The Jobs of Tomorrow : Technology, Productivity, and Prosperity in Latin America and the Caribbean

While adoption of new technologies is understood to enhance long-term growth and average per-capita incomes, its impact on lower-skilled workers is more complex and merits clarification. Concerns abound that advanced technologies developed in high-income countries would inexorably lead to job losses of lower-skilled, less well-off workers and exacerbate inequality. Conversely, there are countervailing concerns that policies intended to protect jobs from technology advancement would themselves stultify progress and depress productivity. This book squarely addresses both sets of concerns with new research showing that adoption of digital technologies offers a pathway to more inclusive growth by increasing adopting firms' outputs, with the jobs-enhancing impact of technology adoption assisted by growth-enhancing policies that foster sizable output expansion. The research reported here demonstrates with economic theory and data from Argentina, Brazil, Chile, Colombia and Mexico that lower-skilled workers can benefit from adoption of productivity-enhancing technologies biased towards skilled workers, and often do. The inclusive jobs outcomes arise when the effects of increased productivity and expanding output overcome the substitution of workers for technology. While the substitution effect replaces some lower-skilled workers with new technology and more highly-skilled labor, the output effect can lead to an increase in the total number of jobs for less-skilled workers. Critically, output can increase sufficiently to increase jobs across all tasks and skill types within adopting firms, including jobs for lower-skilled workers, as long as lower-skilled task content remains complementary to new technologies and related occupations are not completely automated and replaced by machines. It is this channel for inclusive growth that underlies the power of pro-competitive enabling policies and institutions—such as regulations encouraging firms to compete and policies supporting the development of skills that technology augments rather than replaces—to ensure that the positive impact of technology adoption on productivity and lower-skilled workers is realized. Front Cover ......Page 1 Contents......Page 7 Foreword......Page 11 Acknowledgments......Page 13 About the Authors......Page 15 Executive Summary......Page 17 Abbreviations......Page 23 Chapter 1 Introduction......Page 25 Channels Linking Technology to More Inclusive Growth......Page 26 Policies to Enable the Positive Impacts of Technology......Page 30 References......Page 33 Chapter 2 The Need for Productivity-Enhancing Technology Adoption in Latin America and the Caribbean......Page 35 References......Page 40 Chapter 3 A Conceptual Framework......Page 41 What Do We Know?......Page 42 Predictions about the Diverse Impacts of Technology Adoption......Page 43 References......Page 49 Chapter 4 New Lessons from the Region on the Impacts of Technology Adoption......Page 51 Impact on Firm Productivity and the Demand for Jobs, Types of Skills, and Wages......Page 53 Impacts on Job Dynamics and the Role of Complementary Investments in Skills......Page 56 The Role of Labor Market Regulations on Firms’ Decisions and Jobs Outcomes......Page 57 Impacts of Technology on Firms and Workers through Trade and Labor Mobility......Page 59 Notes......Page 60 References......Page 61 Chapter 5 Improving the Environment for Technology Adoption with Inclusion......Page 63 Map 5.1 LAC Has Some of the Highest Total Tariffs and Taxes for ICT Products......Page 65 Product Market Policies......Page 66 Education, Skills, and Labor Market Policies......Page 69 Figure 5.4 Scientific Production by Geographic Region......Page 71 References......Page 72 Chapter 6 Conclusions......Page 75 Questions for Further Research......Page 77 Reference......Page 78 Appendix A Background Studies......Page 79 Appendix B Detailed Literature Review......Page 81 Box 1.1 Déjà vu—Preoccupations of and Responses to Perennial Luddites......Page 27 Figure B3.1.1 Substitution and Inclusive Output Expansion Effects from Technology Adoption......Page 44 Figure 2.2 Unemployment and Productivity in Study Countries and Comparators......Page 36 Figure 2.4 Rates of Internet and Mobile Phone Use by Households across Latin America and the Caribbean, Latest Year......Page 37 Figure 2.5 Digital Adoption in Latin America and the Caribbean Is Still Far from the East Asia and OECD Averages......Page 38 Figure 5.1 LAC Holds Last Place in the Business Environment Related to Digital Technologies......Page 64 Figure 5.2 Indices of Competition......Page 68 Figure 5.3 PISA Results and GDP per Capita......Page 70 Map 2.1 Internet Service Provision across Brazilian Municipalities, 1999–2014......Page 39 Table 3.1 Predicted Impacts of Technology Adoption on Productivity, Jobs, and