The World Bank’s World Development Report 2019 has dismissed fears that robots and machines could take over human jobs, potentially leading to the sacking of thousands of workers.
Instead, it says that though innovation and technological progress have caused disruption, they have created more prosperity than they have destroyed.
Although fears that robots could take away jobs from people have dominated the discussion over the future of work, the report says that such fears are unfounded.
It says that work is constantly reshaped by technological progress, as a result of which firms adopt new ways of production, markets expand, and societies evolve.
“Overall, technology brings opportunity, paving the way to create new jobs, increase productivity, and deliver effective public services,” the report says.
It adds that firms can grow rapidly thanks to digital transformation, expanding their boundaries and reshaping traditional production patterns.
The report says that technology is blurring the boundaries of some firms, as has been evident in the rise of platform marketplaces.
Using digital technologies, entrepreneurs are creating global platform-based businesses that differ from the traditional production process in which inputs are provided at one end and output delivered at the other.
The report points out that platform companies often generate value by creating a network effect that connects customers, producers, and providers, while facilitating interactions in a multisided model. It shows that digital platforms, compared with traditional companies, can scale up faster and at lower cost.
In addition, the rise of the digital-platform firm means that technological effects can reach more people faster than ever before.
The report says that individuals and firms only need a broadband connection to trade goods and services on online platforms. This “scale without mass” brings economic opportunities to millions of people who do not live in industrialised countries or even industrial areas.
However, the report says that technology is changing the skills that employers seek. It says that demand for less-advanced skills that can be replaced by technology is declining, while demand for advanced cognitive skills is rising.
Therefore, investing in human capital is a priority to make the most of technology as an evolving economic opportunity, the report says.
It refers to three types of skills as increasingly important in labour markets: advanced cognitive skills such as complex problem-solving; socio-behavioural skills such as teamwork; and skill combinations that are predictive of adaptability such as reasoning and self-efficacy.
Building these skills requires strong human capital foundations and lifelong learning, and thus the foundations of human capital, created in early childhood, have become more important than ever, the report says.
However, governments in developing countries too often do not give priority to early childhood development, and the human capital outcomes of basic schooling can be suboptimal.
The report encourages governments to create formal jobs to seize the benefits of technological change.
In many developing countries, many workers remain in low-productivity employment, often in the informal sector with little access to technology, the report says, adding that the lack of quality private-sector jobs can leave talented young people with few pathways to waged employment.
“High-skill university graduates currently make up almost 30 per cent of the unemployed pool of labour in the Middle East and North Africa,” the report says.
It also highlights the need for investments in infrastructure, most notably investments in affordable access to the Internet for people in developing countries who remain unconnected.
Investments in the road, port, and municipal infrastructure on which firms, governments, and individuals rely are also important, according to the report.
Another challenge posed by technological advancement is that it is changing how people work and the terms on which they work.
Even in advanced economies, short-term work, often found through online platforms, is posing similar challenges to those faced by the world’s informal workers, the report says.
It says that adjusting to the next wave of jobs requires social protection, showing that eight in 10 people in developing countries receive no social assistance, and six in 10 work informally without insurance.
Thus, social protection should be strengthened by expanding the overall coverage that prioritises the neediest people in society.
Enhanced social assistance and insurance systems would reduce the burden of risk-management on labour regulations, it says.
“As people become better protected through such systems, labour regulation could, where appropriate, be made more balanced to facilitate movement between jobs,” the report says.
For societies to benefit from the potential that technology offers, they would need a new social contract centred on larger investments in human capital and progressively provided universal social protection, the report says.
But this might pose a challenge to many developing countries, because social inclusion requires fiscal space, and these countries often lack finances due to inadequate tax bases, large informal sectors, and inefficient administration.
However, these things could be improved, according to the report. It says that governments can increase their revenue through levying indirect taxes, reforming subsidies, and reducing tax avoidance by global corporations, especially among the new platform companies.
The report concludes by saying that the most significant investments that people, firms, and governments can make in the changing nature of work are in enhancing human capital.
“A basic level of human capital, such as literacy and numeracy, is needed for economic survival,” it says.
It says that the growing role of technology in life and business means that all types of jobs, including low-skilled ones, require more advanced cognitive skills.
For governments to prepare for the changing nature of work, they should boost their investment in human capital, enhance social protection, and increase revenue mobilisation, the report recommends.
*A version of this article appears in print in the 30 May, 2019 edition of Al-Ahram Weekly under the headline: Technological opportunities