Adjusting to the changing nature of work also requires rethinking the social contract.
2019 –World Development Report
From their beginning, robots were intended to replace humans in the workplace. In fact, Karel Cwordto makes it clear what these machines would be used for. Over the robot in 1920, used the Slavic-language word for work,? apex, the Czech writer who invented the robot last century, machines have replaced workers in many tasks. On balance, however, technology has created more jobs than it has displaced. Technology has brought higher labor productivity to many sectors by reducing the demand for workers for routine tasks. And yet in doing so, it has opened doors to new sectors once imagined only in the world of science fiction.
As technology advances, firms adopt new methods of production, markets expand, and societies evolve. Firms rely on new technologies to better use capital, overcome information barriers, outsource, and innovate. New technologies allow for more efficient management of the operations of firms: firms hire workers in one location to produce parts, in another location to assemble, and in a third location to sell. Meanwhile, consumers enjoy a wider range of products at lower prices.
In today’s economy, market opportunities are growing for all participants. Some platform fims1 are creating new marketplaces to trade goods or services. Even small firms are global. And they are growing faster. The firms selling on eBay in Chile, Jordan, Peru, and South Africa are younger than the firms in offline markets. In China, start-ups are dominant on the Alibaba platform. Societies benefit as technology increases the options for service delivery and for citizens to hold their governments accountable.
Workers, firms, and governments are building new comparative advantages as conditions change. For example, by being the fist to adopt 3-D technologies, Danish firms strengthened their hold on the global market for hearing aid products in the 2000s.4 The Indian government invested in technical universities across the country, and subsequently India became a world leader in high-tech sectors. By integrating into global value chains, Vietnamese workers developed their foreign-language abilities, building additional human capital that allows them to expand into other markets.
Notwithstanding the opportunities, however, there are still disruptions. The declining cost of machines especially puts at risk those workers in low skill jobs engaged in routine tasks. These are the occupations most susceptible to automation. Displaced workers are likely to compete with (other) low-skill workers for jobs with low wages. Even when new jobs are created, retooling is costly, and often impossible.
The resulting displacement of workers generates anxiety, just as in the past. In 1589, Queen Elizabeth I of England was alarmed when clergyman William Lee applied for a royal patent for a knitting machine: “Consider thou what the invention would do to my poor subjects,” she pointed out. “It would assuredly bring them to ruin by depriving them of employment.”
In the 1880s, the Qing dynasty fiercely opposed constructing railways in China, arguing that the loss of luggage-carrying jobs might lead to social turmoil. 6 Earlier in the 19th century, the Luddites sabotaged machines to defend their jobs in England, despite the overall economic growth fueled by steam power.
Fears of robot-induced unemployment have dominated discussions about the future of work. Nowhere are these fears more evident than in the industrial sector. The decline in industrial employment in some high-income economies over the last two decades is an established trend. The Republic of Korea, Singapore, Spain, and the United Kingdom are among the countries in which the share of industrial employment dropped more than 10 percentage points. But this trend mainly reflects a shift in employment from manufacturing to services as those countries grow. By contrast, millions of industrial jobs have been created in developing countries since the late 1980s.
Indeed, the share of industrial employment has increased significantly in a few emerging markets such as Cambodia and Vietnam. On average, the share of industrial employment has remained stable in developing countries, despite the many predictions of job losses resulting from technology.
That said, technology is disrupting the demand for skills. Globally, private returns to education ?about 9 percent a year ?remain high despite the significant expansion in the supply of skilled labor. Returns to tertiary education are almost 15 percent a year. Individuals with more advanced skills are taking better advantage of new technologies to adapt to the changing nature of work. For example, returns to primary schooling in India increased during the Green Revolution of the 1960s and 1970s, with more educated farmers adopting new technologies.
Technology has the potential to improve living standards, but its effects are not manifesting themselves equally across the globe. The process of job creation works society wide—and not just for the few—only when the rules of the game are fair. Workers in some sectors benefit handsomely from technological progress, whereas those in others are displaced and have to retool to survive. Platform technologies create huge wealth but place it in the hands of only a few people.
Irrespective of technological progress, persistent informality continues to pose the greatest challenge for emerging economies. Informal employment remains at more than 70 percent in Sub-Saharan Africa and 60 percent in South Asia and at more than 50 percent in Latin America. In India, the informal sector has remained at around 90 percent, notwithstanding fast economic growth and technology adoption. Both wages and productivity are significantly lower in the informal sector. Informal workers have neither health insurance nor social protection. Technology may prevent Africa and South Asia from industrializing in a manner that moves workers to the formal sector.
Progress in the context of the formal–informal worker divide must be reevaluated because of the changing nature of work. Economic growth depends on human capital accumulation and infrastructure that responds to the needs of education, health, and business. Enhanced social protection that applies no matter the form of labor contract is also ripe for consideration.