The future of employment: back in fashion?

Workers on the production line in a car factory, Chennai, India

A range of views from across the UN, the World Bank and the IMF raise some big questions for the future of employment and its relationship with structural economic transformation.

Employment and structural transformation were central issues to Arthur Lewis and many other pioneering development economists in the 1950s and onwards. Are such issues back in fashion?

Multilateral organisations from across the UN and elsewhere are showing a deepened interest in the subject area and in particular the relationship with structural economic transformation.

This post takes a look at a set of recent reports from international development agencies whose viewpoints often play a significant role in shaping the global policy discussion. There are at least three salient themes arising across the various recent reports:

  1. The issue of economic inequality and relatedly, the inclusive growth and policy agenda;
  2. The employment and economic development implications of rapid technological change and new technologies of automation, robotics, and digitalisation;
  3. The contemporary challenges of employment generation and industrialisation in the context of globalisation, ‘premature deindustrialisation’, and the ‘middle-income trap’.

All reports give a clear nod to these mega issues of economic and social development. Yet, converging interests do not imply a consensus in substance.

The IMF’s spring 2017 World Economic Outlook investigates the relationship of structural change and the globally declining labour share of income. They find for high-income countries that both automation and globalisation (specifically, import competition and offshoring) have reduced the demand for middle-skill occupations. Accordingly, they advocate for “skill upgrading of affected workers”. Where emerging and developing countries “have made the transition from agriculture to manufacturing and services (…), their routine exposure has risen” and “challenges similar to those in advanced economies could arise as automation progresses”. However, the IMF does not yet see an urgent case for policy intervention.

A substantial World Bank report on the Future of Manufacturing-Led Development notes that the “manufacturing sector’s job creation capacity is of increasing concern, especially for lower-skilled workers, in less industrialized countries”. In spite of this, the Bank continues to see manufacturing as “entry point” for developing countries. Their hope is that “countries that combine low wage costs with a sound business environment could maintain the cost-effectiveness of labor-intensive production over greater robotization in highly traded sectors”. Of course this follows on from the 2013 World Development Report on jobs.

The UNIDO’s Industrial Development Report 2016 takes a similar position. For them, “manufacturing remains a crucial economic sector in advanced and developing economies” which has “often played a key role in job creation”. The extent to which the service sector can replace manufacturing remains “open to doubt” to UNIDO. They see the “technology gap” between low- and high-income economies as a new “development trap”. This trap can be avoided by capacity building and higher competitiveness, assimilation to frontier technologies and to specialization patterns of highly productive economies.

The 2015 UNDP Human Development Report, too highlights that “work transformations are driven by globalization and technological revolutions, particularly the digital revolution”. In some contrast to the World Bank and UNIDO, they see “traditional paths to development” as “less viable today” considering the rising capital and skill intensity of manufacturing. In the future, according to UNDP, “industry is unlikely to absorb large numbers of rural workers”. In order to continue progress in human development nevertheless, they call for a public provision of essential services and protection against “inadequate wages and exploitative work conditions”.

In a somewhat similar vein, a new ILO report raises issues of taxation on automation technologies, the potential of universal basic income, and calls for a “concerted approach among unions” to safeguard decent work conditions. A newly launched high-level Global Commission on the Future of Work is informing the ILO’s opinion formation on the subject area going forward.

UNCTAD, takes a distinct view in its new Trade and Development Report. UNCTAD remains sceptical of the “hype surrounding the potential of robot-based automation”. In their view, it is a lack of macroeconomic dynamism in the West and “stalled structural transformation in many developing economies” that is holding back investments and thus new employment opportunities. UNCTAD advocates a “Global New Deal” while warning against dangers of “hyperglobalization” and austerity politics.

Overall, there is a renaissance of interest in employment and the relationship between employment and structural change in particular. That is not surprising given debates on premature deindustrialisation (a term UNCTAD coined in the early 2000s in its Trade and Development Report and recently pursued by Gabriel Palma and Dani Rodrik amongst others), and the burgeoning of interest in the employment impacts of automation, digitalisation and other new technologies.

That said, the reports differ notably on the nature of the problem and the policy recommendations – what to do about it. This is an important area for the ESRC Global Poverty and Inequality Dynamics research network. Specifically, how are employment and economic development to be pursued in a broad-based way and how to address what we have called, the developer’s dilemma. We’ll be coming back to such questions over the coming weeks and months.

Andy Sumner and Lukas Schlogl

Andy Sumner is a Reader in International Development in the Department of International Development, King’s College London. He is director of the ESRC Global Poverty & Inequality Dynamics (GPID) Research Network.

Lukas Schlogl is a Research Associate with the ESRC GPID Research Network at King’s College London.