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Technology can boost either resilience or inequality, depending on how much
you have of it

The COVID-19 global lockdown triggered an unprecedented experiment.
Millions of professionals had to do from home what they used to do in
offices. TV anchors hosted from their living rooms; IMF officials working
remotely approved more than 70 emergency loans in three months; traders
continued to buy and sell stocks from mountain cabins. Companies got over
the fear that dispersed teams would be less productive, and many—including
Silicon Valley giants—told employees not to worry about returning to the
office. Teleworking was promoted to viable long-term solution from
temporary fix or precarious freelancer arrangement.

Advances in technology made this global randomized trial possible. Imagine
a Webex meeting over a dial-up modem. Laptops, tablets, and smartphones
connected to high-speed internet connected to cloud services have kept the
world going. Technology has been a resilience factor for the global
economy. But for those who can’t afford it or earn a living through it,
technology accentuates exclusion and inequality.

Half of the US labor force has been working from home amid the COVID-19
onslaught, up from 15 percent previously, according to Erik Brynjolfsson
and four other Massachusetts Institute of Technology economists. By
contrast, 58 percent of households in Brazil don’t even have a computer,
according to a 2019 report. This is in line with recent IMF research
showing that fewer than half of people in developing economies have
internet access. Another IMF paper assessed how “teleworkable” various jobs
are and estimated that 100 million people in 35 advanced and developing
economies are at high risk of layoffs or pay cuts because their jobs can’t
be done remotely. These jobs are filled by mostly young, female, and less
educated people who work in hospitality, food services, construction, and
transportation.

In general, the poorer the country, the harder it is to telework.
International Labour Organization researchers estimated that fewer than one
in five workers worldwide are in occupations and live in countries with the
infrastructure needed for effective working from home. That average
disguises wide disparities. In North America and western Europe, the
proportion is 1 in 3; in sub-Saharan Africa it is 1 in 17.

Destructive creation

In just a few weeks, the pandemic did as much damage to employment as
automation was expected to inflict over decades, according to economist
Daniel Susskind. In his most recent book, A World Without Work, he
acknowledges that the fear of technology destroying jobs is as old as
machines themselves—but argues that this time may be different.

The traditional argument is that innovation destroys some jobs but creates
many others and frees people to do other things. The advent of automated
teller machines in the 1960s, for example, didn’t replace human tellers. It
freed them up to do more complex tasks than dispensing cash. However,
technology has since enabled online banking, which greatly reduced the need
for a customer to go to a branch. In recent years, big data and machine
learning have made it possible for financial institutions to have no
physical branches at all.

In general, the poorer the country, the harder it is to telework.

Over time this “creative destruction” has not been favorable for people.
The jobs created and lost don’t necessarily match in terms of location and
skills. Labor mobility is much lower than believed. Many experts agree that
automation is largely responsible for the massive destruction of
manufacturing jobs over the past few decades in countries such as the
United States.

Susskind sees the automation trend strengthening with the rapid development
of artificial intelligence (AI) because it accelerates machines’ ability to
outperform human beings in more tasks. “Machines will not do everything in
the future, but they will do more,” he writes, observing that automation
has not replaced people entirely in farming and manufacturing, but it has
greatly reduced the number and quality of jobs.

Scientist robot

Automation of assembly lines is nothing new. But robots are expanding into
new occupations, including health services. Mechanical arms built by the
German company KUKA can sort blood samples in Denmark and speed COVID-19
tests in the Czech Republic, mixing reagents to test swabs faster and more
precisely than humans.

A similar machine in a University of Liverpool chemistry lab takes it some
steps further. Using AI, Benjamin Burger, a PhD researcher, programmed the
machine to conduct scientific experiments on its own, mixing samples and
analyzing results. It can work 22 hours a day and once carried out more
than 600 tests in eight days. Burger says the machine complements his work.

“It can easily go through thousands of samples,” he told the BBC, “so it
frees up my time to focus on innovation and new solutions.” The machine
also helps Burger with social distancing and allowed the scientist to
continue experiments while quarantined. But it may have made one or more
lab assistants redundant.

