Technology and Unemployment in the Developing World

How will automation disrupt developing countries?

Technologists and economists alike have discussed the effect of automation on developed countries at length, but when it comes to developing nations, commentators have gone quiet. It’s difficult to imagine a Less Economically Developed Country (LEDC) employing robots, for instance, especially when cheap labour is so highly available. However, with manufacturing giants now focusing their efforts on reshoring (the reintroduction of domestic manufacturing) there’s a vacant space waiting for a developing industrial power to occupy it. According to a report by the United Nations, the way to achieve this coveted economic position is to embrace automation in manufacturing and production. Industrial robots are now cheaper, easier to get hold of and more comprehensive to use. These bots are set to shake up the global economic landscape as they are increasingly adopted in developed and developing nations alike. . . but how can LEDCs specifically benefit from automation? Is the UN’s suggestion worth taking note of?

When it comes to industrial robots, China has the highest deployment levels worldwide. This can be largely attributed to a ten year long, government-backed strategy called “Made in China 2025”, which uses tech adoption to fend off competition from other big manufacturers. The plan seems to be working, because by the end of this year China is set to overtake its neighbours Japan as the biggest global operator of industrial robots. These robots have been mainly used in the automotive, electrical and electronics industries, but applications have expanded as technology progresses. Now that China and other industrial powerhouses are focused on reshoring, developing countries have the chance to capitalise on quietening export markets. The key to this is expansion. . . and that’s where automation comes in. According to the UN report, innovation could lessen the gap between developing and developed countries, creating more of a level playing field. Unfortunately, automated technologies like Advanced Robotics, 3D Printing and AI are all notoriously good at doing human jobs – especially the low-skilled positions that make up almost all LEDC employment. Even China is suffering – as of the start of this year, 77% of Chinese jobs were at risk from automation. The UN believes that the way to respond is to keep adopting tech. This is easier said than done for countries that can’t afford it, but it’s only a matter of time.

How will automation disrupt developing countries?
When it comes to automation, there are two distinct angles. On one hand, it’s pretty clear that the adoption of industrial robots will take jobs away from human workers. On the other hand, it also has the potential to create future jobs (in robot maintenance, for example). There’s no doubt about it, though – unemployment is problematic. That’s probably why it’s hard to associate automation with developing countries that are aiming to create jobs for low-skilled labourers, because it seems like a conflicting strategy. In the short term, automation in developing countries will appear to cause negative disruption. However, as machines become more integrated in the work force, there will be numerous positive effects. For example, more cheap human labour will be freed up for the expansion of manufacturing. As companies begin to imitate others, competition will grow between businesses and revive stagnated, struggling economies. On top of this, technologies like 3D Printing have the power to bring more variety to products, as companies will use tech in different ways. However, there are obstacles to adoption. The first is financial, although costs are gradually decreasing. Other barriers are logistic – some industries like garment making simply aren’t suitable for automation . . . yet. As well as this, the displacement of essentially all workers is a high price to pay for the potential benefits. Some African and Latin American countries have experienced ‘premature deindustrialisation’, where increased automation removes LEDC’s labour-intensive advantage by obliterating the workforce. In January, the World Bank World Development Report revealed that 85% of Ethiopian jobs were at risk of automation. Various other countries were hardly far behind, with China sitting at 77% even despite its success. Whilst established economies may have a chance of survival, it’s uncertain whether developing countries will be able to cope with the initial shock of economic, industrial transformation in order to reap the rewards.

From a business perspective…
The business view of automation depends what industry the business is in, as well as which country. Automation would be quite unexciting for a garment making establishment, because the infrastructures don’t yet support it. However, for an automotive manufacturer, automation represents a huge opportunity to grow as a corporation, using government support to engage with a global audience and create better products. For businesses in the relevant industries, much of the disruption is welcome. Innovation could lead to healthy competition, a vibrant market and increased capabilities in production. To fully benefit from adoption, governing bodies will need to impose constraints and regulations. For example, a major tax on robots as capital equipment could generate the revenue necessary to back the continual growth of industrial markets, ride the initial waves of unemployment and support national productivity as a whole. Business might not enjoy being taxed, but they’ll be able to understand why.

In short, the UN’s report is a call to developing nations to up their game and use innovative, ever-developing technologies to fill the space left by manufacturing giants like China, and it’s a call worth responding to. To prepare for automation, LEDCs will require complete policy overhauls. Governing bodies need to recognise the merit in embracing innovative technology, even if in the short term it looks like shooting themselves in the foot. The challenges and opportunities that automation presents are much the same for developed and developing countries, except that LEDC jobs are more at risk. In the long term, though, automation will play a key role in aiding the expansion of companies within the country. Through automation, LEDCs will be able to encourage the creation of vibrant, competitive markets. Theoretically, this will lead to the production of higher quality goods with greater efficiency. As great as this all sounds, the risks are high. In some developing companies, almost all jobs could fall to machines. The question now is which country will risk unprecedented unemployment to fill the gap in the exports market – assuming, of course, that the established manufacturing giants will let them.

Will developing countries use technology to successfully supply the export market? How will developed countries respond to this new challenge? Is the UN’s report too ambitious? Share your thoughts and opinions.