The urgency to increase productivity has accelerated as aging economies become focused on increasing the productivity of their workers to cope with reduction in their workforce. They would soon be importing workers with highest productivity level. At current output per worker, Pakistan would not be able to find jobs for its workers abroad.
The bottom line is this: while half-century forecasts are hazardous—particularly for the forecaster!—a productivity-based perspective on the future of growth suggests that a demographic slowdown today need not lead to economic stagnation tomorrow.
Productivity growth drives a huge amount of improvement in society whether attained through technology or by workers, it is basically shorthand for increases in our well-being. We can improve our standards of living by doing more with what we have.
The Japanese auto miracle occurred because Japan’s steel industry in the 60’s and 70’s was 45 percent more productive than the US steel industry. Still, overall the United States worker is more productive than workers of other economies. It has now been established that productivity is highest in countries that are exposed to competition rather than operating in protected mode. This is true for the service sector as well.
Skills do enhance productivity but they are only one of the factors. Our government and the private sector can enhance the economic prospects of Pakistan by identifying the measures needed to improve worker productivity. Research by creditable global institutions has revealed that more than 50 percent increase in global GDP has come from increase in workers’ productivity and the rest from increase in the number of workers.
Government planners in Pakistan and the manufacturing sectors should aim to catch up to the productivity level of the global best and should achieve this goal within a timeframe. They should then go beyond the global best through management tools and technology. The aim should be to remain ahead of competition. By catching up with labour productivity of the best, Pakistan could triple its exports in three years and embark on a sustainable growth path. The economy in Pakistan would leap forward at high speed if small scale producers are brought into the tax net. In the current digitalized scenario, the small producers survive by avoiding taxes which helps them to work with obsolete technologies and low labour productivity. The government, on its part, should increase the efficiency and quality of public services through new incentives and managerial practices.
The SME businesses will almost certainly get a productivity boost through mobile applications, cloud computing, and other novel technologies that make it easier for them to innovate. The future belongs to nations that continue to build skills through public or private sector investment.
As the fourth industrial revolution makes its presence felt in economies like Pakistan, there is a worry among workers that the new would throw them in the unemployed pool. The same fear was expressed in the first industrial revolution, when artisans were thrown out of work due to mass production by machines. When products were made by persons with special skills only a selected few could afford them. When mass production started the same products were available to a large segment of society at affordable prices.
In fact, in the early 20th century, vehicles were blocked from the roads, as those earning a living by transporting commuters on horsecarts saw them as threat to their livelihood. The same kind of fear is being felt by workers that could be rendered jobless after introduction of highly automated machines. We are seeing a similar level of production growth that was seen at the start of the first industrial revolution. The fourth industrial revolution is all about data and creating intelligence out of it. Technology empowers people to get work done.
Tech progress is most efficient to improve the human condition. If we demonize technology, we’re making the biggest mistake we could possibly make. Digital technology has brought huge improvement in healthcare. The most complicated operations can be performed with medical specialist sitting in another continent. Technology is increasing productivity mostly in the services sector where general productivity has always been low. In high productivity and efficient manufacturing industries, improving productivity through high cost technology is not commercially viable.
Since high tech innovative technology has started impacting productivity in past five to six years, its actual impact on an economy has not yet been fully realized. One interesting point to note is that economies with the highest use of robots have the lowest unemployment rates. These countries include Germany, Japan and Korea. This amply proves that after embracing even the most sophisticated technology, new work can be created, improving the lot of the people.
We will have to differentiate between jobs and work. Jobs have always changed or been transformed in all the industrial revolutions. Work will always be there; jobs are changing. Those who are pessimistic today see only jobs disappearing. They do not see the opportunities that will arise for new work.
We need to enable not just students coming out of college or school, but also those workers who are being displaced. It could be a radiologist or it could be a factory worker, because these are the sorts of jobs that will be under threat.
It does not need any rocket science to comprehend the reason for school dropouts. Children drop out because they are needed to work on the farm, for example, to supplement the family income. If one could increase family income, one could get students to go back to school.
We will all need to do our jobs differently. We need to work closely with HR experts and formulate policies in education to make sure our people are skilled. Routine manual work is going away very quickly and never coming back. Routine knowledge work—payroll clerk and that sort of work—and routine physical work are disappearing. Work is going digital and it is an unstoppable force.
The large, stable, prosperous middle classes were formed on the back of routine work. When one looks at where the job loss and the real wage pressure have occurred, it is not at the bottom and certainly not the top. It’s right in the middle. The second issue is that educational systems are turning out routine workers. The mismatch is profound. Education is one of the slowest institutions to change in this society. That mismatch in clock speed between technology and education is something we need to work very hard on.
The solution is not for everybody to become a software engineer. We need to develop what is called computational thinking, an understanding of what things mean. We all need this skill.
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