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India in Transition

Automation and the Future of Jobs in India

Francis Kuriakose & Deepa Kylasam Iyer
November 5, 2018

We live in the age of artificial intelligence (AI) that has provided us with immense processing power, storage capacity, and access to information. The exponential development of technology gave us the spinning wheel in the first, electricity in the second, and computers in the third industrial revolution. In 2016, the World Economic Forum called AI “the fourth industrial revolution” that has radically transformed the way we live, work, and connect with each other. However, it has also given us regulatory challenges such as data ownership and labor protection. 

In particular, automation affects jobs and wage levels. A 2013 study by the Oxford Martin Programme on Technology and Employment shows that since 2000, only 0.5 percent of new jobs have been created that did not exist before. This is against 173 million jobs that would be automated in the next eight years in G7 countries, which are also the seven largest advanced economies in the world. In 2016, an OECD working paper titled “The Risk of Automation for Jobs in OECD Countries” concluded that 14 percent of the total jobs in 32 OECD countries would be automated whereas another 32 percent of jobs were under significant risk of automation. For the developing world, the World Development Report (2016) by the World Bank anticipates the consequence of automation as labor reallocation from labor surplus Asia to labor deficit countries of Latin America and Africa. 

Furthermore, in their 2018 research paper titled “Artificial Intelligence, Automation and Work,” MIT economists Daron Açemoglu and Pascual Restrepo calculated that each robot per 1,000 workers reduced the wage level by 0.25-0.50 percent. After examining 702 professions globally, a 2013 study by Oxford professors Carl Frey and Michael Osborne titled “The Future of Employment: How Susceptible are Jobs to Computerisation?” has shown that “middle-skill” jobs that require routine cognitive and manual applications would be automated in the next couple of years. As a result, they argue that India, which has 65 percent of global IT off-shore work and 40 percent of global business processing, will have 69 percent of its jobs in the formal employment automated by 2030. In this context, we examine the macro and micro level implications of automation in India and some emerging labor policy questions.

Impact of Automation
According to the International Labour Organisation (ILO), 60 percent of the formal employment in India relies on “middle-skill” jobs including clerical, sales, service, skilled agricultural, and trade-related work, all of which are prone to automation. Thus, automation has economy-wide implications at the macro-level and work-place level implications at the micro-level for the worker. At the macro level, there are three main transformations that automation will bring about: changes in skill demand, gender disparity in redeployment of workforce, and firm re-organization. First, the definition of “skill” will increasingly denote workers’ adaptability to work with or around automation. For example, demand for “systems skill” involving complex problem-solving abilities and social skills involving human perception will be in greater demand as opposed to physical or content skills.

Consequently, relative returns on time and effort on different jobs will vary significantly. This means work-life balance will improve for some type of jobs while others will be entirely wiped out. For example, jobs in call centers, retail, and administration taken up predominantly by women employees will face decimation whilst data clean-up and creating digital infrastructure performed by male workers will be in high demand, bringing a gendered aspect to the transformation. Finally, automation and redeployment of workers will realign firms on “human cloud platform,” where workers from any location can be hired to perform tasks. This will lead to a divergence between firm and workforce strategies in the short term.

At the micro level, automation will change the meaning of work. Jobs will be increasingly described as a set of discrete “tasks.” Independent workers will perform a portfolio of tasks for specific wage-rates. At the work place, hierarchy of supervision will be replaced by networks of collaboration with distributed and remote teams. This will significantly alter motivation and communication of the workforce. These changes will impact what the new employment contract looks like, with contingent employer obligations on minimum wage, social benefit, and collective bargaining significantly reduced.

Policy Challenges
How should the Indian state regulate this “on-demand” economy with flexible jobs, transient wages, and distributed risks? There are three major areas in labor policy that require attention in the coming years—reskilling workers and rethinking social policy in the short-term, as well as re-examining employment potential of new sectors such as care economy in the long-term.

First, automation involves reskilling existing workers, redeploying others to new tasks and retooling potential workers who are students in university. The 2017 IDC cognitive user adoption survey for the Asia Pacific region indicates that 70 percent of Indian firms plan to make additional investments in workforce-training to leverage the benefits of AI. Furthermore, the concept of “smart” work and demand for specific skills will encourage universities to redesign higher education and training and the state to facilitate job-market transition.

Second, there is an urgent need to rethink working-age population, retirement, and individual life plans. In social policy, futuristic ideas such as livelihood insurance and universal basic income presupposes state capacity to tax and distribute the additional income generated. World Social Protection Report 2017-19 by ILO shows that the share of workers covered by at least one social security program in India is only 19 percent as against 63 percent in China. Furthermore, the international norms of labor including “rights at work” and “decent work” set by ILO needs to be modified and extended to the new economy where workers perform tasks from a “human cloud platform.” Rights at work incorporate collective bargaining rights of labor and the right to form unions. Decent work is defined as productive work under conditions of freedom (existing rights protected), equity (adequate remuneration), and dignity (social policy coverage). 

Third, there is an urgent need to look at new sectors beyond manufacturing and industries, which have the potential to generate paid work in the age of automation. This was pointed out by India’s Minister for Commerce and Industry, Suresh Prabhu, while revealing the new national industrial policy in 2018. One important sector that has enormous employment potential is the care economy as corroborated by the 2018 ILO report “Care Work and Care Jobs for the Future of Decent Work.” This report estimates that every day, unpaid care work employed labor equivalent to two billion people working eight-hour days, and argues that with increased investment in education, health, and social enterprises, 269 million jobs would be created by 2030. This will especially benefit women, who perform more than two-thirds of the current unpaid care work globally. To facilitate such long-term policy changes, channeling investment into the care sector by the state and reexamining the low wage levels of education and health workers are required.

The challenges that AI places before the Indian policymakers is epistemological, technical, and ethical. However, at this moment of technological transformation, human judgment demands prioritization of long-term concerns over short-term difficulties. It asks us to do away with traditional, linear, and non-disruptive thinking. AI prods us to think about technology as well as social relations in a new light. Above all, the future encourages us to have shared understanding of the problem and a context-specific response to the challenge.

Francis Kuriakose is an advisor to Cambridge Development Initiative, University of Cambridge.

Deepa Kylasam Iyer is a research director with Cambridge Development Initiative and a graduate from the MPhil in Development Studies program at the University of Cambridge. 

India in Transition (IiT) is published by the Center for the Advanced Study of India (CASI) of the University of Pennsylvania. All viewpoints, positions, and conclusions expressed in IiT are solely those of the author(s) and not specifically those of CASI.

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