The Czech writer Karel Capek had first coined the word 'robot' back in 1920 based on the Slavic word 'robota' meaning work. Machines have now replaced human workers in numerous fields over the past 100 years. However, contrary to apprehensions by many, technology has generated more jobs than it has dislodged till now. By reducing the demand for routine tasks for workers, technology has also raised labour productivity in many sectors. In the process, it has opened up avenues for newer ventures that were once only imagined in science fiction.
In tandem with technological advancement, new production methods are adopted by firms; markets undergo expansion and societies experience transformation. New technologies are also utilised for enhancing efficiency in the management and operation of firms. Workers are hired to produce parts in one location, which are assembled in another and then sold through yet another site. All these result in consumers getting wider choices of commodities at lower prices. Even small firms become global through this technological progression, and the e-commerce platforms open up new markets for selling goods and services beyond national borders.
It is in the above backdrop that the latest World Development Report (2019) has been published by the World Bank on the theme of 'The Changing Nature of Work'. The outgoing World Bank president Jim Yong Kim noted in the Foreword, "We know that robots are taking over thousands of routine tasks and will eliminate many low-skill jobs in advanced economies and developing countries. At the same time, technology is creating opportunities, paving the way for new and altered jobs, increasing productivity, and improving the delivery of public services. When we consider the scope of the challenge to prepare for the future of work, it is important to understand that many children currently in primary school will work in jobs as adults that do not even exist today".
The primacy of human capital has been emphasised in this report for tackling a challenge that defies simple and prescriptive remedies. Three kinds of skills have been identified as increasingly important in today's labour markets: cognitive skills like complex problem-solving; socio-behavioural skills like teamwork and collaboration; and skill combinations facilitating adaptability like reasoning and self-efficacy. Strong human capital foundations and life-long learning are considered essential for grooming these skills.
It is during early childhood that the foundations for human capital are laid. But most developing countries do not yet attach priority to early childhood development. Consequently, the human capital outcomes of basic schooling in these countries are mostly sub-optimal. This year, the World Bank has presented for the first time a new human capital index (HCI), which highlights the link between investments in human capital (health and education) and the productivity of the next generation of workers. Bangladesh has been ranked 106th in the index out of a total 157 countries with a HCI score of 0.48. Bangladesh's score is better than its big neighbours India (115th, with score of 0.44) and Pakistan (134th, with score of 0.39), but it trails behind smaller South Asian states like Nepal (102nd, with score of 0.49) and Sri Lanka (74th, with score of 0.58). It is claimed that climbing from the 25th to the 75th percentile on the HCI would bring an additional 1.4 per cent annual GDP (gross domestic product) growth over a span of 50 years. The World Bank analysis suggests that the workforces in the countries with lowest human capital investment would be only one-third to half as productive in future compared to what they could be if they enjoyed optimum health and received quality education.
The World Bank prescribes creation of formal jobs as the first-best policy for seizing the benefits of technological advancement. Most workers remain trapped in low-productivity employment in many developing countries, most often in the informal sector having little access to technology. Superior adult learning opportunities could equip those who leave schools to re-skill themselves in line with the demands of changing labour market. Investments in infrastructure are also required, for example, to ensure affordable access to the internet for those who remain unconnected. Investments in roads, ports, and municipal infrastructure are also needed for deriving optimal benefits from technology.
The need for social protection has also been highlighted for adjusting to the next wave of technology-induced jobs. It is regrettable that 80 per cent people receive no social assistance and 60 per cent work informally without insurance in developing countries. Expansion of coverage by prioritising the most-needy people in society could result in the strengthening of social protection. Universal basic income could be another option, but it is as yet untested and might prove to be prohibitively expensive for developing countries. Increased social assistance and expanded insurance system could diminish the burden of risk management in the regulation of labour. In this way, regulation could be made more balanced by facilitating movement between jobs and protection of workers. In fact, the coverage of social insurance remains very low in most developing countries, where two-thirds of workers are employed in the informal sector. The figures for India and Bangladesh are at present only 10 per cent and 2.0 per cent respectively.
A new social contract would also be needed with focus on bigger investments in human capital and gradual expansion of universal social protection. But many developing countries lack the required finances for enhanced social inclusion, mainly because of insufficient tax bases, large size of informal sectors and inefficient public administration. This deficiency can be overcome through improvements in the fiscal regime. For example, more property taxes can be collected from urban municipalities, and additional excise taxes can be levied on harmful commodities like sugar and tobacco. Other possible sources of finance include levying uniform indirect taxes like VAT, and reducing tax evasions, especially by multinational companies and global e-commerce platforms.
It is quite obvious that the developing countries are now caught in the middle of rapid technological shifts that are causing radical changes in the nature of work. They have no option but to invest more in human capital development in order to prepare their citizens for the future challenges.
Dr. Helal Uddin Ahmed is a retired Additional Secretary and former editor of Bangladesh Quarterly.