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Digitalisation of work

At a glance

Automation and digitalisation are expected to cost many jobs, but there will also be entirely new, digital professions. Today, thousands of people are already finding work on digital platforms.

The digitalisation of work affords developing nations in particular many opportunities. It provides new sources of income for specialists, while new markets in remote and disadvantaged regions have the potential to forge new connections. But there are also risks inherent in the digital transformation – developing markets often lack access to global digital markets, have a shortage of experience, and lack the regulatory standards for global competitiveness.

To prepare the local population for the impacts of digitalisation, targeted educational and training activities should be provided within those markets jointly with the private sector. New forms of technology transfer will also enable German development partnerships to lay the proper foundations needed to increase employment in partner countries, compensate for job losses and support international collaboration in the digital sector.

Several people on a motorcycle in Rwanda

Fairwork – fair working conditions on digital platforms

To minimise the negative impact of digital platform economies on employees in developing nations, fair working conditions are required. This is why the Federal Ministry for Economic Cooperation and Development has established the “Fairwork Foundation” jointly with the Oxford Internet Institute.

Which topics will be relevant for the German development partnerships in the coming decades?

The digitalisation and automation of work poses many questions that the development partnership is called to answer. But where lies the boundary between scepticism and hope? Which topics will be relevant for the German development partnerships in the coming decades?

According to the report “The Future of Jobs Report 2018” by the World Economic Forum, businesses expects the loss of 75 million jobs and the gain of 133 million new jobs worldwide by 2022. A net gain in the number of overall jobs is expected

According to a report by the Chief Economist, the low adoption of technology to date will be particularly helpful for creating new jobs on the African continent. This will mean that the introduction of new technologies will result in fewer job losses. In sub-Saharan Africa, there is little local production and processing compared to other regions, so automation will affect fewer workers there in the coming years.

According to the ODI study “Digitalisation and the Future of Manufacturing in Africa” published in 2018, the use of modern robotics in production will not become commercially profitable until 2034, so there is a considerable timeframe available to shape structural change through development policy in a way that is socially responsible. The effects of automation must be taken seriously, but in the short and medium term, they will remain relatively limited.
While more and more work will be distributed through online platforms, thus creating jobs, these jobs will often be under insecure conditions, especially in developed and emerging markets. Digital workers will only be paid based on individual jobs (“gigs”) and will not have social security benefits. Workers are often unable to negotiate wages, working conditions, etc. collectively with employers, as there is a lack of union representation. Inadequate national regulations, a lack of local standards and the fact that employers are frequently located overseas exacerbate this problem. The development of a wave of “digital wage slaves” is a problem to be taken seriously.

In German development cooperation, the Federal Ministry for Economic Cooperation and Development is therefore currently working jointly with the renowned Oxford Internet Institute to develop the Fairwork Foundation, which will certify and classify fair digital platform work based on selected social and labour law criteria. Pilot projects are currently under way in India and South Africa.
Workers who are poorly qualified or unqualified are at greatest risk from technological change, as their jobs are easiest to automate. It is therefore important that these social groups are not left behind. In the future, entirely new job profiles will be created that meet the digital needs of the job market. This requires new approaches to work and education that train both digital and physical skills. To succeed on the job market in future, skills such as critical, creative thinking, empathy, adaptability and management competencies will become increasingly important.

The digital divide between women and men in particular means that women often have less access to digital technologies or fewer avenues to acquire digital skills. Many women are employed in sectors such as the textile industry and agriculture in particular, and these women could benefit from education opportunities. Even in the face of digital change, there is potential here to create long-term employment prospects.

The problem is extremely relevant and must be taken seriously. The Federal Ministry for Economic Cooperation and Development is already on the job – through the G20 initiative #eSkills4Girls, the Ministry is supporting digital skills for women and girls.
“Reshoring” – the return of offshored production facilities from low-wage countries in developed nations – is becoming an increasingly compelling proposition for businesses to have production closer to the consumer and to avoid increases in customs charges or wages in their current production centres. Automation encourages “reshoring”, as high wage costs in the domestic market become less relevant, transport costs fall and the challenges of doing business overseas cease to apply. While globalisation and digitalisation made it possible to divide production over multiple sites in the past, work can now increasingly be automated.

