1. Labour pains

Labour pains

Job losses a major concern

By: | Published: September 24, 2017 3:43 AM
In May last year, there were reports that Foxconn, which manufactures Apple and Samsung phones, replaced 60,000 staff with robots.

Whenever an economy moves towards the mass-scale adoption of a disruptive technology, it opens its gates to collateral damage. In AI’s case, it’s job losses. The IT sector has already started to feel the heat. Massive layoffs by firms such as Infosys, Cognizant and Wipro have already rendered thousands jobless in India as these firms prepare to embrace automation. As per a report by advisory analyst firm HfS Research in July last year, the true impact of intelligent automation will be felt on the of 15 million IT services and BPO workers, which will see about 1.4 million job losses by 2021. In India, the services industry workforce is expected to shrink by 4.8 lakh by 2021, a decline of 14%—HfS Research estimates that IT services and BPO industry employ about 3.5 million people in the country.

In May last year, there were reports that Foxconn, which manufactures Apple and Samsung phones, replaced 60,000 staff with robots. As per reports, the total worker strength at Foxconn has gone down from 1.10 lakh when it started, to 50,000 last year — a huge shift towards automation. “Bankers engaged in repetitive and back-office jobs shall be replaced by machines faster than expected. However, inconsistency of outcomes, lack of ecosystem and readiness of consumers shall delay large-scale replacements in the front office. Men and machines shall co-exist in banks for some time like they do in any modern walk of life. Nevertheless, banks and bankers shouldn’t relax. The speed and disruption, led primarily by innovators and tech companies, could come sooner than expected,” wrote Mrutyunjay Mahapatra, deputy MD and CIO, State Bank of India, in Financial Express.

Robinhood’s Arpan Shah agrees. “A large number of people who have been trained in various domains would all of a sudden find their skills no longer competitive,” he says. “One major downside is the transition of the business model from a headcount-based one to a technology arbitrage-based one,” says Gartner’s Arup Roy. “This means FTE-based (full-time equivalent) contracts get converted into autonomous systems-based contracts, for which either a licence fee can be charged or the pricing model could vary. It eventually results in shrinkage of the contract value.”

Roy, however, looks at this challenge as an opportunity for Indian firms to break the linearity in their business models. “Since they will be using technology arbitrage instead of labour arbitrage, it’s going to break the linearity and the pressures they face in terms of business growth-related challenges and margins, etc,” he says. However, there is another facet to AI adoption that often gets overlooked: job generation. And a case in point are the number of AI-based start-ups that have come up over the past two-three years in India. As per the McKinsey report, of the $14.6 trillion worth of wages associated with technically-automatable activities across the world, India currently encompasses $1.1 trillion. Also, in terms of labour associated with technically-automatable activities, India ranks second behind China. One plausible way to counter the job losses, say experts, is to train as many people as possible in machine learning and artificial intelligence. “All technical colleges in India should expand their programmes in this domain,” Shah says.

Simultaneously, we also need to come up with ways for people who have a higher chance of losing their jobs to make a successful transition. As per industry body Nasscom, up to 40% of the estimated four million workforce in India requires reskilling over the next five years if it’s to keep pace with the changing face of the IT industry.

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