LEAPFROGGING INTO THE UNKNOWN - UNU-WIDER LEAPFROGGING INTO THE UNKNOWN SOUTHEAST ASIA AND THE FUTURE

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  • LEAPFROGGING INTO THE UNKNOWN

    SOUTHEAST ASIA AND THE FUTURE OF JOBS

    Lukas Schlogl

    12 September 2019, Bangkok

    University of Vienna @LukasSchlogl

  • University of Vienna @LukasSchlogl

    Outline

    1. Trends in structural transformation (ST) Tertiarization and convergence

    2. Future employment challenges Technological catch up during late development

    3. Conclusions

    University of Vienna @LukasSchloglUniversity of Vienna @LukasSchlogl

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    Employment across sectors

    0

    25

    50

    75

    100

    1990 2010 2030 2050 0

    25

    50

    75

    100

    1990 2010 2030 2050

    0

    25

    50

    75

    100

    1990 2010 2030 2050

    HIC LIC LMC UMC

    (ILO modelled estimates. Dotted lines are projections based on the linear trend. Country aggregates are based on population-weighted averages.)

    Agriculture Industry Services

  • University of Vienna @LukasSchlogl

    Value addition across sectors

    0

    25

    50

    75

    100

    1990 2010 2030 2050 0

    25

    50

    75

    100

    1990 2010 2030 2050

    0

    25

    50

    75

    100

    1990 2010 2030 2050

    HIC LIC LMC UMC

    (ILO modelled estimates. Dotted lines are projections based on the linear trend. Country aggregates are based on population-weighted averages.)

    Agriculture Industry Services

  • University of Vienna @LukasSchlogl

    Structural convergence

    • Expansion of service-sector jobs at expense of industrial (HICs) and agricultural (DCs) jobs. Little potential left in HICs for cross-sector ST.

    • Industrial employment shares increasingly detached from development level. Congo, Bangladesh, Mexico, Finland have ~20%-25% employment in industry.

    • In OECD, industrial employment peaked in 60s/70s at ~30%. If path is followed, UMICs reach Clark turning point in 2030s, LMICs in 2040s.

    • Structural change fastest in LICs (Merotto, Weber, & Aterido, 2018)

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    The trend in Southeast Asia

    Movement of labour across sectors following similar pattern:

    • Employment in agriculture contracting

    • Service sector expanding

    • Industrial employment mixed • Most of SEA still shows expanding employment in industry

    • Rich SEA contracting: Malaysia reached ‘Clark turning point’ in late 90s, Brunei in early 90s, Singapore earlier. Singapore service sector share now higher than UK or US.

    So, business as usual?

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    Enter the Robots.

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    Automatable work across SEA

    Indonesia

    Malaysia

    Philippines

    Singapore

    Thailand

    0

    30,000

    60,000

    90,000

    40 50 60

    G N

    I p e

    r ca

    p it

    a

    Malaysia

    Thailand

    Cambodia

    0

    10,000

    20,000

    30,000

    50 60 70 80 90

    Share of the labour force susceptible to automation

    McKinsey (2017) World Bank (2018)

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    % of automatable jobs (estimates)

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    WB (2016) MGI (2017) Cambodia 78% Indonesia 52% Malaysia 68% 51% Philippines 48% Singapore 44% Thailand 72% 55%

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    Industrial robot density low but growing fast

    Indonesia

    Malaysia

    Philippines

    Singapore

    Thailand

    R² = 0.6

    0.6

    0.7

    0.8

    0.9

    1

    0 200 400 600 800

    H u

    m an

    D ev

    el o

    p m

    en t

    In d

    ex

    Robots per 10k manufacturing workers (IFR estimate for 2016)

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    Robot sales: prices↓ demand↑

    3.1 million industrial robots in operation globally by 2020

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    A trend towards service automation

    • Indonesian SOE Jasa Marga: phased in e-toll system in 2017 (GOI mandated it)

    • Unions feared loss of 20,000 jobs – JSMR denies layoffs

    • “Although we do not expect the majority of workers to leave JSMR (…), personnel expense growth should still be limited, as the A-Life [task rotation] program should reduce the need for additional recruitment in the coming years.” (Mirae Asset 2018)

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    Meanwhile, 40 miles from Silicon Valley...

