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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 Outline 1. Trends in structural transformation (ST) Tertiarization and convergence 2. 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

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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 @LukasSchlogl University of Vienna @LukasSchlogl

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Employment across sectors

25 50 75 100 1990 2010 2030 2050 25 50 75 100 1990 2010 2030 2050 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

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University of Vienna @LukasSchlogl

Value addition across sectors

25 50 75 100 1990 2010 2030 2050 25 50 75 100 1990 2010 2030 2050 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

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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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University of Vienna @LukasSchlogl

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 30,000 60,000 90,000 40 50 60 GNI per capita Malaysia Thailand Cambodia 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)

University of Vienna @LukasSchlogl

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

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University of Vienna @LukasSchlogl

Industrial robot density low but growing fast

Indonesia Malaysia Philippines Singapore Thailand R² = 0.6 0.6 0.7 0.8 0.9 1 200 400 600 800 Human Development Index 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

  • fficial 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

25 50 75 100 1991 1996 2001 2006 2011 2016 Agriculture Industry Services

(%, OECD, Employment share)

25 50 75 100 1991 1996 2001 2006 2011 2016 Agriculture Industry Services

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

University of Vienna @LukasSchlogl

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Premature deindustrialization?

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

University of Vienna @LukasSchlogl

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R&D expenditure

1 2 3 OECD (2015) Malaysia (2015) Thailand (2015) Vietnam (2013) Philippines (2013) Indonesia (2013) (%, R&D expenditure/GDP)

University of Vienna @LukasSchlogl

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Skills

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 University of Vienna @LukasSchlogl

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But: stable labour force participation

Source: ILO 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
  • Innovation hard to contain in a hyper-globalised, digitally connected world

(‘automation creep’) unless concentrated political resistance

  • 3. Undirected early adoption
  • Selective early adoption during late development despite low-skilled, low-

cost, low-social protection environment.

  • 4. Specialisation towards comparative disadvantage?
  • Less inclusive development, a smaller middle class, less democracy?
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The near term future of ST in SEA

… will be characterised by:

  • Continued expansion of service sector employment
  • MICs reaching Clark turning point, starting job deindustrialisation
  • More technological convergence unless labour protectionism

… will raise the following questions:

  • Should technological adoption be commensurate to level of econ

development? Can you automate prematurely?

  • Can the labour force be upskilled fast enough?
  • Does automation require a specific (social) policy context?
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Thank you!

Forthcoming with Palgrave as OA: lukas.schloegl@univie.ac.at

University of Vienna @LukasSchlogl

Disrupted Development. The Future of Industrialisation and Inequality in the Age of Automation (Schlogl & Sumner 2019)