Robots reduce hours worked and wages for low- and middle-skilled workers, but has no significant effect on high-skilled workers. Photo: Bloomberg
Will the Fourth Industrial Revolution and widespread automation lead to job losses in countries such as India? Some reports have been alarming—a paper by Frey and Rahbari said China risks losing 77% of jobs to automation, while India risks losing 69%. Thankfully, a new study by the Asian Development Bank on how technology affects jobs gives us hope.
Since fears of job losses have been with us since the days of the Luddites, the key question is: is the Fourth Industrial Revolution—technological advancements in robotics, biotechnology, artificial intelligence, quantum computers, blockchain and 3D printing—different from the ones that preceded it?
Sure, technology will displace jobs. But automation also increases productivity and lowers production costs, increasing demand in the economy. It could also lead to new jobs. A study shows that in India, between 2004 and 2015, electrical trade workers had a significant share of new job titles. Examples of these new job titles are computerized numerical control (CNC) operator, machining technician, CNC setter-cum-operator–vertical machining centre, CNC programmer, smartphone repair technician, solar panel installation technician, and optical fibre technician. These are all new jobs.
A paper has said that China and India stand to lose 77% and 69% of jobs to automation, but another study on how technology affects jobs gives us hope
On the effect of rising demand, the study says if the Indian economy grows at 7% over the 16 years from 2015 to 2031, annual per capita income will rise from $1,500 to $4,900. Given the rate of growth of per capita income, India’s textile market can be expected to grow 2.5 times over that period. This would offset job displacement from future automation in the garment industry.
Moreover, automation is used the most in capital-intensive industries. “The two largest users of industrial robots in Asia, electrical and electronics industries and automotive manufacturers, each accounted in 2015 for 39% of Asia’s robot stock but only 9.2% and 4.2%, respectively, of manufacturing employment,” according to the study. If robots have to be deployed in a labour-intensive industry, they will have to be cheap enough to compete with very low wages. The problem with that argument is, even in Bangladesh, automation has started in the garments industry.
As automation is adopted more widely, some classes of workers will certainly be displaced. The study found that robotics reduce hours worked and wages for low- and middle-skilled workers, but has no significant effect on high-skilled workers. Unfortunately, International Labour Organization estimates show that in India, only 15.5% of employment is in the highly skilled category, with the rest in the medium- and low-skilled group.
If robots have to be deployed in a labour-intensive industry, they will have to be cheap enough to compete with very low wages. The problem with that argument is, even in Bangladesh, automation has started in the garments industry
The research shows that, with technological advances in global value chains, the share of non-routine cognitive occupations increases; for non-routine manual occupations, half the economies showed increased employment share; and for both cognitive and routine manual occupations, the employment share is decidedly negative for manufacturing and mainly negative for services.
What about wages? While wages of skilled and managerial workers would rise, those in routine and manual labour would decline. The worst case would see the wages of less skilled workers not rise at all—this happened during the first Industrial Revolution, says the report, when “the average wage of workers barely increased over several decades despite a dramatic increase in labour productivity in manufacturing.” Trouble is, for many in India, it’s the first, second, third and fourth industrial revolutions combined, all at one shot.
Due to automation, while wages of skilled and managerial workers would rise, those in routine and manual labour would decline
What is to be done? An ILO Employment Policy brief had pointed out that “the challenge of technical change may not be so much whether there will be more jobs destroyed than created, but the facility with which workers are able to transition from old to new jobs in a period of rapid change and to equitably share in productivity gains.” The need to upgrade skills is obvious. In 2016, 46% of employers in Asia and the Pacific reported difficulty in filling vacancies for skilled positions. Moreover, rapidly changing technologies imply workers will continually have to learn new skills. The rise in contract work will result in many being intermittently unemployed. They will need protection. Unfortunately, India’s social protection system is totally inadequate. The ILO says the population covered by any one social security scheme in India is 19%, compared to 63% in China, 28.4% in Bangladesh and 37.9% in Vietnam.
We are already seeing the social consequences of the lack of decent jobs and rising inequality in India. It’s time we heed the warnings
How will increased social security be funded? The ADB recommends taxes on property, inheritance and capital gains. That is unlikely to go down well with our elites.
We are already seeing the social consequences of the lack of decent jobs and rising inequality in India. It’s time we heed the warnings.
Manas Chakravarty looks at trends and issues in the financial markets. Respond to this column at [email protected]