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LABOR MARKETS IN THE

DIGITAL ERA: CHALLENGES


AHEAD FOR SOCIAL
PROTECTION
DUNCAN CAMPBELL
CORNELL UNIVERSITY AND THE CERS GROUP

DISCLAIMER: This presentation does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents.

THE CENTRAL QUESTION IS WHETHER THE DIGITAL ERA


WILL SUBSTITUTE LABOR OR COMPLEMENT IT
THE SHORT ANSWER IS THAT IT WILL DO BOTH

THE RAPIDITY OF TECHNOLOGICAL CHANGE COMBINED


WITH HUGELY DECLINING COSTS LEAD TO THE INCREASING
UBIQUITY OF IMPACT

The consequence of the above is the result of a massive increase in computing power in the hands of
more and more people
The consequence of a massive increase in computing power is driven by (1) software capable of
translating ever more complicated information into binary code an algorithm, (2) that instructs ever
more sophisticated hardware, e.g. robots, e.g. visual sensors

WE SHARE NEW JARGON BIG DATA BUT WHAT


DOES IT MEAN?

The collection and storage of massive amounts of data thanks to computing power
The ability to analyze these data thanks to computing power, and thus to isolate patterns that no
human could.

THE IMPORTANCE OF PATTERNS

Patterns are routine and predictable sequences of activities


Software captures these routines in an algorithm
The substitution of people by machines to perform such routines is the consequence

HOW TECHNOLOGY INTERACTS WITH WORKERS SKILLS


Content of tasks

Technology can
substitute
workers
Technology can
complement
workers

High
(routine tasks)
Ease of
automation
Low
(non-routine
tasks)

Cognitive
(analytical/socio
Manual
-emotional)
Bookkeepers
Machine
Proofreaders
operators
Clerks
Cashiers
Typists
Researchers
Teachers
Managers

Cleaners
Hairdressers
Waiters

THE DECLINE IN MANUFACTURING EMPLOYMENT IS


THE CONSEQUENCE OF ROBOTS REPLACING THE
ROUTINE SEQUENCES OF HUMAN LABOR
AT PRESENT, AND RELEVANT FOR ASIA, THE TEMPORARY
BRAKE IS RELATIVE COST I.E. WHEN LABOR IS LESS
EXPENSIVE THAN TECHNOLOGY

India Manufacturing
employment, 1990-2012,
10,000,000

China manufacturing
employment,1990-2011, in
'000

Japan manufacturing
employment, 1990-2012
16000

9,000,000

160,000

14000

8,000,000

140,000

12000

120,000

10000

100,000

8000

7,000,000
6,000,000
5,000,000

80,000

4,000,000
3,000,000

60,000

2,000,000

40,000

1,000,000

20,000

6000
4000
2000

0
90 92 94 96 98 00 02 04 06 08 10 12

90 92 94 96 98 00 02 04 06 08 10

90 92 94 96 98 00 02 04 06 08 10 12

NOR, HOWEVER, IS LABOR SUBSTITUTION LIMITED TO


MANUFACTURING

ASIAN CALL CENTERS WILL ALSO BECOME OBSOLETE

FREY & OSBORNE CONCLUDE THAT, IN PURELY TECHNICAL


TERMS, 50 % OF CURRENT SERVICE-SECTOR JOBS COULD BE
REPLACED BY CODE
telemarketers

sewers, hand

mathematical technicians

insurance underwriters

tax preparers

photographic process workers

data entry keyers

insurance claims clerks

order clerks

0.974

0.976

0.978

0.98

0.982

0.984

0.986

0.988

0.99

JOBS UNLIKELY TO DISAPPEAR .


pre-school teachers

human resources managers

psychologists

dentists

first-line supervisors of police

physicians and surgeons

mental health social workers

healthcare social workers

emergency management directors

first-line supervisors of mechanics

recreational therapists

0.001

0.002

0.003

0.004

0.005

0.006

0.007

0.008

THE THESIS OF JOB POLARIZATION AND WHAT


DOES IT HAVE TO DO WITH LABOR SUBSTITUTION
Weve talked about the missing middle in this conference. This is a different missing middle the
decline of the middle class !
Job polarization refers to the hollowing out of the middle class
What does all this have to do with labor substitution? Routine jobs are concentrated in the band of
middle class incomes. When jobs are lost here people move down rather than up

AND THIS ADVANCED COUNTRY TREND IS NOW ALSO


HAPPENING IN DEVELOPING COUNTRIES, AS IN THE
PHILIPPINES, INDONESIA, AND THAILAND, ACCORDING
TO THE WORLD BANK

HOLLOWING OUT OF THE LABOR MARKET?


Change in employment shares in selected developing countries: 1993-2010
Annual average change in employment share
(percentage points)

2
1.5
1
0.5
0
-0.5
-1
-1.5
-2
-2.5
High-skilled occupations (intensive in non-routine cognitive and interpsersonal skills)
Middle-skilled occupations (intensive in routine cognitive and manual skills)
Low-skilled occupations (intensive in non-routine manual skills)
Source: World Bank WDR Team based on ILO KILM data. For China, data comes from the Population Census for 2000 vs 2010.

BUT THE LABOR SUBSITUTION CONSEQUENCES OF


THE DIGITAL ERA DO NOT NECESSARILY DOMINATE
Technology also leads to innovation completely new products, markets, and occupations
But also to the job-creating potential of the segmentation of existing product or service markets (this is
Uber, or AirBnb, or other web-based new market entrants. Market segmentation most often means
market expansion
And, of course, there is more to digital impacts than labor markets directly

DIGITAL TECHNOLOGIES ARE TRANSFORMING

GOVERNMENT
DIGITAL IDENTITY

Indians with digital identity:

900 MILLION
& COUNTING

SOURCE: http://www.newindianexpress.com/cities/chennai/TraffickingVictims-see-New-life-in-Aadhaar/2015/03/30/article2737396.ece

DIGITAL TECHNOLOGIES ARE TRANSFORMING

PEOPLES LIVES
DIGITAL PAYMENTS

Number of mobile money


accounts worldwide:

300 MILLION
& COUNTING
(end of 2014)
Where mobile
money accounts
outnumber
bank accounts

SOURCE: John Owens, Alliance for Financial Inclusion, June 2013.

DIGITAL TECHNOLOGIES ARE TRANSFORMING

BUSINESS
DIGITAL MARKETPLACE

Number of small & medium


enterprises on Taobao (Alibaba):

5 MILLION
& COUNTING

SOURCE: http://www.alizila.com/chinas-online-cowboy-rounds-buyers

A VERY QUICK CONCLUSION


With the substitution effect, labor market turnover will quicken putting pressure on unemployment
insurance systems
With the substitution effect, the effort on education and skills, i.e. vocational training, rise in
prominence
With the complementary effect of technology and segmenting labor markets, there are important
changes in the status of employment, most especially the change from wage employment to selfemployment, and thus from labor law to commercial law
As to jobs? The jury is out. As to social protection mechanisms, changes will be needed

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