As a country's labor gets too expensive to be used to produce low-value products, some poorer country takes over and starts the climb to prosperity. Will this formula help create more and better jobs in late industrializing countries like Bangladesh, India and Pakistan? Will programs like Indian Prime Minister Narendra Modi's "Make in India" help create more and better manufacturing jobs to bring prosperity to his country? To answer this question, let's look at a recent World Bank report.
World Bank Report:
A 2015 World Bank report titled "Manufacturing Conundrum" says this formula of creating more manufacturing jobs for greater prosperity is unlikely to continue to work in the future. Here are two reasons it offers:
1. Labor productivity has risen faster in manufacturing than in the wider economy. Higher levels of manufacturing output are now compatible with lower levels of manufacturing employment. the following figure confirms this, showing that peak manufacturing employment shares have fallen over time. Peak output shares have not.
2. Manufacturing activity is now more apt to leave for other countries as labor costs rise. Therefore deindustrialization kicks in at lower income levels. Moreover, this premature deindustrialization is more apparent in employment than in output data. Output can be sustained in the face of rising labor costs by replacing workers with machinery. (Arvind Subramaniam and Amrit Amirapu show similar trends in industrial (manufacturing plus mining, utilities and construction) employment using repeated cross-sections of countries.)
Rise of the Robots:
A key factor this report does not fully acknowledge is the dramatic advance in artificial intelligence (AI) leading to the rise of much more capable robots.
To put this in perspective, let's understand that the industrial revolution in the West moved a lot of jobs and people from farms to factories beginning in the 18th century. As a lot of low-cost, low-value manufacturing has moved to cheaper locations in the developing countries, there has been a major transition from manufacturing jobs to service sector jobs in the industrialized nations. Now the application of robots on the factory floors is putting pressure on manufacturing jobs everywhere---in developed as well as developing nations.
Low-Cost Manufacturing Jobs:
Even low-cost manufacturing jobs in garment industry are being challenged by highly capable sewing robots from companies like SoftWear Automation, a textile-equipment manufacturer based in Atlanta in the American state of Georgia. Here's how Economist Magazine describes it: "The company is developing machines which tackle the problems of automated sewing in a number of ways. They use cameras linked to a computer to track the stitching. Researchers have tried using machine vision before, for instance by having cameras detect the edge of a piece of fabric to work out where to stitch".
Service Sector Jobs:
Even the service sector jobs are now threatened with increasing capacity of the robots. Following are examples of robots intended to replace service sector workers that have been described Martin Ford in a recent NPR interview to promote his book "Rise of the Robots":
There's a company in Silicon Valley called Industrial Perception which is focused specifically on loading and unloading boxes and moving boxes around. This is a job that up until recently would've been beyond the robots because it relies on visual perception often in varied environments where the lighting may not be perfect and so forth, and where the boxes may be stacked haphazardly instead of precisely and it has been very, very difficult for a robot to take that on. But they've actually built a robot that's very sophisticated and may eventually be able to move boxes about one per second and that would compare with about one per every six seconds for a particularly efficient person. So it's dramatically faster and, of course, a robot that moves boxes is never going to get tired. It's never going to get injured. It's never going to file a workers' compensation claim.
Hamburger Making Robot:
Essentially, it's a machine that produces very, very high quality hamburgers. It can produce about 350 to 400 per hour; they come out fully configured on a conveyor belt ready to serve to the customer. ... It's all fresh vegetables and freshly ground meat and so forth; it's not frozen patties like you might find at a fast food joint. These are actually much higher quality hamburgers than you'd find at a typical fast food restaurant. ... They're building a machine that's actually quite compact that could potentially be used not just in fast food restaurants but in convenience stories and also maybe in vending machines.
News Writing Robot:
Essentially it looks at the raw data that's provided from some source, in this case from the baseball game, and it translates that into a real narrative. It's quite sophisticated. It doesn't simply take numbers and fill in the blanks in a formulaic report. It has the ability to actually analyze the data and figure out what things are important, what things are most interesting, and then it can actually weave that into a very compelling narrative. ... They're generating thousands and thousands of stories. In fact, the number I heard was about one story every 30 seconds is being generated automatically and that they appear on a number of websites and in the news media. Forbes is one that we know about. Many of the others that use this particular service aren't eager to disclose that. ... Right now it tends to be focused on those areas that you might consider to be a bit more formulaic, for example sports reporting and also financial reporting — things like earnings reports for companies and so forth.
Farm and factory jobs have dramatically declined forcing workers to move into the service sector. So what will happen when the service sector jobs decline? What will people do? Here are some possible answers:
Peer-to-peer economy: In a return to the era of barter economy, people will share what they have for a price. It could be a car, a room, a meal, a basic chore etc. Examples include AirBnB.com, Getaround, Etsy, Lyft, TaskRabbit
Shorter work-week: A shorter work week will alllow more people to be gainfully employed. Example: 35-hour work-week in France
Basic income guaranteed for all: First proposed by Richard Nixon in 1969 as “Family Assistance Plan”. Government will collect taxes and distribute basic assistance to allow people to subsist. If they choose to work, they can earn more money to have a higher standard of living.
People have moved from agriculture to manufacturing to service jobs over the last two centuries. Now highly-capable robots are threatening to replace workers in all sectors. Major disruptions are likely to occur to build a new economic order that offers everyone a dignified existence in future. Such an order could be a combination of peer-to-peer economy, work-sharing through shorter work weeks and basic guaranteed income for all. French philosopher Voltaire said: “Work saves a man from three great evils: boredom, vice and the need”. Basic guaranteed income only takes care of “the need”, not “boredom, vice”.
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