Although automation started decades ago, the recent developments have created highly intelligent technologies, such as robotics and those based on the different forms of artificial intelligence (AI).

As a consequence, some jobs have been replaced by technology and automation while some new jobs have emerged and others have been redefined with new requirements on skills and education.

Automation has the potential to alter nearly every facet of work and daily life. These changes do not only affect the workforce but may also have impacts on socioeconomic, geopolitics and demographic development.

Indonesia, with a big demographic dividend, does not want to fall into the worst-case scenario of technological change coupled with talent shortages leading to mass unemployment and growing inequality.

From past experiences, Indonesia has missed several opportunities arising from the industrial revolution. With a booming textile and garment industry, Indonesia missed an opportunity to reap the maximum benefits since its role in this industry was only as a “tailor” with low added value instead of a “designer”. Cheap labor was one of Indonesia’s comparative economic advantages that did not last long after Vietnam took over.

The McKinsey Global Institute identified the adoption of digital technology as the biggest factor for future economic growth, accounting for around 60 percent of the potential for productivity growth in 2030. AI alone is expected to produce an additional 1.2 percent in productivity growth per year from 2017 to 2030.

Although automation has the potential to drive economic growth, it also has several key challenges to the nature of work. A recent McKinsey survey of 100,000 people in 29 countries revealed that job security is the number one economic priority for respondents.

McKinsey then identified three challenges related to automation, namely a skills requirement shift, rising inequality and backlash against technology.

For the first challenge, it wrote that the path to sustainable prosperity required more and more talented individuals to enable the broad adoption of digital and AI technology. The path also requires a broad-based workforce that is able to operate in a more automated and digital environment.

Without addressing the demand for these skills, technology adoption can slow down and people with outdated skills can be forced to leave the workforce.

The adoption of digital and AI technologies will also require most workers to upskill or reskill themselves. By 2030, as many as 14 percent of the people in the world will need to change their jobs and the figure rises to more than 30 percent in developed countries with faster automatic rates.

The second challenge is rising inequality. The trend of increasing inequality within countries has been visible for decades now.

Most studies on the impact of further automation and AI on inequality expect increased polarization. If income growth is concentrated among high earners with a very low marginal propensity to consume, aggregate demand could stagnate and drag down both business investments and job creation, resulting in a period of secular stagnation.

Third, backlash against technology. Concerns over shrinking job security and growing inequality have already led some governments to take measures to slow the pace of automation. Scaling back investment incentives and hindering the rise of platform-based business models exemplify this trend.

However, hostility toward automation would significantly impede productivity and prosperity growth. Governments have an opportunity to enable the adoption of technology and automation while ensuring everyone benefits from such an effort.

At this time, the government’s role is very important to overcome the bad impacts of automation. Four areas that can be implemented by the government to prevent the side effects are developing a national technology-adoption strategy, reforming the human-capital development system, strengthening social protection systems to ensure universal benefits from automation and convening and mobilizing all stakeholders to play their parts in the future of work transition.

Meanwhile, six catalysts can accelerate automation, namely ample incentives, thriving innovation ecosystems, AI and digital talent, a balanced regulatory environment, digital infrastructure — including data collection and sharing — and supportive government institutions.

The Mandiri Institute has conducted studies on Indonesia’s workers. The research explains the future work and the impact of technology on the workforce, as well as Indonesia's position in terms of skills and talents compared to other countries.

The study uses data from the National Labor Force Survey (Sakernas) to identify whether we have a mismatch in the labor market. To identify the dynamics of global workforce up to skill level, the Mandiri Institute used LinkedIn data to study the change of jobs and skills in Indonesia, globally and in certain regions.

Based on the results of the study, two main focuses need attention. First, recommendations for specifically preparing workers for future skills. This includes initiatives to prepare workers with learning agility and provide lifelong learning opportunities.

Second, to prepare an ecosystem that supports the preparation of future skills. This includes providing incentives for companies that conduct relevant training for their workers and can prove the results of this training for the benefit of the company and provide the infrastructure that allows people to easily access information related to future skills.

Once all of these factors — the workers and ecosystems — are ready, Indonesia can follow Singapore's approach to providing a comprehensive framework for future skills as a result of close collaboration between stakeholders.

______

The writer is an analyst at the Mandiri Institute.

Popular

Great Barrier Reef hit by record bleaching

Govt to undo latest curbs on personal imports

Middle East on edge as Israel and Iran trade threats