The goal of freeing people from repetitive or taxing jobs is valid only if
they can find something else to do. Can they? Are there areas in which
humans don’t need to fear competition? Yes: professions that require social
intelligence and face-to-face interaction. Between 1980 and 2012, these
jobs grew 12 percent as a share of the US workforce.

At least until COVID-19 hit. “Jobs with a high level of social interaction
and less susceptible to automation are exactly those most at risk with the
pandemic,” Susskind told F&D in a video interview from Oxford. “Many of
the scenarios in the book that might have sounded outlandish five months
ago are now completely mainstream.”

Calling all doctors

Some eminently face-to-face professions have been able to rearrange
themselves quickly using technology. The explosion in telemedicine is a
good example of agility—but also of how the process might leave some people
behind.

Videoconferencing instead of visiting a doctor has been available for
years. But in the United Kingdom, only 1 percent of general practitioner
appointments were remote before the pandemic. After it hit, it soared to 90
percent. In the United States, one health insurer reported that online
appointments jumped from 10,000 a month before the pandemic to 230,000 last
April—in only one state.

This explosion did not require groundbreaking technology. Telehealth can be
as simple as a Skype call. Technology facilitated a behavior change that
the pandemic supercharged. For safety, patients and doctors shed long-held
habits and suspicions. Recent regulatory changes helped. In the United
States, doctors were allowed to bill online appointments in the same way as
physical visits. Patients were no longer required to be in a health
facility for a remote appointment.

Although it worked well for doctors and patients, the transition may have
left some victims in its wake. An online practice will probably need fewer
nurses, receptionists, technicians, and managers.

The global teleworking experiment has led many to herald the end of the office as we know it. But reports of its demise may be exaggerated.

Pandemic-induced cultural change is likely to meet technological
convenience in many areas, with potentially serious consequences for jobs.
E-commerce does not require scientist-robot technology. More online buying
in itself puts physical retailers at a disadvantage. Teleworkers can fill
their caffeine craving by ordering Nespresso capsules online instead of
going to chic but probably empty shops. Indeed, Nestlé reported recently
that online demand for coffee pods increased 30 percent with the pandemic.

RIP office?

As long as COVID-19 remains a threat, it will be impossible to tell whether
the world is seeing real cultural change or just successful contingency
adaptation. The global teleworking experiment has led many to herald the
end of the office as we know it. But reports of its demise may be
exaggerated. What is now considered lifesaving technology has been around
for years without triggering a mass exodus. While there are many potential
benefits—flexible working hours, less commuting, people able to work and
companies able to hire anywhere—the long-term consequences of home working
are yet to be fully assessed. One obvious danger is cybersecurity: more
people connected to unprotected domestic networks increase the so-called
attack surface available for hackers. The impact on cities and office
areas, as well as on hotels, restaurants, shops, and other services, is
hard to estimate, but it could be meaningful.

Brynjolfsson, recently named director of Stanford University’s Digital
Economy Lab, believes the change is more permanent and predicts expanded
use of machine learning. “The question is, What parts of the economy are
going to be most [or] less affected?” he said in a recent seminar. Without
an effective treatment or a vaccine, the pandemic can lead to more
automation because of social distancing and businesses seeking resilience.
A more automated assembly line is less susceptible to outbreaks.

“In the UK, the incentive for automation has been suppressed by government
interventions to protect workers,” Susskind told F&D. “Once these
protections expire, this incentive might be unleashed again.”

Technology has kept the world humming but has also accentuated many fault
lines: education, income, types of jobs. The solution to this dilemma is
complex. Governments will be called on to spend more in the short
term—helping companies keep current employees, expanding training, and
facilitating rehiring—and over the long run, in particular, investing in
education and broader internet access. It’s a tall order even for advanced
economies, but especially for emerging economies still struggling with
basic needs.

Maybe the solution is inside the problem. Economies—advanced or
developing—must make technology work in their favor, and governments must
make inclusiveness a priority. “Innovation can create new growth and boost
productivity,” Era Dabla-Norris, lead author of the teleworkability study,
told F&D. “Digitalization is reshaping many activities and can help
workers and business adjust to this new world. The key is to create digital
inclusion and then translate it into economic inclusion.”

ANDREAS ADRIANO
is on the staff of Finance & Development.

Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.