    Toll Gates at Oakland Bay Bridge “Gutierrez and other collectors sometimes worry that the FasTrak lanes could replace tollbooth operators altogether. Gutierrez says it’s a question that has been coming up repeatedly at union meetings over the last three months. “The union claims that if it does come to that, they’ll help us get to another job site,” Gutierrez says. But CalTrans officials say—and Gutierrez agrees—that it is just a rumor. No official proposal has been laid out or discussed.” (Waheed 2012)

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    Late developers, early adopters

    McDonald’s e-Kiosks in Indonesia

    • Weak labour protection might make adoption of labour- displacing technology easier in countries where labour costs would otherwise provide little incentive for it

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    Late developers, early adopters

    SEA: Rapid rise of gig economy HICs: Banning Uber…

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    What’s the trouble?

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    Lots of agricultural work, despite ST

    OECD ASEAN-5

    0

    25

    50

    75

    100

    1991 1996 2001 2006 2011 2016 Agriculture Industry Services

    (%, OECD, Employment share)

    0

    25

    50

    75

    100

    1991 1996 2001 2006 2011 2016 Agriculture Industry Services

    (%, ASEAN-5 (simple ave.), Employment share)

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  • University of Vienna @LukasSchlogl

    Premature deindustrialization?

    0

    5

    10

    15

    20

    25

    30

    35

    40

    6.5 7 7.5 8 8.5 9 9.5 10 10.5

    Manufacturing (% of value added, constant prices)

    Korea (1960-2011)

    Malaysia (1970-2011)

    China (1960-2010)

    Indonesia (1960-2012)

    GDP per capita (2011 PPP dollars, log)

    Philippines (1971-2012)

    Thailand (1951-2011)

    Source: GGDC 10 Sector Database

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    R&D expenditure

    0

    1

    2

    3

    OECD (2015) Malaysia (2015)

    Thailand (2015)

    Vietnam (2013) Philippines (2013)

    Indonesia (2013)

    (%, R&D expenditure/GDP)

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  • University of Vienna @LukasSchlogl

    Skills

    0

    10

    20

    30

    40

    50

    60

    70

    80

    OECD (2016) Thailand (2015)

    Malaysia (2016)

    Philippines (2017)

    Vietnam (2016) Indonesia (2016)

    (%, Tertiary school enrolment rate)

    University of Vienna @LukasSchlogl

    Source: World Bank

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    Demographic dividend?

    HICs SE Asia

    Source: UN World Population Prospects

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  • University of Vienna @LukasSchlogl

    But: stable labour force participation

    Source: ILO

    0

    20

    40

    60

    80

    100

    1990 1995 2000 2005 2010 2015

    Indonesia Malaysia Philippines Singapore Vietnam Cambodia Thailand

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    Technological catch-up or automation creep?

    • Gerschenkron’s (1962) ‘advantages of backwardness’: “It makes sense for latecomers to utilise all the resources from the advanced world that they can acquire” (Mathews 2006). Today’s parlance: “successful economic development involves a leapfrogging process” (Burlamaqui and Rainer Kattel 2014). Also a major theme in NSE (Lin).

    • Robotisation pressing in tradeable sectors where GVC suppliers face international competition and risk of Reshoring

    But…

    • Rodrik (2018, p. 14) argues that “The evidence to date, on the employment and trade fronts, is that the disadvantages [of new technologies] may have more than offset the advantages” for developing countries due to erosion of low-cost labour advantage.

    • Brynjolfsson and McAfee (2014, p. 184) argue that the “biggest effect of automation is likely to be on workers (…) in developing nations that currently rely on low-cost labor for their competitive advantage”.

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    Late Development, Early Adoption

    1. Directed technological change • Labour saving innovation driven by firms innovating in a high-skill, high-cost,

    high-social-protection environment of HICs

    2. Innovation as global public good