In this chapter, we conclude and identify areas for future research. We stress three points. First, automation is challenging any competitive advantage of low-cost labor of late developers. Second, due to low levels of skills, the labor force in many developing countries is vulnerable to replacement by labor-saving technology. Wage stagnation and premature deindustrialization are already unfolding—however, unemployment is not (yet) the main problem of technological change. Third, we need to ask different policy and research questions and be concerned about the jobs impact of technology and the political economy of automation rather than just automatability in principle. In that vein, the Lewis model and surplus labor theory could once more help us understand the dynamics of economic development and structural transformation.
KeywordsPublic policy Reserve army Labor surplus Disruption Premature deindustrialization Future research
This book has surveyed the literature on automation and in doing so discussed definitions and determinants of automation in the context of theories of economic development, assessed the empirical estimates of employment-related impacts of automation and outlined the public policy responses to automation. We have shown that the contentious debate on automation is not new. Its origins can be traced back to classical political economy and thinking on economic development, and both the optimistic and pessimistic camps that have emerged over time have made valid points. To understand the employment dynamics of automation-driven structural change, the book used a simple framework in the tradition of W. Arthur Lewis (and William Baumol) and with recognition of Marx’ reserve army thinking.
In conclusion, we would argue that the main implications of advances in technology and automation are not mass lay-offs and technological unemployment necessarily (though both are plausible under certain scenarios) in developing countries, but an increasing pressure toward deindustrialization and deagriculturalization. Empirically, the impact of automation is complex to estimate, and most studies have tended toward technologically deterministic approaches. Theoretically, the net effect on jobs could be both positive (lower prices lead to higher quantities demanded and thus more labor demand) and also negative (displaced labor is not absorbed in the ARS). Manual routine work, especially in agriculture, remains prevalent throughout the developing world, which is an important concern. Overall, the focus of many studies on employment is arguably too narrow, and there are broader questions about the impact of the digital revolution on structural change and strategies of economic development to be addressed.
The developing world could well experience more negative impacts from automation than the developed world, since (i) there are substantially more jobs to be lost through labor-substituting technical progress than in the rich world and (ii) new industries may stop outsourcing production to the developing world. We argue that it is likely that real wages may stagnate rather than unemployment rise per se in the developing world which implies sociopolitical consequences. This line of argument is, of course, particularly tailored to the characteristics of labor-abundant open economies and may not be generalizable beyond that.
One way or another, technological innovation is causing disruption and thus poses questions for public policy. We would express skepticism about the often-voiced call for skills-based development strategies alone. Social safety nets, on the other hand, do seem to offer one strategy; yet, to the extent that they raise the cost of labor, could exacerbate the trend toward technological substitution. In this context, discussions about a living-wage level universal basic income (UBI) somewhat smack of a “first-world problem”: to be able to worry about the redistribution of profits due to productivity gains assumes the luxury of jurisdiction over those profits, which many developing countries may not have. So, what to do?
We see the policy space for developing countries split between coping and containment strategies and constrained by globalization. Protectionist trade policy in the North could well accelerate reshoring, and hence the impacts on the developing world that this book discusses. In the long term, utopian as it may seem now, the moral case for a global UBI-style redistribution framework financed by profits from high-productivity production clusters in high-income countries may become overwhelming, but it is difficult to see how such a framework would be politically enacted. For the moment, in any case, workers in developing countries are facing an uphill battle against a growing “Robot Reserve Army”.
Avenues for future research are numerous. Here we simply set out a range of indicative questions. The core research question is, given a context of automation and digitization, how are developing countries to increase the quantity and quality of employment growth? The core question can be broken down into three clusters of (indicative) sub-questions. First, regarding the poverty–employment nexus: How/when/why does productivity growth translate into employment growth? What determines the distribution of productivity gains in terms of the functional distribution of income between capital and labor? Second, regarding the automation–employment nexus: Which tasks are being automated and by when? How do automation and digitization impact different developing countries, considering their specific production, employment, and export structures, and differing contexts? Third, regarding political and policy implications: What have been or are likely to be the political consequences of changes in employment due to automation and digitization? Under what conditions and circumstances can technological change and deindustrialization be inclusive? What factors incentivize and constrain the adoption of labor-saving technologies? And how have national and subnational governments responded to date? How have existing deindustrialization, automation, and its socioeconomic effects expressed themselves (or not) politically? What are the public policy options for governments? In sum, there are numerous questions arising for the future of economic development that automation throws up. Understanding the more precise impacts of automation on the economic development of developing countries can only be well understood if such questions are urgently pursued.
In conclusion, we would make three points. First, automation is challenging the competitive advantage of low-cost labor of late developers. Second, many developing countries have a vulnerable labor force in terms of wage stagnation and premature deindustrialization could loom. However, unemployment is not (yet) the problem. Third, we need to ask different policy and research questions and be concerned about the jobs impact of technology and the political economy of automation rather than just automatability in principle. In that vein the Lewis model and surplus labor theory could once more help us understand the dynamics of economic development and structural transformation.
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