Jan 21, 2016 (LBO) – Developed countries could gain more from the introduction of new technologies through automation and artificial intelligence, Swiss bank UBS said in a report to coincide with the World Economic Forum.
The Fourth Industrial Revolution will be driven by robotic automation and connectivity, a special feature of which will be use of artificial intelligence.
“Developed economies are likely to be relative winners at this stage, whereas developing economies (will) face greater challenges as their abundance of low-skill labor ceases to be an advantage and becomes more of a headwind,” the report said.
Greater returns will accrue to those with already-high savings rates, and in the short run, this could exacerbate inequality via relatively lower borrowing costs and higher asset valuations.
Nevertheless, extreme automation and particularly extreme connectivity could improve the productivity of existing jobs or create demand for entirely new jobs, UBS said.
“While technological revolutions often stoke fears of declining employment as “robots do all the work,” we believe a decline in aggregate employment is unlikely.”
“It is usually difficult to envision today what the jobs of the future might be. But we believe that extreme automation and extreme connectivity could actually increase demand for customized “human” work.”
However, there will be an impact on relative differences in regional labor forces in the short-run.
“While aggregate employment is unlikely to fall in the long-run, we could start to see polarization in the labor force and frictional unemployment until workers reskill, relocate or alternatively adapt. Additionally, labor-intensive goods could see their prices fall relative to more capital-intensive goods.”
Low-skill employment will likely continue to contract, and an increasing range of middle-skill jobs will become vulnerable as extreme automation is rolled out.
Tim Worstall, a writer to Forbes, however, raised a fairly common criticism of the argument.
“They’re telling us that the robots coming to take all our jobs will, or at least could, lead to increased inequality. Which, if we think purely in terms of income inequality might be true,” he said.
“But we shouldn’t actually be thinking in terms of income inequality at all: what we’re interested in is consumption inequality. And when we look at that then inequality will decrease as a result of automation, not increase.”
According to UBS, flexibility will be key to success in the Fourth Industrial Revolution. Economies with the most flexible labor markets, educational systems, infrastructure, and legal systems are likely to be relative beneficiaries.