Technological unemployment

May 5, 2017 at 14:04

Technological unemployment

Globalization has often been accused of causing the rise in populism and people voting against the establishment or the elite. All over the world, there is a worrying trend towards popular sentiments for the strong-man leadership together with a decline in democracies. The decline in labor intensive businesses is now being felt especially in manufacturing and construction industries. This has led to a permanent class of unemployed and underemployed people even in developed economies. There is now a growing belief that the real cause for this phenomenon is technology and not globalization.

In a recent World Economic Forum ( WEF) report, it said: “Today’s world is one in which production, mobility, communication, energy, and other systems are changing with unprecedented speed and scope, disrupting everything from employment patterns to social relationships and geopolitical stability.“

The World Bank was even more direct when it said – automation will wipe out two-thirds of all jobs in developing countries. A recent study by the International Labor organization ( ILO) said that more than half of laborers in five ASEAN nations – Cambodia, Indonesia, Philippines, Thailand, Vietnam – will lose their jobs to automation in the next two decades. The most vulnerable sectors to automation are in manufacturing including textiles, clothing, footwear, electronics, automotive and business process outsourcing.

The ILO said that technologies including 3D printing, wearable technology, nanotechnology and robotic automation could cause this massive unemployment. The ILO report said: “ Robots are becoming better at assembly, cheaper, and increasingly able to collaborate with people.”

World Bank President Jim Yong Kim said in a recent speech: “Mechanization and the arrival of technology have disrupted traditional industrial production, upended manual jobs and called time on the work that has been done by generations of families.”

There are three reasons why the gap between the rich and the poor have become wider as a result of technology. First, automation has reduced the demand for labor. In 2015, a Mckinsey study reported that 45 percent of activities that workers do could already be automated if companies chose to do so. This percentage keeps increasing every year.

Second, according to the Organisation for Economic Co-operation and Development ( OECD) composed of 35 countries, up to 80 percent of the decline in labour’s share of national income between 1990 and 2007 was the result of the impact of technology. The result is that the distribution of income has shifted from labour to capital creating a situation where a few multibillionaires have more wealth than the combined assets of the bottom 50 percent of the world’s population.

Third, the measure of a nation’s economic progress is now being measured by the percentage of internet access of its population. According to a WEF report, at a global level, many people are being left behind altogether because more than 4 billion people still lack access to the internet, and more than 1.2 billion people are without even electricity.

The top 50 countries in internet penetration have an average penetration of 85 percent. This ranges from Iceland ( 97 percent) to Canada ( 91 percent) to South Korea and the United States ( both 85 percent) to Argentina and Hongkong ( both 75 percent). The rest of the world have an average penetration of 35 percent. Among ASEAN countries, the internet penetration are: Malaysia (67 percent), Vietnam ( 50 percent), Philippines ( 43 percent), Thailand ( 34 percent), Cambodia 32 percent), Indonesia (29 percent), and Myanmar ( 3 percent).

Technological unemployment

Technological unemployment or the loss of jobs caused by technological change has happened in previous industrial revolutions. During the last Industrial Revolution, in the late 19th century, a series of inventions happened over a brief period time. Among these inventions were the steam engine, telegraph, electricity, telephone, airplanes, and automobiles. Mechanized warfare was also invented which led to millions of deaths in two world wars.

The Industrial Revolution enabled products like cars to be mass produced for the first time. Mass transportation and real time communications were now accessible to the public. It was also the time when factories were invented; and, labourers replaced craftsmen.

The world became more prosperous; but, the gap between the poor and the rich widened. The abuses of capitalism led to the birth of Marxism. This led to bloody revolutions; the rise of dictators; and, two world wars. The world must ensure that this next technological revolution will not lead to another century of dictators, revolutions and wars.

The primary solution to avoid technological unemployment is by investing in human capital. This term was invented by the economist Theodore Schultz to reflect the value of human capacities. He believed that human capital was like any other type of capital. It could be invested through education, training and enhanced benefits that lead to an improvement in the quality and level of production.. It is said that any organization is only as good as its people.

Tax the robots

Investments in human capital will require massive financing which the private sector will not be willing to provide.. Bill Gates, founder of Microsoft, has proposed that companies who use robots should be taxed to temporarily slow the spread of automation and to generate funds for training workers, in areas such as manufacturing, who are displaced by automation.

Governments must accept the ultimate responsibility for investing in human capital since this is the only long term sustainable solution to massive technological unemployment.


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