Wages......Page 47 Table 4.1 Empirical Impacts of Technology Adoption on Jobs, Wages, and Productivity......Page 52 K01 Front Cover 1 Contents 7 Foreword 11 Acknowledgments 13 About the Authors 15 Executive Summary 17 Abbreviations 23 Chapter 1 Introduction 25 Channels Linking Technology to More Inclusive Growth 26 Policies to Enable the Positive Impacts of Technology 30 Notes 33 References 33 Chapter 2 The Need for Productivity-Enhancing Technology Adoption in Latin America and the Caribbean 35 References 40 Chapter 3 A Conceptual Framework 41 What Do We Know? 42 Predictions about the Diverse Impacts of Technology Adoption 43 Notes 49 References 49 Chapter 4 New Lessons from the Region on the Impacts of Technology Adoption 51 Impact on Firm Productivity and the Demand for Jobs, Types of Skills, and Wages 53 Impacts on Job Dynamics and the Role of Complementary Investments in Skills 56 The Role of Labor Market Regulations on Firms’ Decisions and Jobs Outcomes 57 Impacts of Technology on Firms and Workers through Trade and Labor Mobility 59 Notes 60 References 61 Chapter 5 Improving the Environment for Technology Adoption with Inclusion 63 Technology Diffusion Support Policies 65 Product Market Policies 66 Education, Skills, and Labor Market Policies 69 Notes 71 References 72 Chapter 6 Conclusions 75 Questions for Further Research 77 Reference 78 Appendix A Background Studies 79 Appendix B Detailed Literature Review 81 Boxes 27 Box 1.1 Déjà vu—Preoccupations of and Responses to Perennial Luddites 27 Box 3.1 A Model of Firm Heterogeneity with Predictions of the Impacts of Technology Adoption 44 Figures 36 Figure 2.1 Unemployment and Productivity by Region 36 Figure 2.2 Unemployment and Productivity in Study Countries and Comparators 36 Figure 2.3 Rates of Adoption of the Internet across Study Countries 37 Figure 2.4 Rates of Internet and Mobile Phone Use by Households across Latin America and the Caribbean, Latest Year 37 Figure 2.5 Digital Adoption in Latin America and the Caribbean Is Still Far from the East Asia and OECD Averages 38 Figure B3.1.1 Substitution and Inclusive Output Expansion Effects from Technology Adoption 44 Figure 5.1 LAC Holds Last Place in the Business Environment Related to Digital Technologies 64 Figure 5.2 Indices of Competition 68 Figure 5.3 PISA Results and GDP per Capita 70 Figure 5.4 Scientific Production by Geographic Region 71 Maps 39 Map 2.1 Internet Service Provision across Brazilian Municipalities, 1999–2014 39 Map 5.1 LAC Has Some of the Highest Total Tariffs and Taxes for ICT Products 65 Tables 47 Table 3.1 Predicted Impacts of Technology Adoption on Productivity, Jobs, and Wages 47 Table 4.1 Empirical Impacts of Technology Adoption on Jobs, Wages, and Productivity 52 While adoption of new technologies is understood to enhance long-term growth and average per-capita incomes, its impact on lower-skilled workers is more complex and merits clarification. Concerns abound that advanced technologies developed in high-income countries would inexorably lead to job losses of lower-skilled, less well-off workers and exacerbate inequality. Conversely, there are countervailing concerns that policies intended to protect jobs from technology advancement would themselves stultify progress and depress productivity. This book squarely addresses both sets of concerns with new research showing that adoption of digital technologies offers a pathway to more inclusive growth by increasing adopting firms' outputs, with the jobs-enhancing impact of technology adoption assisted by growth-enhancing policies that foster sizable output expansion. The research reported here demonstrates with economic theory and data from Argentina, Brazil, Chile, Colombia and Mexico that lower-skilled workers can benefit from adoption of productivity-enhancing technologies biased towards skilled workers, and often do. The inclusive jobs outcomes arise when the effects of increased productivity and expanding output overcome the substitution of workers for technology. While the substitution effect replaces some lower-skilled workers with new technology and more highly-skilled labor, the output effect can lead to an increase in the total number of jobs for less-skilled workers. Critically, output can increase sufficiently to increase jobs across all tasks and skill types within adopting firms, including jobs for lower-skilled workers, as long as lower-skilled task content remains complementary to new technologies and related occupations are not completely automated and replaced by machines. It is this channel for inclusive growth that underlies the power of pro-competitive enabling policies and institutions-- such as regulations encouraging firms to compete and policies supporting the development of skills that technology augments rather than replaces-- to ensure that the positive impact of technology adoption on productivity and lower-skilled workers is realized