Robots Threaten Jobs in Developing Countries, But Could be an Opportunity Too

The increased use of robots threatens millions of jobs in developing countries, by undermining the advantage of low wages and facilitating the “reshoring” of industries back to industrialized countries, according to a new policy brief from United Nations Conference on Trade and Development (UNCTAD).

However, the brief – “Robots and industrialization in developing countries” – finds that reshoring is happening slowly and is limited to certain sectors. It advises developing countries both to embrace the digital revolution and to build local and regional markets that will make the reshoring less likely.

“The increased use of robots in developed countries risks eroding the traditional labor-cost advantage of developing countries,” the policy brief says.

“The share of occupations that could experience significant automation is actually higher in developing countries than in more advanced ones, where many of these jobs have already disappeared, and this concerns about two thirds of all jobs,” it adds, citing World Bank research.

Some reshoring has taken place, but the economy-wide effects have been minor so far.

“The slow pace of reshoring may partly be explained by tepid investment and sluggish aggregate demand [in the global economy] more generally,” the policy brief says.

“Offshoring continues to take place, and while labor-cost differentials remain a factor in the decision of firms on where to locate production, especially of goods with a high labor content, demand factors such as the size and growth of local markets are becoming increasingly important determinants,” it adds.

The policy brief says that industrial robots have primarily been deployed in the automotive, electrical and electronics industries.

“This means that in developing countries – such as Mexico and many countries in Asia – those engaged in export activities in these two sectors are the most exposed to reshoring,” it says.

The policy brief advises developing countries to tax robots and to prevent the rising inequality – caused by loss of low-skilled jobs – through social transfers.

Much of the debate on the economic impacts of robots remains speculative, it says.

“Disruptive technologies always bring a mix of benefits and risks,” the paper says, noting that by embracing the digital revolution, developing countries could use robots to open up new opportunities.

By combining three-dimensional printing and the use of robots, small businesses in developing countries could access new possibilities to manufacture on a much larger scale.

Each year since 2013, China has bought more industrial robots than any other country. By the end of 2016, it is likely to overtake Japan as the world’s biggest operator of industrial robots, the policy brief says.