Technological revolution accelerated by COVID-19 in Latin America and the Caribbean

Technological revolution accelerated by COVID-19 in Latin America and the Caribbean

Monday, September 28, 2020

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WASHINGTON, United States — Latin America and the Caribbean (LAC) is in the midst of a "Fourth Industrial Revolution" of technological innovation which requires enhancing the productivity of the services sector, investing in human capital and rethinking labour regulations and social protection policies, according to a new World Bank report.

In a release today, the World Bank said these policy priorities have become all the more urgent now that the COVID-19 pandemic is fuelling the biggest contraction in economic activity since the great depression. It said digitisation has become more important to support economic activity at a time of social distancing and is accelerating this technological transformation, potentially putting jobs at risk across Latin America and the Caribbean.

According to Going Viral: COVID-19 and the Accelerated Transformation of Jobs in Latin America and the Caribbean, employment transformations that were already apparent in the last few decades are bound to deepen, and the question in this context is how to recover from the crisis and build back better.

“We need to rethink the future and not just try to get back to where we were before the pandemic,” said World Bank Vice President for Latin America and the Caribbean Carlos Felipe Jaramillo. “Governments need to find ways to support the creation of new jobs, train workers to be ready for these new jobs and support their citizens through this disruptive transformation.”

Premature deindustrialisation and rapid technological innovation will require policies to support a smooth transformation of jobs that is socially acceptable, the bank said. It noted that the region was already struggling with the end of the so-called "Golden Decade" (2003-2013) of rapid development and strong improvements in social indicators. Economic growth and poverty reduction had stalled and the pandemic has only made things worse, the global bank said.

“While fears of mass 'technological unemployment' are largely unfounded, many jobs are at risk due to lower external demand, a protracted period of quarantines and lockdowns, solvency problems for firms, and financial crises in some cases. In addition, the social unrest seen in 2019 is a warning. It is urgent to restore economic growth and create more and better jobs,” the bank explained.

“However, this 'Fourth Industrial Revolution' of technological innovation means that further industrialisation or re-industrialisation will be limited in many developing countries. Low-paid, uneducated workers and those in high-contact activities typical of the informal sector are at highest risk of being replaced by machines. In addition, informal workers are harder to reach with essential social protection programs. The COVID-19 crisis could accelerate these changes, bringing the future much closer than anticipated,” it continued.

The bank said that with limited scope for employment growth in manufacturing, modernising the services sector is a priority and calls for an emphasis on removing the distortions that prevent competition and innovation from occurring at a rapid pace.

Preparing workers for the changes is also fundamental, the bank said.

“Education offers the best insurance against the risks of automation,” said the report's lead author Guillermo Beylis, Research Economist in the World Bank's Office of the Chief Economist for the LAC. “Workers will have to adapt to demand for cognitive or analytical skills, as well as interpersonal skills.”

Adult learning and re-training will be key as new automation technologies are adopted in LAC countries, while the focus should be on policy reforms to increase productivity in the services sector, which already employs 60 per cent of the workforce and will play an increasingly important role in the future, the World Bank report.

It added that a rethinking of labour regulations and social protection policies is needed, which involves flexible regulation of the emerging forms of work in a way that encourages employment and supports formalisation, thereby expanding the coverage of social protection to larger segments of the population.

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