The jobs & technology trade-off

Source: The post is based on the article “The jobs & technology trade-off” published in the Business Standard on 4th January 2023.

Syllabus: GS 3 – Employment.

Relevance: About job-displacing technology.

News: The negative impact of technological progress on jobs is often ignored. With India’s G20 presidency, India is expected to bring a human-centric approach to technology.

How has technological progress impacted the job market worldwide?

Since the 1990s in the US and Europe, labour has been continuously replaced by capital due to huge advances in technology, such as the internet and digital technology.

The pace of technology has accelerated, and the vast mass of workers cannot adjust to the new realities at that speed. Labour-replacing technologies are getting better and better every year. So, every country will face a job crisis in the near future.

On the other hand, technological improvements reduce the need for skills at the bottom end of the job market. For instance, deadbeat jobs will expand in sectors such as logistics, food and grocery delivery, retail and warehousing, and cab-hailing services.

How has India’s job market impacted technological progress?

In India, the employment elasticity of growth is probably between 0.1 and 0.2 now, which means even if we grow gross domestic product at 10%, jobs will grow just by 1-2%.

The Centre for Monitoring Indian Economy produces a four-monthly estimate of employment and unemployment the employment figure has stayed stuck in the 395-405 million range.

Read more: The Great Jobs Hunt – Too few Indians are seeking work and mostly among those working quality of employment isn’t great
Why India is more vulnerable to technological progress associated with job loss?

a) India has a lower level of per capita income than the rich world, b) India’s labour market will continue to expand for another 20 years. So, job loss will be more in India, c) Rich nations finance welfare with higher taxation, d) India did not conduct factor markets (labour and land) in 1991, e) Reskill and upskilling the citizens is impossible to do so for a working age population of 900 million.

Read more: India’s big problem of low-quality employment
What can be done to reverse job-displacing technologies?

Direct tech innovation towards job-enhancing sectors and disincentivising job-replacing ones: For this to happen a global consensus is required. This is because, a) In an interconnected world, it is not possible for any one country to decide on an automation policy on its own, b) Each country will try to frame a policy for its advantage. For example, China might advocate for job displacement technology due to its own ageing population, c) Jobs crisis is global in nature.

So, India should under its G20 presidency at least launch a study on how technology impacts jobs. Without a deeper understanding of job-displacing technology, the world can never get our arms around the problem.

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