However, it must not be forgotten that developing and emerging nations are also important and growing markets. Production may also be offshored to these countries to supply local markets and demonstrate presence. Not only this, but services are also offshored to developing and emerging nations via digital platforms. This means that any “reshoring” of industrial capacities will be offset by digital “offshoring” of services.

To date there is little in the way of empirical evidence regarding the scope and trends of “reshoring”, and OECD analyses show that the impact on economies is still limited. This phenomenon must be observed closely in the coming years. However, “reshoring” remains an important topic to be taken seriously for the development partnerships.

Which specific developments are expected on the job markets?

Modern information and communication technologies (mobile telephones, internet) have also created new opportunities for income and work in low-wage countries, especially in relation to financial services (mobile payment systems) and agriculture (consulting and market information). Women benefit from this too. How automation will diminish the opportunities for low-wage countries to attract work-intensive export industries such as the textile and clothing industry remains to be seen. However, there are still technological limits to automation, and that includes the clothing industry. There are also industries (such as the agricultural industry) that require commodities held by low-wage countries, putting them at a geographical advantage beyond the mere low cost of labour. In many low-wage countries, demographic and economic change has also resulted in the development of a growing middle class with greater purchasing power, creating an internal market that is becoming increasingly appealing and in which local providers enjoy a comparative advantage due to their good knowledge of consumer preferences and their lower transport costs.

Digital change offers new work opportunities in the digital economy (IT sourcing, platform economies, etc.), but digitalisation can also exacerbate inequality – women in particular are at risk of being left behind by the digital trend. A lack of basic literacy and poor skills in the use of new technologies are obstacles in this regard. Not only that, but matters such as the handling of privacy and data security are underdeveloped in many cases.

The global digital economy creates new sources of income for specialists and markets in remote and disadvantaged regions. Mid-income countries, however, are often lacking adequate market access and the necessary experience and quality standards to be competitive on a global scale.

Emerging markets are in a unique position to benefit from digital change. However, it is necessary to reduce the digital divide – between the urban and rural spaces, between the old and the young, and between the sexes. Not only that, but matters such as the handling of privacy and data security are underdeveloped in many cases. Overall, many places lack the necessary infrastructure and digital know-how for the rural populace to even make use of digital applications in the first place, let alone benefit from them. Digital skills and qualifications are essential for women and girls to have better opportunities and greater access in an increasingly digital world.

The Federal Government expects the following specific developments for these economic sectors:

Digital technologies enable better access to information, whether it is localised weather data, more direct access to current market prices without the involvement of middlemen, or improved coordination of transporters to enable the transport of crops from the producer to the consumer. This helps to reduce crop losses. Agricultural products can also be distributed more efficiently through online trading and more precise pest control is possible thanks to the use of artificial intelligence in applications. These both help to secure food reserves. In the field of agriculture, digital technologies have also given rise to new services such as rental and sharing shares for agricultural equipment and machinery. Training service can be provided more cost-effectively via e-learning platforms, for example. This can be used to improve the employment prospects of young agricultural workers. Automation in the agricultural sector is usually found in crop processing. The sustainability of agricultural supply chains is improved by way of better transparency and traceability. Agricultural production is notable for its frequent employment of women, who can benefit from improved working conditions and better access to information.
Digital applications enable information to be delivered in a more targeted fashion to more people and allow information to be provided on employment, health and safety standards. Sensors can monitor production and be used, for example, for quality assurance. Automation is taking hold gradually in developing markets and is often dependent on the availability of capital or credit to replace workers and work stages with machinery. Low wage costs still sometimes undercut the corresponding investment and maintenance expenditure. There is also often a local lack of appropriate specialists.
Automation is also occurring to a certain degree in the services sector, for example through the use of chatbots or digital translation services. Worldwide, however, around 70 million people are working in the platform economy, which comprises localised services (such as delivery services) as well as non-localised jobs (e.g. graphics work, translation, programming). This creates many new jobs. It is important to ensure that these jobs remain fair and that labour and social standards are upheld.

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