26.03.2017 Author: Grete Mautner

What Changes Will Automation Bring Along with It?

5645342343Over the past decades, we’ve all witnessed how China transformed itself in a world’s workshop due to the extensive amount of cheap labor that it has had. However, in recent years, there’s been reports pointing out that the wages of regular workers in China have exceeded the average payment rate that can be observed throughout the world. But China’s place of a low costs manufacturer is now being quickly occupied by other developing countries, where labor is still relatively cheap, especially in South-East Asia and Africa. It is for this reason that many industries have been moved to developing countries, which has allowed them to create additional jobs and improve social conditions of their populations.

However, as the majority of production capabilities were transferred to developing countries, workers living in the countries that can be described as developed started losing job. Now a number of Western states have waken up to this fact and their governments are taking measures to return industries back home. The new US president has been pondering on this issue for a while, he has even made it a cornerstone of his election campaign, arguing that it is imperative to return jobs to the US, which, he believes, will not only strengthen the middle class in the United States, but will also significantly alleviate social problems in society. However, there only way for those industries to be transferred back to the developed countries is the automation of production, which can allow its placement in countries with a high level of wages.

There’s a lot of supporters of these idea across the globe, since they assume that automation will only affect labor markets in developed countries, since there’s an absence of sufficient number of skilled workers in those states. However, the recent report from the UN Conference on Trade and Development has already noted the ways in which automation impacts those in developing countries—and it seems that it impacts these nations even more than the industrialized world.

The report would note that the increased use of robots in developed countries risks eroding the traditional labor-cost advantage of developing countries, as the share of occupations that could experience significant automation is actually higher in such states than in more advanced ones, where many of these jobs have already disappeared.

As it’s been noted by the Futurism website this means that low-skill jobs in developing countries are more vulnerable, as these jobs could rather easily be done by robots. This translates to some staggering numbers: two-thirds of all jobs in developing countries might be lost to automation.

Those behind the UN report are convinced that automation could cause economic activity, like the manufacturing industry, to be reshored to developed countries from developing ones, and it’s already happening today, but according to the report, it’s happening at a slow pace. The outcome of this process will be shaped by policies. In other words, nations need to start planning for the inevitability of automation and job loss now. To that end, the report advises countries to embrace the “digital revolution” through the changing of educational policies combined with “supportive macroeconomic, industrial and social policies.

Yet, most people fail to realize that in a automated economy the high level of consumption that has already become commonplace in most Western states is going to be supported by extreme tax rates. That is why Bill Gates in his recent interview proposed a tax on robots to cushion worker dislocation and limit inequality.

Disruptive technologies always bring a mix of benefits and risks. We should always weigh the risks these technologies bring while, at the same time, exploring new ways to transform our society with them. That is why the Financial Times seems convinced that this will mean major reforms of education and retraining systems, consideration of targeted wage subsidies for groups with particularly severe employment problems, major investments in infrastructure and, possibly, direct public employment programmes.

Grete Mautner is an indepenent researcher and journalist from Germany, exclusively for the online magazine “New Eastern Outlook.