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Issue #1788      August 2, 2017

Culrture & Life

Automation, robots in developing countries

Deepening use of automation is threatening mass displacement of jobs everywhere, and developing countries could be the worst hit.

Last year Uber started testing driverless cars, with humans inside to make corrections in case something goes wrong. If the tests go well, Uber will presumably replace its present army of drivers with fleets of the new cars. Some personally-owned cars can already do automatic parking. Is it a matter of time before Uber, taxis and personal vehicles will all be smart enough to bring us from point A to point B without our having to do anything ourselves?

But in this application of “artificial intelligence”, in which machines can have human cognitive functions built into them, what will happen to jobs? It is estimated that in the US alone, 4-5 million drivers of trucks and taxis could be rendered unemployed.

The driverless vehicle is just one example of the technological revolution that is going to drastically transform the world of work and living. There is concern that the march of automation tied with digital technology will cause dislocation in many factories and offices, and eventually lead to mass unemployment.

Just a day before he left office, former US President Barack Obama warned in a farewell interview that “jobs are going away because of automation and that’s going to accelerate”, pointing to “driverless Uber” and “displacement that’s going to take place in office buildings across the country”.

The new technologies will cause uncontrollable disruption and add to the social discontent and political upheaval in the West which had fuelled the anti-establishment votes for Brexit and Donald Trump.

Recent studies are showing that deepening use of automation will cause widespread disruption in many sectors and even whole economies. Worse, it is the developing countries that are estimated to lose the most, and this will exacerbate the already great global inequalities.

The risk of automation to jobs in developing countries is estimated to range from 55-85%, according to a study in 2016 by Oxford University’s Martin School and Citi. Major emerging economies will be at high risk, including China (77%) and India (69%), higher than the OECD developed countries’ average risk of 57%.

The Oxford-Citi report, The future is not what it used to be, provides many reasons the automation revolution will be particularly disruptive in the developing countries.

Firstly, there is “premature deindustrialisation” taking place as manufacturing is becoming less labour-intensive and many developing countries have reached the peak of their manufacturing jobs. Manufacturing processes are more automated today, also in low- and middle-income developing countries.

Secondly, while 20th-century technologies allowed companies to shift production abroad to take advantage of cheap labour, recent developments in robotics and additive manufacturing now enable firms to locate production closer to domestic markets in automated factories. Seventy percent of clients surveyed believe automation and 3D printing developments will encourage companies to move their manufacturing close to home.

China, South-East Asia and Latin America have the most to lose from this relocation, while North America, Europe and Japan are the main winners.

Thirdly, “the impact of automation may be more disruptive for developing countries, due to lower levels of consumer demand and limited social safety nets” as compared with the developed countries, according to a summary of the Oxford Martin School report.

The report warns that developing countries may even have to rethink their overall development models as the old ones that were successful in generating growth in the past will not work anymore.

“In the light of these technological developments, industrialisation is likely to yield substantially less manufacturing employment in the next generation of emerging economies than in the countries preceding them. Hence it will be increasingly difficult for African and South American manufacturing firms to create jobs in the same numbers that Asian countries have done. In other words, today’s low-income countries will not have the same possibility of achieving rapid growth by shifting workers from farms to higher-paying factory jobs.”

Instead of export-led manufacturing growth, developing countries will need to search for new growth models, said the report. “Service-led growth constitutes one option, but many low-skill services are now becoming equally automatable.”

It cites a World Bank report showing that developing countries are highly susceptible to their workforce being affected by increasing automation, even relative to advanced economies where labour costs are high. Moreover, countries with lower levels of GDP per capita typically have a higher share of their workforce at risk.

“Thus there are reasons to be concerned about the future of income convergence, as low income countries are relatively vulnerable to automation,” concludes the report. Another series of reports, by McKinsey Global Institute, found that 49% of present work activities can be automated with currently demonstrated technology, and this translates into $15.8 trillion in wages and 1.1 billion jobs globally. About 60% of all occupations could see 30% or more of their activities automated and 5% of jobs can be entirely automated. But more reassuringly, an author of the report, James Manyika, says the changes will take decades.

How automation affects jobs will not be decided simply by what is technically feasible. Other factors include economics, labour markets, regulations and social attitudes.

Which jobs are most susceptible? While most people think they would be in manufacturing, in fact many jobs in services will also be disrupted. The McKinsey study lists accommodations and food services as the most vulnerable sector in the US, followed by manufacturing and retail.

In accommodations and food, 73% of activities workers perform can be automated, including preparing, cooking or serving food, cleaning food-preparation areas, preparing beverages and collecting dirty dishes.

In manufacturing, 59% of all activities can be automated, especially physical activities or operating machinery in a predictable environment. Activities range from packaging products to loading materials on production equipment to welding to maintaining equipment.

For retailing, 53% of activities are automatable. They include stock management, packing objects, maintaining sales records, gathering customer and product information, and accounting.

A technology specialist writer and consultant, Shelly Palmer, has also listed elite white-collar jobs that are at risk from “robots” – which she defines as technologies, such as machine learning algorithms running on purpose-built computer platforms, that have been trained to perform tasks that currently require humans to perform. Those she assessed would be displaced include middle managers, salespersons, report writers, journalists and announcers, accountants, bookkeepers and doctors.

For the developing countries in general, there will have to be much thinking of the implications of the new technologies for their immediate and long-term economic prospects, and a major rethinking of economic and development strategies is also called for.

Third World Resurgence

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