Robots could cause massive job losses in developing countries

Nearly two-thirds of all jobs in developing countries could be lost as a result of automation, says a UN report.

Chee Yoke Heong

AS companies around the world increasingly move towards automation to stay competitive, more and more low-paying jobs, especially in the developing world, will suffer as a result.

The United Nations Conference on Trade and Development (UNCTAD), in a policy brief titled 'Robots and industrialisation in developing countries', says nearly two-thirds of all jobs in developing countries could be lost as a result of automation.

'The increased use of robots in developed countries risks eroding the traditional labour cost advantage of developing countries. If robots are considered a form of capital that is a close substitute for low-skilled workers, then their growing use reduces the share of human labour in total production costs,' with significant adverse effects for developing countries, says the UN agency.

'The share of occupations that could experience significant automation is actually higher in developing countries than in more advanced ones, where many of these jobs have already disappeared, and this concerns about two thirds of all jobs,' says UNCTAD, citing World Bank research.

The report says industrial robots have primarily been deployed in the automotive, electrical and electronics industries.

'This means that in developing countries - such as Mexico and many countries in Asia - those engaged in export activities in these two sectors are the most exposed,' it says.

But in certain industries, it is still cheaper to employ low-wage labour than to deploy robots.

'In many labour-intensive industries, such as garment-making, widespread automation is not yet suitable,' the report explains.

'While robots have become cheaper, some developing countries continue to have a large pool of cheap labour.

'Thus, for those countries whose major challenge is to create jobs for a large number of low-skilled entrants to the labour force - such as in many parts of Africa - deploying robots under current cost structures many drive production costs up, rather than down.'

As such, for a range of labour-intensive industries, this leaves the door open for developing countries to enter industrialisation processes along traditional lines, such as garment-making which has been a stepping stone in many cases of industrialisation, according to the report.

Income polarisation

Since the adoption of industrial robots tends to create jobs in higher-skill activities with comparatively fewer benefits for low-skilled and medium-skilled workers, this will result in 'polarisation' in how income is distributed, UNCTAD warns. The 'benefits [will be] accruing in productivity growth and for better-skilled workers and the owners of robots, while low-skilled workers risk being impoverished,' it says.

But much of the debate on the economic impacts of robots remains speculative, UNCTAD says, adding that 'disruptive technologies' always bring 'a mix of benefits and risks'.

Among developing countries, deployments of industrial robots have been concentrated in China, spurred by a shrinking working-age population and rising labour costs which have eroded the country's cheap-labour advantage.

Each year since 2013, China has bought more industrial robots than any other country. By the end of 2016, it is likely to overtake Japan as the world's biggest operator of industrial robots, the policy brief says.

Ultimately, says UNCTAD, the future adoption of robotics around the world 'will be shaped by policies'.

The report advises developing countries to tax robots and to prevent the rising inequality - caused by loss of low-skilled jobs - through social transfers.

'Clearly, without the introduction of a major tax on robots as capital equipment, robot-based manufacturing cannot boost the fiscal revenues needed to finance both social transfers, to support workers made redundant by robots, and minimum wages, to stem a decline in the living standards of low-skilled and medium-skilled workers,' according to the report.

It also calls for greater public investment in infrastructure such as logistics and telecommunications, power and water utilities, in order to further stem the risk of return of industries to developed countries (or 'reshoring') even as the cost of owning and operating robotics systems further declines.

For Africa and Latin America, which are facing deindustrialisation, whatever strategy is taken will have to account for the rapidly increasing spread of new technologies in the form of robots, says UNCTAD.    

Chee Yoke Heong is a researcher with the Third World Network.

*Third World Resurgence No. 314/315, October/November 2016, p 10