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This article is inspired by the INSEAD article, the link of which appears at the end.
Continued from Previous……
We look at the two major factors causing employment polarization: Automation and Globalization.
Automation[Quote] MIT Professor of Economics David H. Autor notes that automation has been going on for centuries, but in the last few decades it has become cheaper than ever with the ubiquity of computers and internet. [Unquote]
The critical factor is the ever-decreasing cost and ever-increasing efficiency of technology. The jobs for which skilled blue-collar workers charged handsomely can now be done more swiftly and more neatly at a much cheaper price. Take any labor-intensive work, and you will find technological substitutes in most cases. In construction for instance, machines are providing cheaper technological substitutes to human labor. In the embroidery industry, the machines with 50-100 heads gives an output which may be higher than 100 skilled workers. In Pharmaceutical production, auto-cartoning is replacing packing staff which formed a large bulk of labor. Pakistan Pharma is still quite slow in adopting technology, while other industries are running fast. The probable reason for slow adoption at Pharma may be that the top tier is still occupied by the old seniors who are neither well-versed with new technology nor interested in it.
Machines are replacing repetitive jobs fast, because they work fast, their work is error-free, they do not need tea/lunch/bathroom/sickness breaks, and they do not demand anything. Middle level, moderately skilled, and skilled labor jobs are at the highest risk of getting eliminated.
Advancing globalization has contributed to employment polarization after 1980. There was a flurry of global and regional trade accords, such as WTO, NAFTA, SAFTA, ASEAN, SAARC, COMESA, IBSA etc.
The world economies came closer in unprecedented fashion and jobs shifted freely between nations. After China signed WTO, the bulk of manufacturing was shifted to China from the US and other countries. Free Trade sentiment also helped China to spread its products all over the globe.
Another effect of globalization in the rich nations was on wages. Most jobs, other than the executive positions, were transferred to manufacturing hubs like China, Vietnam, Bangladesh and India etc. Profitability improved and liabilities declined. The management therefore continued to revise their compensation upwards, till they reached an unsustainable level. In the US, this fact has been noticed, debated hotly and became a subject for congressional investigation.
There has been a change more recently. Political support for globalization is going down everywhere and protectionism is rising. The forms may be different, but one common component is huge investment in the AI technology and robotics. This will impact the employment polarization in the short term, based upon the nature of the original cause. If globalization was the main driver, we may expect polarization to somewhat improve. However, if technology was the main cause, then the polarization is likely to get worse.[Quote] A 2014 paper in American Economic Review found that “routine-biased technological change” (i.e. automation) was far more important than offshoring in fuelling pervasive employment polarisation across the advanced economies. This conclusion jibes with Professor Dutt’s recent observation that only a relatively small percentage of U.S. unemployment in the two decades or so preceding the Great Recession can be attributed to competition from China. Globalisation’s ongoing flaying at the hands of populist politicians may serve as a convenient public distraction, rage against the machines is a more justified response for the masses who find themselves trapped in lousy jobs. [Unquote]
Globalization and automation are interdependent and intertwined in some ways. If manufacturing in China is risked with the theft of intellectual property, the companies would invest more into securing this factor and that would mean creation of more highly skilled jobs. The lower- and middle jobs loss stays where it is.
It may be safely assumed that polarization will increase with time. The current ‘lovely-jobs’ will fall into ‘sagging middle’ and the middle jobs will descend down to ‘lousy-jobs’.
In order to safeguard this eventual writing-on-the-wall, several steps are urgently required. The most important of these is redesigning of educational system. The present bulk of curriculum is largely useless and must be replaced with future-looking technology and related education. This will help the masses to acquire relatively better jobs and save the population from falling into the spiral of poverty and its consequent problems.
This quote is most suitable for ending this discussion.
“The indispensable executive of the future will be adroit not only at managing human teams, but also at commanding automated minions so as to amplify the impact of her strategies.”
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