Photo: Russell Watkins / DFID | Attribution 2.0 Generic (CC BY 2.0)

The changing world of work, inequality and development

5 September 2017
Author: Andrew Norton

Accelerating technological change is disrupting and transforming the world of work.  In IIED's recent paper, Automation and inequality: The changing world of work in the global South [PDF], I looked at the impact of this change on poor countries.

We can identify six key forces arising from automation and digitisation that could increase inequality, either within or between countries.

1. The decline of export manufacturing

Many Asian countries have followed a route to rapid growth through manufacturing goods for export to rich country consumer markets, but automation is eroding this pathway. Sectors that are next in line for automation include the textile and call centre industries, both of which have expanded opportunities for women, so the impact on gender equality could be sharply negative. For Africa, with a high youth population, not being able to capitalise on low-cost labour to attract manufacturing investment is concerning.

2. Increasing returns to capital vs. labour 

The tendency of technological advance is to increase returns to capital (the owners of the machines) and decrease returns to workers. This will drive polarisation of incomes and wealth, increasing inequality.  

3. Boosting incomes of top end workers.  

Digital technologies can provide a huge boost to the productivity of highly skilled workers in some sectors, leading to less demand for the less skilled.  

4. Transforming rural economies. 

If automation enables agri-business to develop more profitable business models, the asset base of poor households may be at risk.  Digital management of supply chains will increasingly integrate production, processing and marketing, meaning smallholders may struggle with these changing distribution systems.

5. Increasing insecurity and isolation for workers in the digital economy.  

On-demand “gig economy” platforms create challenging conditions for collective action for workers, undermining protections and living standards.

6. Eroding openness and solidarity in rich countries.  

The erosion of meaning, security and certainty in the world of work in rich countries has potentially serious impacts on developing countries.  It can reduce tolerance of migration, public support for aid and openness to imports, as well as lowering support for tackling global challenges like climate change.

But growing inequality is not inevitable. Forces that increase the gap between developed and developing countries, and undermine poor people’s livelihoods, can be mitigated through policy changes. 

Governments need to act now to introduce reforms that will shift their economies’ focus. By moving the dependence on manufacturing, and preparing for the changes that automation and other technological developments will bring, they can protect people’s livelihoods. 

Six ideas for mitigating rising inequality

1. Using your natural capital 

Countries with rich ecosystems can focus their sustainable development on the inherent value of these resources. Costa Rica has done this through its reforestation, which has helped develop sustainable tourism.

2. Social protection systems

A basic level of support allows people to seek work in the informal economy. There are many viable models already operating in middle income countries, from cash transfers to employment guarantee schemes such as MGNREGA in India. Equally vital is for governments to invest in education systems that help people to flourish in the new, dynamic world of work.

3. Energy access

Smart grid systems or digitally enabled household access could enhance access to clean energy from renewable sources, boosting employment opportunities.  

4. Information and communication technology

Mobile phone technologies can greatly benefit people’s livelihoods. They improve access to social transfers, reduce costs of remittances from labour migrants, and provide access to climate, weather and market information.
5. Enhanced smallholder production

Transformative micro-technologies such as drip irrigation and crop information provided by drones could enhance small producers’ productivity and help stimulate a vibrant smallholder sector, shaping equitable markets.

6. Global access to rich country labour markets for some services

The rapid expansion of global on-demand platforms for skills such as translation, accountancy and copywriting provides a way for educated workers in the global south to access northern markets.

Actors in developing countries will need to make bets on how they can best position themselves. Automation and inequality [PDF] assesses implications for a range of actors and increasingly challenging policy areas, including social policy, industrial policy and how to maintain a tax revenue base.  If export manufacturing’s power to stimulate rapid economic growth falls, then ensuring distributional equity and the good stewardship of natural capital for now and the future, will matter more than ever.

Bond and Forum for the Future are launching a collaborative inquiry to stimulate thinking about how to harness trends such as automation, digitisation, and the rise of artificial intelligence to create sustainable and decent livelihoods for all. To find out more and to join our kick-off workshop on 3rd November 2017 in central London, please email Beatrice Waddingham: [email protected] 

About the author

Andrew Norton

Andrew Norton is an applied anthropologist and the director of IIED.