THE IMPACT OF AUTOMATION ON EMPLOYMENT

Figure 3.8 Impact of Automation on Employment Decisions

Share of Firms (%)

Domestic Investors

Share of Firms (%)

Foreign Investors

Same Number of Workers, Same Tasks Same Number of Workers, Different Tasks More Workers w/Automation Fewer Workers, Same Tasks

Fewer Workers, Less Sophisticated Tasks Fewer Workers, More Sophisticated Tasks 18.5

16.4

12.6 15.3

6.7 5.3

0 2 4 6 8 10 12 14 16 18 20 22 24

14.6 13.6

17.8 17.5

6.8 8.5

0 2 4 6 8 10 12 14 16 18 20 22 24

Source: PCI QJ.4 and PCI-FDI QL.4: “Which statement best describes the way in which automated and digital means of production has affected your employment decisions?” Analysis limited to firms that have automated at least one task (n=1050 foreign and 5937 domestic).

Figure 3.9 studies which sectors are most likely to increase employment. For FIEs, real estate and manufacture of furniture rank at the top of the list with over 30 percent planning to add workers. However, less than 10 percent of firms in three service sectors (wholesale/retail, construction, and information/communications) expect automation to create new jobs. Zero information/communication firms expect employment growth. Among domestic firms, over 25 percent of manufacturers of electronic equipment and leather expect automation to generate new employment, leading the pack. Utilities like electricity and gas, manufacturers of motor vehicles, and businesses in information and communications services also are not optimistic about automation leading to new hires.

Figure 3.9: Companies Hiring More Workers (by Sector)

0 5 10 15 20 25 30 35 40 Information/Communication

M:Motor Vehicles Electricity/Gas/AC Others Services Wholesale/Retail M:Furniture Real Estate Construction Edu/Healths/Labour services M:Basic Metals M:Food Processing Professional Services M:Paper Products Agriculture/Aquaculture M:Rubber/Plastics M:Wood Products Financial/Insurance M:Textiles M:Machinery M:Chemicals M:Fabricated Metals M:Computers/Electronics M:Garments M: Other M:Leather M:Electronic Equip.

Domestic Investors

0 5 10 15 20 25 30 35 40 Information/Communication

Construction Wholesale/Retail M:Leather M:Chemicals Professional Services Edu/Healths/Labour services M:Food Processing M:Garments Others Services M:Computers/Electronics Electricity/Gas/AC M:Textiles M: Other M:Basic Metals M:Electronic Equip.

M:Rubber/Plastics M:Machinery Financial/Insurance M:Motor Vehicles M:Wood Products M:Paper Products Agriculture/Aquaculture M:Fabricated Metals M:Furniture Real Estate Foreign Investors

Total Share of More Workers (%)

Source: PCI QJ.4 and PCI-FDI QL.4: “Which statement best describes the way in which automated and digital means of production has affected your employment decisions?” We have both expanded employment and automated production. By two-digit sector from ISIC Rev. 4, analysis limited to firms that have automated at least one task (n=1050 foreign and 5937 domestic).

Figure 3.10 illustrates the other side of the coin by depicting industries where job losses are expected. The graph presents three bars disaggregating where these employment reductions are aimed at improving the sophistication of business activities or simply cutting costs.

Fascinatingly, foreign real estate firms, accounting for 60 percent of the sample, are planning to cut jobs due to automation, illustrating diversity in firm strategies between domestic companies and FIEs even within the same industry. Even more interestingly, these foreign-owned real estate firms are evenly split between those planning to concentrate remaining workers on more sophisticated tasks, and those planning to employ them in less sophisticated

activities. Manufacturers of paper products (50 percent), electronic equipment (43 percent), and fabricated metals (39 percent) rank as the next sectors most likely to shed workers due to automation over the next three years among FIEs. In all of these cases, only a small share will employ workers in more sophisticated tasks. For domestic firms, manufacturers of furniture (57 percent), food processing (52 percent), and textiles (48 percent) are the most likely to reduce employment. Again, in these sectors, only a small minority of firms plan to use automation to engage in more sophisticated activities. In almost all of these cases, the majority of companies will use automation to have fewer workers doing the same tasks, leading to cost savings.

Figure 3.10 Companies Planning to Reduce Employment by Sector

0 10 20 30 40 50 60

Wholesale/Retail Information/Communication M:Machinery Electricity/Gas/ACReal Estate Financial/Insurance Edu/Healths/Labour services M:Computers/Electronics Construction Others Services M:Motor Vehicles M:Leather Professional Services M:Garments M:Fabricated Metals M: Other M:Basic Metals M:Electronic Equip.

M:Paper Products M:Rubber/Plastics Agriculture/Aquaculture M:Chemicals M:Wood Products M:Textiles M:Food Processing M:Furniture Domestic Investors

0 10 20 30 40 50 60

M:Machinery Edu/Healths/Labour services Financial/Insurance M:Wood ProductsM:Leather Agriculture/Aquaculture Others Services M:Food Processing M:Chemicals M:Furniture M:Garments Construction M:Motor Vehicles M:Basic Metals Wholesale/Retail M:Rubber/Plastics Professional Services M:Textiles Electricity/Gas/AC Information/Communication M:Fabricated Metals M:Computers/Electronics M:Electronic Equip.

M: Other M:Paper Products Real Estate Foreign Investors

Total Share of Fewer Workers (%)

Fewer Workers, Same Tasks Fewer Workers, Less Sophisticated Tasks Fewer Workers, More Sophisticated Tasks

Source: PCI QJ.4 and PCI-FDI QL.4: “Which statement best describes the way in which automated and digital means of production has affected your employment decisions?” By two-digit sector from ISIC Rev. 4, analysis limited to firms that have automated at least one task (n=1050 foreign and 5937 domestic).

Our final analysis in Figure 3.11 depicts how firms think about automation in relation to the average skill level of their employees. For both foreign and domestic firms, there are two dominant answers, but their rank-ordering is different depending on the business’ origin. For domestic firms, the most frequent answer was that automation would have no impact on the average skill level of employees (just under 24 percent). This is consistent with Figure 3.8 where domestic firms answered that they intend to either use the same number of workers or fewer workers on the same tasks. The second most common answer for domestic firms was that they would seek more high-skilled labor (19 percent), illustrating that some firms are interested in upgrading their workforces. For foreign firms, these answers are reversed. More than 23 percent of FIEs plan to hire workers with greater skills and just over 20 percent do not expect to change. The graph perfectly illustrates the dual-edged nature of automated technologies. In some cases, they will lead to redundancies and decreased employment. In other cases, they will lead to enhanced training and greater opportunities for the next generation’s workers.

Figure 3.11 Impact on Average Skill Level on Hiring Strategy

Share of Firms (%)

Domestic Investors

Share of Firms (%)

Foreign Investors

No Change at All More High-Skilled More Medium-Skilled More Low-Skilled

Fewer High-Skilled Fewer Medium-Skilled Fewer Low-Skilled

23.9

19.0

3.5 1.7

7.7

2.8 4.7

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28

20.3 23.4

4.4

1.3 10.0

3.2 6.0

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28

Source: PCI QJ.5 and PCI-FDI QL.5: “Which statement best describes the way in which automated and digital means of production have affected the average skill level of your employees?” Analysis limited to firms that have automated at least one task (n=1050 foreign and 5937 domestic).