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Fear the disconnection, not the machine

Siddhartha Raja's picture
Will robots, artificial intelligence, and derivatives such as driverless cars or automated call centers put us all out of work? Maybe. But the more immediate worry is about the effect of businesses not adopting today’s technologies. If businesses do not invest in technology, they will fail to increase productivity and become non-competitive, limiting job creation. Their disconnection is the bigger risk to job creation, rather than the speculated job losses due to automation.
 
This risk is already apparent. Take manufacturing and robots: if the adoption of technology is faster in say Germany than China, German manufacturers will re-shore to Germany. Indeed, robots in German car factories have already proven to be half the cost of human workers in Chinese car factories. Thus, a business in China has to upgrade technology in order to compete.
 
And China’s businesses have responded; they have been the largest buyers of robots in recent years. Moreover, a quarter of Chinese-bought robots were made in China. So some of the jobs lost in the factories were compensated by jobs created in making, installing, operating, and maintaining robots: adopting technology will create jobs even if some might be lost. But lagging behind will mean losing out.
 
As today’s World Development Report 2016 shows, technology adoption by firms brings digital dividends. Governments and donors can help smaller firms and firms in rural areas from developing countries reap these dividends. Those firms face higher risks of disconnection from the opportunities of technology such as access to markets and information, productivity, and quality.

But before businesses begin to even look at robots or AI-based machines, they should adopt simpler technologies, such as a website or email. Those statistics are telling. Less than half of businesses surveyed by the World Bank across 135 countries have a website. The number falls to one in four for Sub-Saharan Africa. In India, which has the world’s largest number of people not connected to the Internet, the share of firms with their own website is one in three, and only a bit more than half use email to correspond with their clients or suppliers. Advanced economies tend to do better. But even in those countries, many businesses have yet to adopt more advanced technologies, such as robots. Data from the International Federation of Robotics, an industry association, shows that only about a quarter of U.S. and Canadian manufacturing, construction and mining firms have adopted robots.
 
Returning to the example of firms with websites, small firms (less than 20 employees) are half as likely to have a website as large firms (with more than 100 employees). So are firms in rural areas versus those in larger cities. Informal firms and firms in poorer countries are even worse off; they do not gain from technology, nor are they protected against local and global competition.
 
What does this mean for the ongoing debate about technology and the future of work? It means that we need to recognize that machines do not just let themselves into our offices, homes, and factories; that is still a human choice. The takeover of work by robots is less straightforward than the current dialogue suggests. We need to think about how businesses, and not only individuals, will adopt and adapt to technology. The immediate problem is that they are not increasing productivity or connectivity through today’s available technologies, more than the risk of job losses due to tomorrow’s machines.
 
Adapting to and adopting technology
 
Research across many countries finds a range of factors determines how and why businesses adopt today’s information technologies (IT). A business’ decision depends as much on their perceptions of costs and benefits (and the costs relative to wages) and on access to finance, as it does on the availability of vendors and consultants (to help deploy IT), skilled workers (to use IT), and eager managers or owners (to make the final decision).
 
The regulatory environment also makes a difference: if a business does not face competitive pressure, or is held back unfairly, it will not make investments in upgrading any of its technology, including IT. And the social or cultural values embedded in a society will also determine how businesses react. Consider how Japan excelled in electronic hardware manufacturing, but struggled with software; or how mobile money has boomed in Kenya but is struggling in other settings. In sum, the entry of robots or any other technology will not be automatic. And neither will its impacts on jobs.
 
Failing to adopt and adapt to technology would render businesses unviable. Take the newspaper industry, ravaged in much of the developed world by the flourishing online news and social media revolution. Similar stories are playing out in taxis, bookstores, and hotels. When businesses fail to adapt, they close. And this will lead to job losses that might outweigh the longer term risks of intelligent machines replacing humans.
 
Bridging divides
 
Technology can help people get better at doing their jobs; those benefits could outweigh the costs of automation, even if the transition is painful for some. But for the benefits to be realized in the developing world, countries need to make significant investments in education, infrastructure and business environment. Without these basic building blocks in place, it is unlikely that businesses and workers will be able to build and operate robots. Or that the poor will invest in mechanized farming or market information services. As the WDR 2016 shows, countries will not truly benefit from digital technology if they do not address some of these analog foundations.
 
Put another way, new technology could lead to new divides. Smaller firms, older people, and poorer countries could fall behind. Inequality could rise from the inability of these groups to adopt technology. They will lose the chance to improve productivity and connectivity and share the benefits of the automation of work. Technology could very well put some of us out of work. But the larger risk is to leave many of us out of touch.

Comments

Submitted by Krishnan on

I tend to believe that far from killing small businesses, technology will help destroy unwieldy monopolies and bring about a fairer marketplace. If the benefits of scaling up enjoyed by oligopolistic and near monopolies can be had for a fraction of the cost thanks to technology, then that really is the end of big business. There would be no real efficiencies to be gained from scaling up, except that inefficiencies could actually be hidden under the cloak of size. A global consultancy I used to work for spent nearly a billion dollars coming up with a private data security system for its documents. When I started up, I paid 100 dollarsa month for a secure database with the same if not better security. And yes they take of security and updates. If anything over the past 200 years, value has been added by dehumanizing. Maybe now value will finally be added through rehumanising, where human input actually matters into the products and services we consume.

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