jobs.

Regarding the perceived high cost of automation, it notes with the cost of robots expected to decrease over time, economic barriers to the expansion of automation in different sectors are expected to fall even though barriers still exist for small and medium-sized enterprises (SME’s) which can however find the flexibility and affordability provided by co-bots as more appropriate solutions.

On the education front, the report states thus: “With careers likely to be more disrupted than at any other point in the past, individuals should anticipate the need to retrain in the future. A talent mismatch already exists in many countries, with many well-educated workers finding employment in lower-skilled jobs. To combat this, greater coordination will be needed between the educational, training and employment sectors.”

Overall, 85 per cent of the survey respondents felt automation posed a challenge to societies and policymakers, with 64 per cent stating that it was a major challenge. However, 76 per cent also said they were techno-optimists on the outlook for productivity and profits, with policy adapting to share increasing abundance. Only 21 per cent were techno-pessimists on the outlook for growth, employment, inequality, and disruption of company profit pools.

“We agree with the optimists that the opportunities for increased innovation and productivity can be very beneficial, providing policy, education and workers can adapt to the challenges faced from accelerating technological change,” state the researchers behind the report.


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