The rapid growth of digital technologies is bringing with it both fear and opportunity for Asian economies. Productivity gains should outweigh any loss of jobs, but Asia still needs to be on guard.
Back in 1980, when automated teller machines were beginning to catch on in the US, a Wells Fargo executive predicted the end of the traditional branch network. Thousands of jobs would go as machines took over the tasks of handling money, since customers would no longer need to visit a physical branch.
In fact, the reverse happened. ATMs did not replace bank branches; they made them more efficient. By taking away some of the routine tasks, the cash machines freed up bank staff to work on more profitable activities, and made the branches themselves cheaper to run. As a result, banks opened more branches.
This often-cited example is still relevant today, at a time when Asian workers are facing the threat of disruption from new technologies.
Will artificial intelligence replace business process outsourcing in India and the Philippines? Will textile workers in Bangladesh be replaced by robots?
The ADB has devoted a considerable amount of its research efforts to answering these questions, including an extensive chapter in April’s flagship Asia Development Outlook report.
The overall findings are encouraging.
“Across history, automation has always resulted in displaced workers. This anxiety is as old as mankind’s first technological breakthrough,” said Yasuyuki Sawada, ADB chief economist. “However, displacement has always been accompanied by rising productivity, the emergence of new occupations and better-paid jobs.”
Washing machines, refrigerators or electric cars may still be out of reach for many Asian workers today, but lower costs from more efficient production processes can stimulate demand in the future.
DEMAND AND DISPLACEMENT
The ADB calculates that, in job terms, higher demand has more than offset the disrupting impact of labour-saving technology. Whereas 101 million jobs a year might have been lost in 12 countries of developing Asia between 2005 and 2015 if output had stayed constant as productivity increased in line with technological progress, growing demand for goods and services instead led to the creation of a net 134 million jobs a year, equivalent to an 88% increase in employment, the ADB reckons.
“This whole phenomenon of productivity going up sets in motion a number of different effects that actually leads to job creation,” said Rana Hasan, director of the development economics and indicators division, who worked on the report. “Henry Ford’s assembly line was able to reduce the number of workers per car produced, but the demand for cars skyrocketed so much that it cancelled out any displacement.”
Improvements in technology can also increase earnings through productivity gains. Indonesian motorcycle taxi app Go-Jek is another popular example, raising income for moped owners by connecting them with nearby customers via their smartphones.
“While there are growing concerns that new technology could lead to widespread job losses, there are compelling reasons to remain optimistic about developing Asia’s job prospects,” said Sawada.
Sawada notes that automation only goes ahead when it is economically feasible. Across Asia, robots are found mainly in capital-intensive sectors that already employ relatively few workers, such as the electronics and automotive industries. Food and textiles, which together account for 31% of Asia’s manufacturing jobs, employ less than 1% of the region’s industrial robots.
The unknown factor, however, is the pace of change associated with the digital economy – the fourth industrial revolution, as it is often called.
Productivity gains in Asia have so far largely come from improvements in existing technologies within specific sectors. Smart irrigation systems, for instance, do not replace the job of growing rice. Nor do higher-quality fabrics displace textile workers.
The digital transformation challenges these notions. Automating more complex tasks could displace entire industries, shifting manufacturing jobs to entirely new sectors where the existing workforce does not have the skills to compete. A 2016 report for the International Labour Organization found that 56% of all jobs in five ASEAN countries (Indonesia, Thailand, the Philippines, Vietnam and Cambodia) faced a high risk of automation.
Routine jobs are especially vulnerable, including both manual labour and cognitive tasks such as customer help desks. Conversely, robots are not yet capable of displacing non-routine manual workers, such as cooks or hairdressers, or cognitive functions, such as researchers or people managers.
Looking at new job titles recorded in member countries, the ADB’s analysis notes that most positions created in the latest year were both non-routine and cognitive in nature – web designers or digital artists, for example. Wages also rose faster in those sectors than for manual tasks.
“Without adequate skills or retraining, workers with weaker foundation skills face hurdles in seizing the opportunities that new technology provides,” said Sawada. “Low-skilled workers are also more likely to experience lower wage growth, thereby exacerbating inequality.”
The growth of the “gig economy” and entrepreneurial start-ups also poses challenges around social protections. While these jobs may offer higher wages, workers often rely on casual, short-term contracts with limited benefits.
“Governments must respond to these challenges by ensuring workers are protected from the downside of new technology and able to harness the new opportunities they provide,” said Sawada.
OPPORTUNITIES FOR ASIA
Rather than fearing disruption, the ADB argues that technology presents Asia with an opportunity to build on its growth momentum.
Improved connectivity and access to the internet can accelerate development and job creation by opening up more remote regions to trade, from the mountains of south China to the Solomon Islands.
Governments also have the opportunity to use technology to improve efficiency, through enhanced tax collection, targeted subsidies and enhanced monitoring. India’s Aadhaar card programme, for example, has attracted over 1 billion registrations with the promise of a more user-friendly alternative to the traditional system that relies on different paper licences for each government service.
Financial technology also promises to open up banking services to new groups of customers, enhancing inclusive growth.
Hasan argues that Asian governments can embrace technological advancement without fearing a mass displacement of jobs back to the US and other more developed economies.
“The big message is that Asia is getting more sophisticated,” said Hasan. “There are things you can do around preparing for this technological change, around teaching, the delivery of skills and matching workers with jobs.”
The ADB’s outlook report closes with a call for Asian governments to harness these opportunities for the region’s development. The rise of Asia’s middle class, the report says, is bringing with it new demand for goods and services that can both drive Asian development and reduce its dependence on exports to the West.
“With the right policies, new technologies can play a key role in this transition.”
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