Rethinking the World of Work
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Bibliographic details
- Authors: SABINA DEWAN, EKKEHARD ERNST
- Published: December 1, 2020
Overview and central finding
- The pandemic is accelerating a shift toward more informal and precarious work.
- Many pandemic-era developments (job losses, automation, remote work) accelerate preexisting megatrends—shifting demographics and technological upheaval—that have been restructuring labor markets for at least two decades.
- The acceleration has particularly devastating consequences for developing economies, which the United Nations Development Programme estimates are expected to lose at least $220 billion in income.
Changing demographics
- A demographic reappraisal is required: advanced economies (for example, Germany, Japan, and the United States) face aging populations while a majority of developing economies face a swelling youth population.
- Some developing countries (for example, India, Indonesia, and Nigeria) will approach the peak of their demographic bulge during the next two decades; smaller countries such as Angola and Zambia are earlier in the transition.
- A youth bulge is an advantage only if productive jobs with rising wages are created.
- Key statistics:
- India’s youth population of 362 million, ages 15–29, is higher than the entire population of the United States.
- At 17.8 percent, the unemployment rate for India’s 15–29 cohort was three times that of the overall working population even before the pandemic.
- A survey of more than 12,000 young people conducted across 112 countries in April and May found severe disruption to social, educational, and economic outcomes for young adults.
- The ILO found that 17 percent of previously employed people between the ages of 18 and 29 stopped working after the pandemic hit, and 42 percent reported a drop in income.
Technology, automation, and the platform economy ("Fast and furious")
- Technology was already restructuring labor markets; COVID-19 has accelerated automation, remote work, and the platform economy.
- Automation:
- Has destroyed some jobs (examples: robots cleaning hospital floors, disappearing tollbooth operators, chatbots replacing customer service agents).
- Is advancing faster in developed economies and China, where labor costs are relatively high and capital is available, but developing economies are not immune.
- Developing economies face a triple shock: increasing domestic labor substitution via automation, at least moderate reshoring by foreign companies, and slowing exports due to weak demand.
- Platform economy and gig work:
- Digital platforms create new jobs (software programming, health care, delivery, taxi) but also hazards—low barriers to entry can lead to oversupply of labor and downward pressure on wages and working conditions.
- Evidence: A 2015 study by Perkumpulan Prakarsa and the JustJobs Network surveyed 205 on-demand motorbike taxi drivers (Gojek and GrabBike); of respondents who were previously employed, 51 percent had been engaged in the formal economy before joining the gig economy.
- Digital divides:
- Trends in distance learning and remote work widen gaps between those who can and cannot afford computers and internet access and between those with and without requisite digital skills.
Growing precarity
- The pandemic is driving a shift toward more informal and precarious work; prior to the pandemic informal employment was stagnant or declining in some countries, but COVID-19 will likely reverse that trend.
- Informal and precarious jobs may reduce measured unemployment but are lower-paying, less secure, and less productive—so declining unemployment rates after the pandemic should not be mistaken for economic recovery.
- The ILO estimates workers around the world lost $3.5 trillion in labor income in the first three quarters of 2020.
- Risks include employers favoring cheaper gig, temporary, or contractual workers over permanent workforces, and many informal/contractual workers lacking employer-provided social security, leaving them vulnerable to shocks.
- Consequences: squeezed consumption power, wasted productive potential, deeper inequality, and limits on broad-based economic development.
Policy recommendations (Solutions)
- Reorient policy priorities toward job-rich growth rather than assuming aggregate growth will automatically create good jobs.
- Advance sectors that both employ many people and raise growth capacity (example: infrastructure).
- Invest in increasingly productive labor-intensive sectors and move up the value chain (example: from assembly to full package production of apparel; from subsistence farming to food processing).
- Ensure wage growth aligns with productivity increases.
- Reject the idea that “any job is better than no job.”
- Poor-quality jobs exacerbate inequality, waste productive potential, and reduce aggregate demand.
- Avoid indiscriminate weakening of labor regulations; instead implement appropriately formulated minimum wages, social security, and active labor market policies (including job search assistance and apprenticeship programs).
- Regulate technology and digital platforms in the public interest.
- Mandate data sharing and transparency from tech companies that run digital platforms.
- Ensure platform workers can access public benefits and services and that governments have access to data for evidence-based policymaking.
- Enforce competition law more stringently to curb the power of large and growing corporations.
- Revisit corporate taxation, particularly for tech companies engaged in rent seeking and labor arbitrage, to help extend social security coverage to informal and contract workers.
- Invest in human capital reforms to educate and train young people so they are more employable and can be retooled as the economic landscape shifts.
- Build resilience alongside efficiency:
- Government investments in health, education, public employment, and social protection systems are essential.
- Fiscal and monetary stimulus provide space for policymakers to react quickly in uncertainty, even if such programs seem inefficient in good times.
Rethinking the World of Work — F&D Magazine, SABINA DEWAN and EKKEHARD ERNST, December 2020
Content in this bundle
- إعادة النظر في عالم العمل
- Una redefinición del mundo del trabajo ● Finanzas y Desarrollo ● Diciembre de 2020
- Repenser le monde du travail
- Rethinking the World of Work – IMF F&D
- Переосмысление мира работы – Финансы и развитие – декабрь 2020 года