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Economic Futures Reflections

2: Digital technology is transforming production and labour

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Digital technology is transforming production and labour

The current wave of technological innovations is changing how goods and services are produced and delivered. Mass consumption can happen without mass production, mass transportation, or mass warehousing; likely compress supply chains; and improve performance in many industries. Technology-enabled global competitive labour markets displace labour across worker categories, including white-collar and professional workers, and cause wage convergence. At a global scale, relocation of key production and labour inputs due to digital technologies could reduce the level of global aggregate demand, measured in gross domestic product (GDP).

Production

Repurposable, on-demand production platforms such as local 3D printing have become more sophisticated. Advanced 3D-printing technologies have led to lower costs, a greater range of material inputs, and greater ease of use. 3D printing can now produce prosthetics, homes, aircraft parts, bridges, organs for transplantation, and even food.1 Technological advances create the possibility of mass consumption without mass production, mass transportation, or mass warehousing. More products with custom specifications could be made on demand locally, at costs that rival those of mass-market goods made in low-wage economies. Algorithms can immediately identify the cheapest price point for intellectual or physical inputs to production. Blockchain technologies enable secure, trusted, low-cost digital transactions between humans and machines who do not know each other. These advances will likely compress supply chains and improve performance in many industries.

Labour

Some digital platform technologies deepen local markets by expanding access to local goods and services. For example, Uber provides a platform for local drivers to earn income from vehicles that would otherwise be underutilized. Airbnb provides a similar function for housing, and platforms such as Deliveroo2 and TaskRabbit3 facilitate on-demand discovery of, and access to, local labour.

“The Internet is enabling a new kind of poorly paid hell”


A comprehensive 2017 study of 3.8 million tasks conducted on Amazon’s Mechanical Turk platform by 2,676 workers found a median hourly wage of around US$2.00, with 96% earning less than $7.25/hour (i.e. the current minimum wage in the U.S.).8

It is uncertain to what extent digital technology adds or destroys work, but it is shifting work from one location to another. The increase of digital technologies is having a marked impact on labour. In one future scenario, digital technology contributes to the input of work both regrading production and labour, while in another it may destroy it. Work, however, is definitely shifting from one location to another. Global task-based platforms such as Upwork4 or freelancer.com5 help create new global labour markets. They facilitate employers unbundling jobs into tasks and microtasks that can be open for bids by skilled workers anywhere in the world.

Complementary digital technologies enable remote workers to participate fully and directly in local work—from knowledge work to front-line on-call expertise. Examples include telepresence robots such as Double6 and mixed reality telepresence glasses like Microsoft’s HoloLens.7 More work will likely be done in lower-pay jurisdictions. This could trigger an era of rapid global wage convergence.

Such labour displacement enabled by technology will affect workers across the wage spectrum. Wages could rise in less developed economies, where lower living costs allow workers to undercut and still live reasonably well due to gains in purchasing power. At the same time, wages could fall in developed economies like Canada.

Taylorism


Taylorism: a factory management system developed in the late 19th century to increase efficiency. It evaluates every step in the manufacturing process and breaks down production into specialized repetitive tasks (Merriam-Webster).

In this case, Taylorism moves from the shop floor to personal and business services that perform both physical and cognitive tasks in a highly specialized way. Mass production, previously considered as “efficient,” is superseded by even greater efficiencies that result from the application of digital technologies to both production and labour.

White-collar and professional workers are soon expected to face global labour markets for the first time. In the past, they have been relatively immune to global competition in labour markets and the price competition that results. Historically, work displacement has affected mainly blue-collar workers. However, the ongoing technological change will also impact professions such as accountants, lawyers, architects, engineers, software developers, editors, and auditors.

In light of a future that results in a global marketplace for white-collar and professional services, high-paying jobs are no longer connected to particular geographic locations. Historically, the supply of a large number of good, high-paying jobs was rooted to where the demand occurred, particularly in relation to services. For example, financial, insurance, and real estate jobs are concentrated in large metropolitan centres.

Possible futures that transform production and labour

Digital technologies enable sophisticated online platforms that allow tasks to be performed from any location, provided the worker’s competencies fit the employer’s needs. As a result, an increase in demand for a service may no longer result in local growth for services in this sector. This is true even in location-dependent sectors such as real estate. For example, Task Network9 is a platform-based agency that provides clerical and professional services to Canada, the U.S., and Australia through its fulfillment office in the Philippines. Its Toronto offices say it can cut labour costs by 50-70 percent. Back-office services are billed below Ontario’s minimum wage (C$6.40/hr versus $14/hr). Job postings for workers in Manila offer ₱30,000/month (C$733), a high wage in the Philippines. The service is used by the real estate industry, a highly profitable sector that has seen remarkable growth and profitability in home sales in recent years.

Futures are affected from both the digital relocation of work and the global distribution of demand given that providers of the work are in geographically less concentrated regions. Incomes and demand could decrease significantly in regions that have lost work due to digital relocation. This is particularly so if substituted workers cannot find new employment that provides the same level of income. Conversely, for regions that have gained work due to digital relocation, the opposite may occur: incomes and demand could increase.

It remains unclear whether growth in on-demand online labour, algorithmic management, and telework creates a net increase in spending, but it clearly adds new sources of supply. The net effects on pay rates and the volatility of earnings are unlikely to contribute to GDP growth in developed countries. However, the lines between personal and work lives will likely continue to be blurred. More people will spend longer hours working at their screens, increasing social isolation and stress. This may increase demand for, and expenditures on, healthcare. At a global scale, relocation of key production and labour inputs due to digital technologies could reduce the level of global aggregate demand, measured in GDP. This may occur if the purchasing power in the original location stops growing or declines, and the growth in purchasing power in the new location does not match the loss or is slow to accommodate changes in spending behaviour.

Endnotes

1 John Hauer, “3D Printing in the Food Industry,” Get3DSmart, accessed May 2019, https://get3dsmart.com/2019/06/03/3d-printing-in-the-food-industry/

2 Deliveroo, last accessed May 2020, https://deliveroo.co.uk/.

3 TaskRabbit, last accessed May 2020, https://www.taskrabbit.com/

4 Upwork, last accessed May 2020, https://www.upwork.com/

5 Freelancer.com, last accessed May 2020, https://www.freelancer.com/

6 Double Robotics, last accessed May 2020, https://www.doublerobotics.com/

7 “HoloLens 2,” Microsoft, last accessed May 2020, https://www.microsoft.com/en-us/hololens/hardware

8 Alana Semuels, “The Internet is Enabling a New Kind of Poorly Paid Hell,” The Atlantic, accessed January 23, 2018, https://www.theatlantic.com/business/archive/2018/01/amazon-mechanical-turk/551192/

9 Task Network, last accessed May 2020, http://tasknetwork.ca/

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