Will digital economy kill jobs

Written by Uma Ganesh | Updated: Oct 21 2013, 14:04pm hrs
The recent Gartner report about the top ten predictions for IT organisations and users indicates that by the year 2020, the labour reduction effect of digitisation will lead to social unrest and that new models of economy is likely to emerge in the developed world. It will highlight the reduction of labour content in work due to digitisation leading to large part of the eligible workforce being unable to participate in the traditional income generation model and hence resorting to alternate models of bartering, protectionism or social movements like occupy Wall Street at a significantly larger scale. While this prediction is for the matured economies, some of the signs of which are being already experienced, in a world which is more connected today than ever before in the past, there are some useful nuggets for Indian policy planners.

We have to remind ourselves that in the early days of computerisation in our country, employees of public sector companies, banks and other large establishments resisted automation due to fear of reduction of jobs but ultimately they turned around to accepting the transition due to the promise of better work environment, better customer service, growth in business and expansion of economy leading to more jobs. While we have come a long way in re-engineering several sectors and businesses on the strength of ICT and automation, the plan for transforming rural economy with ICT which is under way has huge expectations from all its stakeholders, the most important one being making labour markets more inclusive through job creation and better returns.

After registering an impressive GDP growth rate of over 9% between 2006 and 2008, 2012 ended with 5.2% raising questions about the prospects for employment opportunities and the social implications thereof. While manufacturing sector has to pick up momentum to be able to put a sizeable number of people into jobs, rural areas are aspiring to modernise and move away from being totally dependent on agriculture and tertiary sectors to becoming knowledge economies.

This trend would be even more real in the coming years with the number of students in the school and college system increasing substantially. There are 23 crore children in 13 lakh schools across the country today, thus registering a growth rate of around 14% as compared to the year 2002. Similarly the total number of enrolments in the higher education system has doubled from 8.4 million to around 17 million. With the increase in literacy and education levels, the aspirations of the youth to find suitable employment opportunities will further soar and whether digital economy is capable of creating or killing jobs is a moot question to rise.

Let us take a look at some of the models emerging out of ICT that are aimed at employment creation. The biggest opportunity for employment creation will be around the SMEs. According to McKinsey Global Institute, SMEs tend to create 2.6 jobs for every job displaced. For developing countries this effect is significantly higher, the ratio stands at 3.2. These SMEs are not just those who are connected with the ICT sector but others as well who are consumers of ICT. The opportunities for employment are therefore not only for IT specialists but for others who can support these SMEs with their specialised skills.

Online contracting is one of the emerging avenues of employment that can service these SMEs. It is similar to outsourcing but individuals directly participate in this form of activity. Apart from the large organisations who tap into these services, SMEs would have a need for such talent at low cost with geography and location being no constraint for sourcing. An estimated 2.5 million jobs were advertised in 2012 on sites such as Desk and Elance according to the World Bank publication Connecting to Work. While initially most of the jobs pertained to IT skills, the report says, as of July 2013, 50% of the jobs are non-technology related in areas requiring creative skills. The interesting aspect of online contracting is the access to global opportunities and the possibility of higher earnings than local alternate employment. While the initial draw for online contracting opportunities came from the mature markets, employers from India now post 9% of the opportunities on Freelancer.com.

The other model of employment is micro work. Micro work breaks up a large activity into multiple tasks and each task is assigned to specialists from around the world which are then finally assembled virtually. Microwork assignment has been popular with areas such as gaming, market research, testing, translation and copy writing. Some micro working sites even provide training and mentoring to those who undertake micro tasks and have created excellent quality control, acceptance and rewarding metrics. Amazon Mechanical Turk(AMT) is a good example of this category which is estimated to have 500,000 micro-workers from around the world with 34% being Indians according to the World Bank Report.

What we find in both these examples is the opportunity for Indian talent pool connected to the digital world and equipped with a variety of well honed skills, to offer their services in a competitive manner to customers around the world. While the private sector has started experimenting with such models for their domestic needs, the same models could be adopted by the state governments and the public sector enterprises who could consider lowering their costs by directly reaching out to the skilled workforce via the digital connected channels and thus make their labour pool productive and income generating. In order to make the model tick, the current expressions of work will get redefined.

For example, skilling people extremely well in the areas identified, orienting the suppliers and the consumers about how to transact in the new ecosystem, creating appreciation of the new work culture and building models that have the ability to scale and long lasting are worthy of attention. It should be noted that the proposed models have to be implemented in conjunction with other employment generation models in view of the compensation expectations and capabilities of individuals being varied. If we are successful in addressing some of the areas mentioned, such models could be significant game changers not only in terms of income generating opportunities but they would be the major enablers in discouraging migration of rural population to urban locations and encourage women to work from home in large numbers and contribute to the national economy.

The writer is CEO, Global Talent Track, a corporate training solutions company