Will automation create jobs, or destroy them?

The Fourth Industrial Revolution is a challenge, but also an opportunity for the region to create jobs and deepen its hard-won prosperity.

In an era of sweeping transformations, one of the most important has been the dramatic reduction in poverty in developing Asia. Since 1990, more than one billion people have escaped extreme poverty, and many of them now earn a decent wage.

These workers are more productive and therefore earn higher salaries. Often they’ve left subsistence agriculture for better-paid jobs in modern industry and services – where 30 million new jobs have been created annually in the past 25 years.

Advances in technology have fueled this transition. From the use of high-yield crop varieties in farming to modern machine tools in manufacturing and ICT in services, new technology has played a pivotal role in the region’s transformation.

Now, Asia faces another challenge – the Fourth Industrial Revolution. The rise of new technologies such as artificial intelligence and industrial robotics will, if headlines and many commentators are to be believed, destroy many of the jobs that made this transformation possible.

ADB’s 2018 Asian Development Outlook finds a strong case for cautious optimism. This is encouraging news for developing Asia, where countries face the prospect of finding jobs for a regional labor force expected to expand by 161 million people between 2015 and 2030.

 Strong case for cautious optimism on automation & jobs in Asia

There will be hardship as repetitive, manual jobs in particular give way to robots. Governments should respond by ensuring that workers are protected from the downside of new technologies and able to harness the new opportunities they provide.

But a key finding of the report is that new technologies can also generate employment by spurring demand and productivity to create new occupations. It can even create entirely new industries like 3D printing of prosthetics, just as the internet spawned online malls.

A review of Asia’s economic evolution from agriculture to manufacturing shows how technology helped create prosperity. It also poses a key question for the region: Can a similarly positive experience occur today, given the extreme disruption in prospect?

Asia’s experience shows that good jobs and wages reduce poverty. Manufacturing is more likely than other economic sectors to provide a living wage, despite rising rural incomes across the region. Economies that made the structural transition from low-productivity sectors like agriculture to modern industries and services have been most successful in reducing poverty.

Practically every economy enjoying a high income today managed at some point to lift the share of workers in manufacturing above 18%. Agriculture still employs around a third of workers in developing Asia, but that share is falling.

 Asia’s experience shows that good jobs, higher wages reduce poverty

New technologies have underpinned this transition, raising factory and office productivity, and spurring higher wages.

This has attracted workers from rural areas to higher-paid jobs at urban centers. But technology has improved life on the farm, too. The adoption of new high-yielding varieties of grain, fruit, vegetables, and even livestock—coupled with better fertilizers, irrigation and machinery—has boosted agricultural productivity and raised rural standards of living.

As a result, agricultural workers now have options. They can leave subsistence farming for manufacturing jobs in towns and cities or remain on the farm to produce more food for higher incomes.

But while most people of working-age are employe—the median adult unemployment rate was just 3% in 2015—they may also be under-employed. This can mean they work fewer hours than they’d like or be trapped in low-paid jobs in the informal sector, doing work such as a backyard mechanic or a domestic servant.

The challenge is to ensure that enough new and better jobs are created to replace the ones displaced by technology. This might not be easy, with recent research suggesting that the manufacturing sector has lost power as an engine of job creation. Ever-increasing opportunities for automation enable the production of more goods without large workforces.

 Technology gives opportunities to create jobs lost by automation

But they also create value elsewhere, even among low-paid and low-skill workers in the informal economy. Take the case of Go-Jek, a motorbike service in Indonesia which has transformed Jakarta transport. Digital technology has allowed Go-Jek drivers to expand into food packaging and food delivery, further boosting their productivity and earnings.  

There are other signs that an increased use of technology will unleash forces that offset job losses. In the Philippines’ booming business process outsourcing sector, for example, robotic process automation (RPA) might allow a customer service representative to field four calls simultaneously rather than one. These workers would need extra training and will be in high demand. Likewise, RPA will likely spur the creation of jobs for better-trained financial and accounting professionals to handle the increased demand for services.

Some new jobs may call for skills that workers do not possess. People with weaker foundational skills best learned during childhood and adolescence could find themselves left behind.

That’s one reason why lifelong learning will be important for some workers. Education and training can be interwoven with full-time work through well-designed programs such as “nano-degrees” that develop specific skill-sets for targeted professions.

Making the most of the Fourth Industrial Revolution will be a challenge. But Asia’s economic rise shows it’s also an opportunity to create jobs and deepen the region’s hard-won prosperity.

This blog post is part of a series by the Asian Development Bank and Thinking Machines Data Science, Inc.