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Impact of automation on employment opportunities in India: Analysis

Oct 9, 2017 15:49 IST
Impact of automation on employment opportunities: Analysis

Job losses due to automation have become a cause of concern in recent times. Various reports of the multilateral agencies such as the World Bank Group and the International Laour Organisation have cautioned the developed countries, including India, to take appropriate policy measures to minimize the adverse impacts of automation on job opportunities.

It is against this backdrop, it is pertinent to know what is automation, positive and negative impacts of automation and the possible solutions before the government.

About automation

As per the International Studies Association (ISA), automation is defined as the creation and application of technology to monitor and control the production and delivery of products and services. Automation is spread across different segments of the economy, such as, manufacturing, transportation, utilities, defense, services, etc.

Introduction of driverless metros in Delhi, the news of layoffs in big IT companies like Cognizant, Infosys, and Tech Mahindra due to automation, the threat to employment opportunities from information and communication technologies, artificial intelligence and robotics in content, banking, pharmaceuticals, food and beverages, logistics and security sectors are indications of the impact of automation on employment scenario in the country.

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Positive impacts of automation on jobs

The following are some of the positive impacts of automation on creation of jobs in the country.

• A company which resorts to automation offers goods and services at lower costs than traditional providers. The reduced costs keep the inflation under check and results in more savings by individuals and companies. The increased savings will be utilized as capital by the industry, which will lead to the creation of more jobs.

• Automation raises the efficiency and productivity. This principle applies to public, private and non-profit sectors alike. For instance, a report released by the World Bank Group in 2016, Digital Dividends, concluded that e-procurement initiatives by the Indian government helped in injecting more competition into the process by increasing the probability that the winning bidder comes from outside the project’s region resulting in more qualitative infrastructure. The better socio-econimic infrastructure always attract more investment, production and more employment opportunities.

• Under normal circumstances, automation takes place to reduce costs by a firm. Reduction in costs leads to more profits. Increase in profits ensures more funds for innovation and research by companies, which in turn lead to the development of new technologies and consequently, more jobs.

• Automation reduces bureaucratic discretion and reduces opportunities for petty corruption in patronage-based systems. Reduction in corruption leads to improved ease of doing business conditions, which will further lead to more investments and more job opportunities.

Despite the above mentioned positive impacts, automation is not without its share of criticisms. The following are some of the adverse impacts of automation on creation of jobs in the country.

• The major criticism against automation of processes is lay offs. This is more so in the lower and middle-level due to the low skill set required and less human-to-human interaction of employees. Besides loosing an existing job, automation also creates challenges for individuals in the transition to new jobs, especially when the skill needs of new jobs are different from those of the old jobs.

• As per the World Bank’s report, automation leads to an emergence of new forms of jobs such as mircowork, which are the  jobs in the on-demand economy. These new forms of jobs are freelancing in nature and leads to erosion of workers’ bargaining power and a lack of benefits such as health, insurance, etc.

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Way Forward

As per the World Bank Group’s report, two-thirds of all jobs could be susceptible to automation in developing countries in coming decades. However, barriers to technology adoption, lower wages, and a higher prevalence of jobs based on manual dexterity in India mean that automation is likely to be slower and less widespread compared to other countries.
The major challenge before the India is to find jobs for its working-age population which is forecast to increase from the present 740 million to 1.3 billion by 2050. On the other hand, job creation is not expected to rise to 18 million by 2018.

It is against this backdrop, the following steps need to be taken to minimize the adverse impacts of automation on employment opportunities.

Skill upgradation: The union government has launched various programmes to skill the youth under the Skill India campaign. The programmes should include not only the illiterate youth, but also those who lost jobs due to automation.

Flexible-labour laws: Apart from the skill upgradation, the labour laws should be made flexible to facilitate an employee’s transition from one job to another job is smooth. Adequate social support systems should be put in place to support workers while they are between jobs or not working regularly.

Focus on SMEs: As per an estimate, an investment of around 1.5 lakh rupees is needed to create one job in small and cottage industries, whereas an investment of around 6 lakh rupees are required to create one job in capital intensive heavy industries. Hence, the immediate focus should be on the development of small and medium enterprises as heavy industries based on automation cannot be driver of employment. Thus, labour-intensive infrastructure sectors such as roads and railways and cottage industries should be developed.

Need for employee protection: The World Bank Group suggested that it would be better to strengthen workers’ protection independently from work contracts by de-linking social insurance from employment, offering independent social assistance, and helping workers retrain and find new employment quickly.

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Conclusion

The Indian economy is in transition. Recent initiatives like demonetization and Goods and Services Tax (GST) are yet to deliver the results. Besides, the technological advancements are pre-conditions to sustain high growth levels in the economy. Whenever a new technology is integrated into economic processes, it is quite natural that it leads to anxieties about job losses. However, the present trend of automation is a cause of worry due to its impact on even white-collar jobs. Since unemployment is a socio-economic problem, the government, especially the NITI Aayog, should dwell into the issue and come up with a right mix of solution keeping in view the varied interests of the economy as a whole.

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DISCLAIMER: JPL and its affiliates shall have no liability for any views, thoughts and comments expressed on this article.

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