Where will jobs come from?

One of the main concerns of early 21st century is where jobs will come from. The question is valid in light of evidence that technologies such as artificial intelligence, robots and remote services will destroy certain jobs. Different commentators have different opinions of the future. But forecasts aside, the consensus is that impact will be great.

What remains unclear is how these technologies will affect countries with different characteristics. Will there be winners and losers? The potential economic, social and even political implications bring the question to the forefront.

New technologies seem to have a two-fold effect on employment. First, creation and destruction of jobs associated with technology and remote services may be affected. This means the use of AI in manufacturing activities, as well as the utilization of digital service platforms.

Secondly, there will be effects associated with the creation of jobs related to the development, management and distribution of new technologies and services. Such technologies require hosts of professionals and specialized technicians, as well as an assortment of activities aimed at managing and operating global businesses.

The first effect involves countries that use technology and services. The second is limited to countries that have become developers, managers and distributors of technologies and services. Therefore, the net effects vary between countries.

But there are reasons to expect even more asymmetrical outcomes. Firstly, as tech and services markets become more globalized and integrated, countries that develop, manage and distribute such products and services are expected to benefit to a greater extent in terms of employment, as many of these ventures are remotely managed. The second reason has to do with digital commoditization and its influence on the geography of investment.

The term “digital commoditization” refers to business models that seek to popularize access to and use of digital technologies and services. The model focuses on the network and platform effect and the commercialization of specialized services and licenses, rather than profiting by selling smart factories or providing paid access to platforms, which helps explain the relatively low prices of sophisticated technology chains, as well as access to digital services.

The work-saving features of these technologies are replacing an assortment of labor-intensive manufacturing tasks in developed countries. This helps to explain industrial activism and investment displacement in favor of developed countries. It also sheds light into the emergence of large manufacturing, technology, business and services hubs around various cities and the transformation of global value chains into regional value chains.

In fact, the vigor displayed by the American labor market is linked to the performance of such activities. Data from the Bureau of Labor Statistics show an increasing demand for technology jobs, estimating strong wage increases.

In this context, it seems reasonable to predict that developing countries will be facing a few challenges to creating jobs, including the effects of digital commoditization on the replacement of human labor by technologies and on changes in the geography of investment, which is likely to affect these countries. The third obstacle to overcome is associated with the growing demand for services supplied by foreign providers.

For Latin America, this debate is critical. In short, we have an ever-growing population of unqualified young people in a region that struggles with high unemployment rates and informality. 

If low costs of labor are no longer as effective to attract the investments, where will jobs come from?

Obviously, the issue is quite nuanced by country. Generally speaking, new and existing businesses may benefit from the region’s growing efficiency levels, a variety of digital raw materials and the increasing number of people joining the financial and consumer markets, as well as an assortment of infrastructure projects as part of an agenda that requires micro- and macroeconomic reforms.

However, if we want to give our countries a place in the global economy, it will be necessary to consider broader policies that bring the region into the digital age, including the industrialization of sectors with comparative advantages, the development of technologies, digital solutions and global services related to these sectors, and, most importantly,  the training of the next generation of workers for an increasingly digital, service-oriented world.

The region has already proved that it can successfully participate in the digital agenda as developer, manager and distributor. It is now necessary to create the conditions needed to scale capacities and encourage the development of new ideas and business. This will require skillful policymaking. The road ahead will be complex, but it is the only way to go.