More People, More Technology, More Jobs: How to Build Inclusive Growth
IMF Blog, December 4, 2017
Source details
- Canonical URL
- More People, More Technology, More Jobs: How to Build Inclusive Growth
Other formats
Bibliographic details
- Authors: Stefania Fabrizio, Andrea Presbitero
- Published: December 4, 2017
Overview and framing
- Authors: Stefania Fabrizio, Andrea F. Presbitero
- Date: December 4, 2017
- Central premise: Population growth and technological innovation do not necessarily have to widen inequality in developing countries; outcomes depend on current policy choices and on balancing short-term needs with long-term goals for sustainable and inclusive growth.
Population dynamics and labor market challenges
- Demographics:
- In Africa the under-25 generation represents 60 percent of the population.
- Labor supply and demand pressures:
- Population growth potentially boosts the supply of low-skilled workers while automation simultaneously squeezes labor demand.
- World Bank estimate cited: two-thirds of jobs in developing countries are susceptible to mechanization.
- A McKinsey report indicates robots using current technologies could already carry out more than 50 percent of work activities in countries like Kenya and Colombia.
- Labor market polarization and premature deindustrialization:
- Technological advancement may polarize the labor market into very low-skilled and high-skilled workers, increasing inequality.
- Continuous skill upgrading in manufacturing has led to a decline in low-skilled manufacturing jobs, described as `premature deindustrialization'—developing countries are starting to deindustrialize earlier and at lower income levels than in the past.
- Constraints to inclusive growth:
- Shortage of skilled workers.
- Insufficient infrastructure such as electricity and roads.
Opportunities from technology
- Positive impacts of technology on development:
- Improved job matching through greater information.
- Lower consumer prices and greater access to new markets and services due to lower connectivity costs.
- Case examples:
- Kenya: access to the mobile money M-PESA increased per capita consumption levels and lifted 2 percent of Kenyan households out of poverty, especially households led by a woman.
- Rwanda: a start-up uses drones to deliver medicines and blood in remote areas.
- Tanzania: in 2013 a new tax payment system using mobile phones lowered the risk of carrying money to banks and reduced the cost of doing business by saving time spent queuing in banks.
- Philippines (city of Batangas): supported by USAID, launched a similar mobile tax payment system in March 2014 to help businesses pay taxes via mobile devices.
- Technology and public services:
- Technological change can improve transparency and efficiency in public service provision.
Policy priorities and reforms
- Education and skills:
- Invest in the quality of education, align education with labor market demands, and emphasize on-the-job training.
- Evidence: an experiment in Afghanistan showed that setting up good quality village schools significantly increases enrollment and academic performance, especially for girls.
- Connectivity, migration, and investment:
- Improve connectivity and technologically advanced transportation networks to broaden benefits of urbanization, create opportunities, and increase jobs.
- More open migration policies and incentives for diaspora investment can foster diversification, diffusion of technology, and growth.
- Ricardo Hausmann’s emphasis: growth potential depends on diffusion of know-how and technology; “it is easier to move brains than it is to move the relevant information into brains.”
- Industrial policy and spatial trade-offs:
- Concentrating resources in one part of a country can boost innovation and create jobs but may widen income gaps between rich and poor areas and risk social and political unrest.
- Political economy and timing:
- Some policies that generate higher long-term growth may not provide wide short-term benefits, reducing political incentives to implement them.
- Key challenge: balance short-term imperatives with longer-term goals to achieve sustainable and inclusive growth.
Key takeaways
- The long-term outcomes of population growth and automation hinge on today’s policy choices.
- Policies should prioritize:
- Skill development and education quality.
- Improved mobility and connectivity.
- Migration frameworks and incentives for diaspora engagement.
- Strategic infrastructure and targeted industrial policies that consider equity implications.
- Implementation requires managing trade-offs between efficiency and equity, and between short-term political constraints and long-term development goals.
IMF Blog post: “More People, More Technology, More Jobs: How to Build Inclusive Growth” (Stefania Fabrizio, Andrea F. Presbitero; December 4, 2017).