In the era of digital technology, the structure of production as well as the interaction between humans and machines is being redefined. The diffusion and application of digital technology can increase productivity in an unprecedented manner, with potential to reshape the role of humans in the function of production. Jobs are the drivers of development and pillars of resilience for people. Five years ago, the World Development Report (WDR 2014), Risk and Opportunity – Managing Risk for Development, highlighted the role of enterprises in supporting people’s risk management by absorbing shocks and exploiting the opportunity side of risk. There have been heated debates on how technology may lead to risks, such as job loss and structural changes of employment. While the risks are real, the estimates of the impact of digital technology on employment vary widely, from substantial job loss for both skilled and the unskilled workers, to potential job gains thanks to the complementarity of humans and machines, as well as the income and wealth effect derived from higher productivity.
The World Bank and the Alibaba Group have been conducting joint research to examine how China has harnessed digital technologies to contribute to growth and expand employment opportunities through e-commerce development. Early findings show e-commerce fosters entrepreneurship, including for the youth and women, and contributes to growth in Taobao villages. Most people, especially e-households, in Taobao villages perceive their social status as equal or higher when compared to five years ago, and they believe they will have equal or even higher social status two years into the future. While it is still early to judge the impact of e-commerce on total employment, or the additionality of e-commerce to the economy as a whole, a few examples of innovation in the e-commerce platforms indicate possible channels how digital technology can create new business and employment opportunities, as well as pave ways for new opportunities.
Digital technology can create new business opportunities
Digital technology can support innovation. In Sichuan, local firms collaborated with AliCloud to set up “profiles” for farm pigs using computer vision and AI voice recognition. The “ET Brain” documents their breed, age, weight, eating conditions, exercise intensity and frequency, and movement trajectory to reduce mortality rate of baby pigs and increase the fertility rate of female pigs.
Technology and big data can improve quality and increase profit margins. In Xinjiang, with the support from local service providers, farmers apply new technology to improve the quality of melon for online sales. The e-commerce contract farming model not only allows farmers to minimize risks of price fluctuations at harvest, but also enables platform companies to ensure product quality and pre-stock products in nearby warehouses according to big data sales predictions to enhance consumer satisfaction.
E-commerce platforms can create markets for traditional products. In Qinghai, women of ethnic minority sell traditionally embroidered clothes (intangible cultural heritage as classified by the Chinese government) online, leading them to move out of poverty while balancing the needs to stay at home caring for their elderly and children.
Technology can create new forms of employment
E-commerce can provide flexible/part-time jobs, meeting the special needs for employment of the disadvantaged and improving their sense of satisfaction. For example, women can take advantage of flexible working schedules to start and do business online while taking care of the young and elderly family members. Almost half of e-entrepreneurs in Taobao are women (this compared to 25% of women entrepreneurship in China), and three quarters are under the age of 34. Female business owners, through knowledge sharing, demonstration, and affinity, often inspire more women in the neighborhood to find employment opportunities, including part-time jobs.
E-commerce creates on-the-ground jobs for logistics business. According to the State Post Bureau of China, 40 billion of parcels were delivered in 2017, generating revenue of nearly 500 billion RMB (or over 70 billion USD) with a year on year increase of 25 percent. According to the China Federation of Logistics and Purchase, the number of employees in express delivery services increased 130 percent from January 2014 to November 2017. There are numerous anecdotal stories of how people first start from being deliverymen and become owners of delivery companies in their hometowns making use of the close kinship in rural areas to expand business. The experience obtained through on-job-learning can help the disadvantaged to develop their human capital and be well placed to pursue better employment opportunities.
Technology can also pave the way for financial inclusion
Fintech can improve access to finance in a more flexible and inclusive manner. For example, through Alibaba’s “310” loan service, in China, 4 million micro and small business receive loans with a total amount of RMB 700 billion, with an average per-account outstanding loan of less than RMB 30,000. And this is achieved through a 3-minute application, 1-second approval & grant, and 0 manual intervention. 100 million consumers, who have no or very limited loan history, now have credit ratings from AntFinancial.
Big data and block chain technology can facilitate public participation in welfare programs and support health insurance for poor households. For example, a new internet public welfare program provides free health insurance to breadwinners of poor households to reduce the risks of falling into poverty due to catastrophic health expenditure. Mobile payment, image identification, and blockchain technology together enable the participation of the general public to welfare programs and enhance the transparency and efficiency of the program management. And local mobile public platforms can improve administrative efficiency and transparency.
Technology has been changing the ways by how production is conducted and how employment opportunities are distributed. The steam revolution lowered transport costs and made it feasible to spatially separate production and consumption, with production becoming specialized and concentrated in select areas. The ICT revolution lowered the coordination costs and separated the production stages previously conducted in close proximity. The separation of the stages of production across regional and national borders became more profitable and the higher end of the production concentrated in developed countries and the lower end in several developing countries. The fourth industrial revolution, such as robotics, AI, Internet of Things, is transforming the entire systems of production and management and the ways people interact, with the potential of making the world more integrated or segmented depending on the evolution of multiple forces.
With access to better opportunities as well as better risk management tools, places with better digital technology and individuals with better endowment are likely to have the first mover advantage. Meanwhile, the drastic improvements in market access and potential of productivity increase may benefit the less fortunate more in relative terms as they can learn from the first movers without an expensive trial-and-error but by directly adopting the new technology.
While numerous examples show how technology can bring new opportunities to people, this comes with unprecedented risks as well. When the natural barriers that segregate local markets are drastically reduced by e-commerce platforms and numerous innovations are stimulated to meet the increasingly fast evolving demands and provide tailored services to the unique taste of various consumers, the risks due to the exposure to fierce competition and unpredictable changes in the online markets are substantial and require new ways to manage. The jury is still out about what these risks may lead to, and how the benefits and costs will be distributed across the different segments of the population.
The World Development Report 2014 Risk and Opportunity: Managing Risk for Development, contends that the solution is not to reject change in order to avoid risk but to prepare for the opportunities and risks that change entails. What policy measures to put in place, in what areas, and in what sequence, to support people to seize the new opportunities of digital technology while managing risks will have a profound impact. The WDR argues that “people can successfully confront risks that are beyond their means by sharing their risk management with others”, and that “the various systems—from the household and the community to the state and the international community—have the potential to support people’s risk management in different yet complementary ways.” In the digital era, concerted efforts are crucial to support equitable access to technology and skills, as well as a conducive business environment for everyone, to make digital technology more beneficial to people in an inclusive manner.
This is the fifth in a series of blogs commemorating the fifth anniversary of the 2014 WDR on Risk and Opportunity. Read all the blogs here.